Funds Rate to that historical low of 0.25 percent. The Fed signaled that they expected rates to remain at those historic lows until 2023. However, the Federal Open Market Committee (FOMC – the Fed committee that determines interest rates) started the “tightening” process in March 2022 by raising interest rates 0.25%. At subsequent meetings, the Fed greatly accelerated the pace of rate hikes, and by the end of 2022, the fed fund’s target rate stood at 4.25% to 4.50%. The 0.25% rate hike in March 2023 followed a similar rate increase in early February. The fed funds target rate increased further to the 5.25% to 5.50% range in mid-2023 through Q3 2024 but has now returned to the 4.25% to 4.50% target range. At its most recent meeting, March 18-19, 2025, the FOMC did not adjust interest rates. However, there is still a significant amount of uncertainty, considering everything currently happening in the world economy. While the city expects significant interest income to continue in FY2026, it cannot expect it to continue nor can it “bank on it” in subsequent years. The city expect that Interest income will become a “declining” revenue stream over the next few years and must budget this source of funding carefully. The city set the interest income revenue budget at $6.5 million, an increase of $1.5 million over FY2025 (net of extraordinary interest on Bond Anticipation Notes). As always, all surplus interest income above the $6.5 million will drop to Free Cash where it will be invested in and appropriated for much needed one-time expenditures. Revenue from Parking Meters & Parking Violations Parking meters were first installed in the 1930s to instill some order to the chaos of street parking. Charging promotes turnover to regulate the use of a scarce and valuable resource – curb space in dense areas. Over the years, the city has installed new “smart” parking meters which accept credit card payments and allow the city to monitor how consistently they are utilized. Throughout the pandemic, the City made the conscious decision to not enforce parking policies, as an attempt to entice people back to the village centers. After the pandemic, the City began enforcing the parking restrictions again. As such, the city expects FY2025 parking meter revenues to total $1.0 million and have included a projection of $1.1 million in the FY2026 budget. Enforcement of parking policies has a direct correlation with revenues from Parking Violations. Therefore, the city have slightly increased our FY26 budget, to $1.05M. State Education Aid - Chapter 70 Chapter 70 State Education Aid is the largest source of financial aid from the State that the City of Newton receives. The Student Opportunity Act, signed in 2019, introduced the most significant statewide update to the education funding formula since its inception in 1993. The bill, passed before COVID-19, is intended to infuse an additional $1.5 billion annually into the state’s education aid, as well as to increase funding to school districts for transportation, school construction and renovation, and special education. The bulk of the new funding has been directed to school districts with the highest concentrations of low-income students, thereby aiming to close achievement gaps and provide opportunity for all students in the Commonwealth. The additional financial support for the Newton Public Schools has been modest, increasing less than the rising costs of NPS and less than the growth in Newton’s revenues.
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