City Council - Ways & Means Committee Hearing on Docket #0201

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Good afternoon. For the record, my name is Benjamin Weber. I'm the District 6 City Councilor and the Chair of the Boston City Council. on Ways and Means. Today is February 26th, 2026, and the exact time is 2.10 in the afternoon. The hearing is being recorded. It's also being live streamed at boston.gov slash city dash council dash TV and broadcast on Xfinity Channel 8, RCN Channel 82, Fios Channel 964. Written comments may be sent to the committee email at ccc.wm.boston.gov and will be made part of the record and available to all Councillors. Public testimony will be taken at the end of the hearing. Individuals will be called out in the order they've signed up and will have two minutes to testify. If you're interested in testifying in person, please add your name to the sign-up sheet near the entrance of the chamber.

If you are looking to testify virtually, please email our central staff liaison, Karishma Chauhan at Karishma, that's K-A-R-I-S-H-M-A dot CHOUHAN at boston.gov for the link and your name will be added to the list. Today's hearing is on docket number 201 in order for a hearing to discuss Boston's FY27 operating budget. This matter was sponsored by myself and the Vice Chair of the Ways and Means Committee, Councilor John Fitzgerald, and was referred to the committee on February 4th, 2026. Today, I am joined by my colleagues in order of arrival, Feel free to challenge this, but I have Councillor Pepén, Councillor Flynn, Councillor Murphy, Councillor Culpepper, Councillor Fitzgerald, and then Councillor Breadon. We have a letter of absence from Councillor Santana.

I am going to Because we're kicking off the budget season, really, with this meeting, I'm going to give each Councillor two minutes for an opening statement. It includes Councillor Flynn. And I just, you know, Just briefly, Councilor Flynn will get the full two minutes, but subject to further review. Thank you. Okay, so we're here to kick off the budget season and we've We've had working sessions over the RFIs, but one thing I wanted to highlight and I think the administration wants to talk about is how healthcare costs and the increase in healthcare costs are going to impact Our budget next year, we've received a letter from the Chief Financial Officer, Ashley Groffenberger,

Today detailing some of the reasons why this is an important issue for our budget review and our budget approval. for the FY27 budget. So I want to thank the administration for being here. We're joined by Ashley Groffenberger, who's the Chief Financial Officer. Alex Lawrence, who's the Chief People Officer, and Lou Mandarini, who's the Senior Advisor for Labor Policy. Everyone's going to have time for questions, but I'm just going to give everyone two minutes. I'll have to relearn how to operate this machine. But I'll give you two minutes for an opening. So, Councilor Pepén, you have two minutes.

Thank you, Councilor Weber. And thank you to the team for being here today. Kicking off budget season for us is a very important topic across the city. Obviously, it is what decides how much money is put into each department and how that impacts the residents of Boston that we serve. We take very serious here in the Chamber. We've already seen news, obviously, that we're reaching a tough spot with our budget. We have to really look at every single Santana we spend and how is that going to impact the services that are given out and distributed throughout each department that's that's truly what I am very curious about is how you know our day-to-day services are going to be impacted as our public works department our Parks Department, our Streets Cabinet. I really want to make sure that the neighborhoods that I represent and the entire city, honestly, is still receiving quality service across All neighborhoods. And I want to make sure that we as counselors are advocating for each of our neighborhoods.

I know that we have to take very strong looks at to where we can pull some of that money or if that money is even there this time around. I'm going to be very intentional this year and I'm going to focus my questions on just where are departments getting their money from and how are employees going to be impacted moving forward. But looking forward to this conversation, very thankful that We're having this meeting. Thank you to the chair and vice chair of this committee. We'll get forward to the conversation. Thank you.

Okay. Councillor Flynn, two minutes. Starting a minute and a half ago.

