The City of Newton’s Finance Committee voted unanimously on Tuesday to allocate $2 million in “free cash” to pay for increases in health insurance costs for fiscal year 2026 (FY26).
The increase is needed because consultants had estimated a 7.8 percent increase in Newton’s health insurance rates in November, then upped the estimate to 10.1 percent after an uptick in claims in December.
Despite the new recommendation, Newton’s financial planners planned the FY26 budget with the original 7.8 percent estimate, given that it included a 2 percent buffer and that December may have seen an unusual increase.
“We wanted to continue to monitor data and determine if December was an anomaly,” said Perry Rosenfield, manager of financial planning and analysis for the City of Newton.
When the consultants and planners met again in March, though, consultants upped the estimates to 11.2 percent, given new data from January and February.
“The reasoning for that was mostly January and February, showing us that December data was not an anomaly and therefore added more weight to their financial analysis,” Rosenfield said.
Planners still chose not to update the budget to account for this, though, because Newton Public Schools had already built its budget off the original estimate of a 7.8 percent increase, according to Rosenfield.
“We didn’t want to drop a $1.3 million increase on them,” Rosenfield said.
Instead, financial planners decided to keep a 7.8 percent increase in the budget and make up the difference with “free cash,” according to Rosenfield.
Newton has more than $23 million in “certified free cash” or unspent money left over from past years’ budgets. This money is mostly used to cover unexpected expenses in a budget year, though this year, a combined $10 million of it is planned to be spent on one-time city initiatives.
Ward 4 Councilor-at-Large Leonard Gentile asked why the city was willing to allocate free cash for health insurance, which is a recurring cost for the city, when previously, Chief Financial Officer Maureen Lemieux had called the use of free cash for recurring needs “not fiscally responsible.”
“That’s essentially an ongoing operational expense, right?” Gentile said. “But when it comes to other operations that we’ve talked about, right, say, hiring a new [full-time-equivalent employee] for something, the argument has been made, well, we can’t use free cash for that, because that’s an ongoing expense.”
But Rosenfield said the insurance situation was different because the city would have included it in the budget if it had known costs would rise so high.
“Had we known in the very beginning, had we known in November, December, that we needed to increase health insurance by 11.2 percent, that would have been part of those conversations back then,” Rosenfield said.
Gentile acknowledged that there was some difference between the two situations but maintained that the city would need to determine more defined guidelines for what qualifies as an “ongoing operational expense” in the future.
“I’m just saying in terms of money, it is functionally occupying the same space, so I think, like you said, you’re gonna have to figure out how to cover for it or deal with it,” Gentile said.
Lowering costs in the future will require investment in preventive care, given that the city tends to keep its employees for long periods of time.
“It’s different when you’re a municipality,” Lemieux said. “People stay with us for their entire careers, and then we, more or less, from an insurance perspective, own them for life.”
All seven councilors present voted to approve the allocation.
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