I know. I know. Thank you, Mr. Chair. And I would like to echo what Councilor Pepén has highlighted, too. This is going to be a very challenging and difficult time in our city. And what I focus on and what I will continue to focus on is for Boston to be fiscally disciplined, fiscally responsible, Transparent, accountable, even while we provide the best services we can to the residents of the city. I do think there's going to be sacrifice that we all have to make. as elected officials and city residents as well. That will be cuts in services that will impact some residents. I am interested in learning more about the Healthcare costs that the administration has mentioned.

We had a hearing, kind of an informal hearing. I believe it was in the Curley Room. That was one of the issues I had, and I know some city employees and unions have mentioned that issue as well. So I'm looking to learn more about that and get more information on that. Thank you, Mr.

Chair. Hearing and getting ready for budget season. A couple of things. I had a hearing already and was talking to a department head and how they worded it. I like to say, you know, if we're going to all be expected, you know, we're going to have to take a haircut. Like, I hope we all need to do it, right? We're all going to have to do that. And but in my opinion like fair doesn't always mean equal and to me like fair I think means that each department has at the end of the day what they need. To be successful and to provide the services so I'm not sure you know what the messaging is so I'd like to just hear and I assume during this hearing we will hear like what message has been sent to each department head who makes these budget decisions.

We've seen it now that we have the amendment ability that when we want to pull even $100,000 from a department like Veterans that only has a couple million, It has a much bigger negative impact than if we're pulling that amount from, not that we have ability, but like a $1.7 billion school budget, right? That some budgets like police and fire and others are just so much bigger. Thank you. Thank you. Thank you. What each department expected to do so that I have a better understanding of how to advocate. Thank you. Thank you, Chair.

Okay, thank you very much. We've been joined by Councillor Durkan. We're just having two minutes for questions. Opening Statements, and then we'll hear from the administration on healthcare costs. Yes, I was about to say, Councilor Culpepper, You have two minutes. And then before we get to questions, I know Councilor Culpepper has a hard stop at 3, so we may shuffle the order of questions. But Councilor Culpepper, two minutes for an opening.

Thank you, Council Weber, for convening this hearing on the fiscal 27 operating budget. I believe it's critical that we look closely and drill down into the details, not only for ourselves as policymakers, Before our constituents who are counting on us to ensure that every dollar is being spent responsibly and in a sustainable way. When we really think about where we are, I hope to work hard to invest in the residents with a budget that supports our schools, our parks, Our streets are libraries, housing, climate resiliency, and community safety.

I think that when you look at these, as you said in your order, the challenging times that we're in, it's incumbent upon us that as we review this budget and as we discuss What significance, what's important that we make sure whatever we do that the essential services to our residents in the city of Boston are provided for. Thank you. Mr. Chair, I won't have any questions. I'm going to run right out at the appropriate time. Thank you.

Okay. Thank you very much. Councilor Fitzgerald, two minutes. Thank you, Chair.

Vice Chair. Please. Thank you, Chair. Appreciate it. And thank you, the administration, for being here as well. We know that there's a lot of cost increases coming and maybe not as much revenue as expected and so obviously something's got to give so I'm looking forward to working with you all over this budget season and my colleagues. To prioritize, make sure we understand where that money's going and for what, to deliver the best services, and so looking forward to those conversations.

Thank you. Okay, thank you very much. Councilor Breadon, you're up, and then Councilor Durkan.

Thank you Mr. Chair and good afternoon everyone. I do understand the whole concerns about healthcare costs. It seems like this year we're expecting an Thank you very much. Exceptional increase in healthcare costs. I know we're in the middle of this Snowmageddon sort of effort that we're in the middle of, I anticipate that out of the financial year 2026 that our snow removal budget is going to certainly make an impact on any balances we may have in there.

The other thing I'm anticipating thinking forward is thinking about a summer of special events, the 250, the big tall ships, I call them the big ships, the tall ships, and FIFA, the World Cup. Do we have any projected costs for increased overtime for police department, EMS? We need EMS coverage for all of these events. Extra security that we might need. Any projected costs and all of that. But so I'm just trying to get like, it's not a normal year that we're also contenting with these other fixed costs that are increasing dramatically. I'd love to get some more insight into that and see where there's any wiggle room because we also want to really protect our essential services and the things that the city and our residents expect going for every day service that That's the business of government.

I look forward to the conversation and thank you all for being here.

Okay, thank you for that. And I will say, so we do have another sort of, we're early in the budget process. The mayor won't produce the budget to us until April. but having these hearings pre-budget and helping us advocate for what we want to see in the budget We do have another budget hearing with the CFO and I believe Jim Williamson and Sheila Dillon and perhaps Monique from Moya. on March 5th. And so I am hoping that there will be other discussions outside of health care in terms of police overtime and things like that. We can submit questions before that. and many more.

Durkan, you have two minutes for an opening statement. And then we've also been joined by Councilor Ruthzee Louijeune, and you'll have two minutes as the last opening. Jerky.

Thank you so much, Chair Weber. I think we're all coming off of the GIC's decision this morning to eliminate GLP-1 medications for obesity. Looking at the slides for today's presentation, the city has the same decision to make. As a result, I know 22,000 state employees who rely on medications for weight management will lose coverage. A lot of those folks are my constituents. I know the City of Boston's Live Long and Well agenda makes it clear that cardiometabolic diseases, including obesity, diabetes, and hypertension, are one of the top three drivers of premature death in Boston. and Black Bostonians are three times more likely to die from diabetes compared to White Bostonians. Latinx residents are nearly twice as likely. GLP-1 medications are not vanity medications. They're helping people across the city and across the Commonwealth manage obesity, reverse diabetes progression, lower blood pressure,

I think today there was a very split decision that was done at the GIC. It just got some coverage in WBUR. I think that That is really the top question of today is what benefits will city employees be able to access? This is a union issue. This is a labor issue. This is a disparate impact issue. And so I know that health care costs are planning to go up or expected to go up $80 million. The question for me is, how much of that is GLP-1 medication? Are we as a city doing everything we can to protect coverage? I was open about my own use of GLP-1 medication on the council floor. and many city employees have now come to me as their resource for information about what the city is doing next. So I feel a deep responsibility to ask these important questions today. Thank you.

Okay, thank you very much. Councilor Louijeune, two minutes if you want to make an opening.

I just want to say thank you for being here. I know that we have an incredibly difficult year because of The world in the context of everything that's happening so there are a lot of challenges and difficult decisions but our budget must continue to reflect what we value here in the city and must continue to make sure that we are taking care of all of our residents and sharing in the prosperity of this city. I will say that, especially when it comes to rising healthcare benefits, I think there's a reason for us to be concerned. I'm still very proud of every vote that I took here on the council to support our city workers, our teachers, our folks working in public works to make sure that they have the health Thank you. Thank you.

The leadership of the chair to make sure that we are putting forward a budget that is both fiscally responsible, demonstrative of our 12-year AAA bond rating, but also takes into account the reality that we're living in. Thank you.

Okay, thank you very much. So now we'll go to our panelists. I think you have, we received the letter. Thank you very much. Hopefully everyone's gotten a copy of it. on the rise of healthcare costs. If you have a presentation, I know there's some slides. I'll hand it off to you.

Thank you very much. Thank you, Mr. Chair and members of the council. I'm Ashley Groffenberger. I'm the Chief Financial Officer for the City, and I'm joined by Alex Lawrence, our Chief People Officer, and Lou Mandarini, Senior Advisor to the Mayor on Labor. Thanks for having us here today. Just I will mention, as the Chair mentioned earlier this afternoon, I shared a letter with all of you giving a kind of Thank you. Thank you. Very much in the thick of our process, we will introduce a balanced budget to you all on April 8. And at that time, we'll be able to speak to a lot of the choices and decisions that we made in order to deliver that balanced budget within those difficult financial constraints.

One of the constraints I talk about in the letter and which we're here to talk to you about today, kind of the surprise cost growth of the year, is our rise in healthcare costs for the city. And so we have a couple of sides today to give you kind of some overview of how we handle health insurance here in the city. and talk through what has happened to get us to the point where we're anticipating that costs will rise $80 million in the next year. Got it, okay. Okay, so this is really just a table setting slide here. So a couple of key points to understand as we kick off this topic. So the city of Boston provides Group Health Insurance, Life Insurance, and Dental Insurance to our employees, retirees, and their dependents. We are self-insured, which means that we assume all of the financial risk for medical claims.

Rather than purchase full coverage. And this is pretty standard for large public and private sector employers to be self-insured. Every year we go through what's known as a rate setting process, and that is something we do in consultation with our health insurance actuary, which helps us to project What we think our costs are going to be for the next year and the rates, the revenue we need to generate in order to both cover those costs and make sure we're meeting our reserve goals. And then the third important thing to note here is the city since 2011 has collectively bargained health insurance with a group of our unions known as the Public Employee Committee. which consists of union representatives and a retiree representative from our labor unions.

We enter into multi-year agreements with our unions for our health coverage, and that covers things like the plan design, your co-pays, all of that. And so we're locked into those agreements. We're currently in the middle of a seven-year agreement with our unions. And so any plan design changes or anything we want to do aside from setting the annual rates must be done in consultation with the union partners on the PEC. So we pay for our health claims through what's known as the Health Insurance Trust Fund. and we pay for claims and other expenses out of there directly. The revenues that go into that fund are the premiums that our employees pay as well as our employer contribution to those to health insurance, which is reflected in the city's operating budget.

And we pay all of our medical expenses out of that, claims, administrative fees, that sort of stuff. So that's something that we manage. We also maintain two reserves associated with that trust fund, a very technical reserve called the Incurred but Not Reported or IBNR Reserve. which is basically just a way for us to ensure we have sufficient cash on hand to pay for claims that we are aware of but have yet to be paid out. And then we also maintain what's known as a catastrophic trust fund reserve to help us deal with Any unanticipated high-cost claims and as a matter of policy the city maintains a 10% catastrophic reserve in the trust fund. So a little bit of context on how health care costs have changed over the last couple of years in relation to the trust fund.

So for many years, we had more Thank you. Thank you. to essentially take that surplus and over time spend it down in order to subsidize rates for employees. And this was very stable and it allowed for us to provide Annual single digit rate increases and keep rates very, very stable. So that moved forward very, very smoothly until about FY25. In FY25, the year that just ended, We saw an unexpected jump in claim activity and the costs both wiped out all of our remaining surplus as well as most of our catastrophic reserve. And this is kind of the key of why that happened.

So there's kind of a perfect trifecta of things that happened all at the same time. So at the same time that our surplus was stepping down as we had planned, we saw a nationwide increase in health care costs. We saw a series of exceptionally high cost claims come in to get charged to the trust fund. We had two claims. I think that together totaled $7 million. and then we have seen a dramatic increase in the utilization of GLP-1 for weight loss. So due to our continuous high cost claim activity, The trust fund at the end of FY26 is expected to actually be negative. So even when the fund is negative, we don't have a choice. We still have to make claims. We're able to manage that through that IBNR Reserve that I talked about, that kind of like cash flow management.

But ultimately, we have a fiduciary responsibility to restore the trust and make sure we're able to pay claims. So that leads us to FY27. and the context for the large increase in healthcare costs. So if we're going into FY27, we know that we have to close that projected trust fund deficit and we also need to rebuild back part of our catastrophic reserves that were wiped out in the last two years. So based on that and budget availability, we have with our actuary or consultant, have proposed a rate increase of 22.6%, which allows us to build pack a part of our reserve, as well as ensure we have sufficient revenue in order to pay claims. From an operating budget perspective, a 22.6% rate increase would result in an $80 million increase to the city's operating budget, including BPS and BPHC over FY26.

And for context, for the last eight years, the average year-over-year and many more. Our operating budget increase has been around $10.6 million. On the employee side, a 22.6% rate increase would be for sure the largest year-over-year premium increase that we've seen. Remember, and we've included an example here for what that would mean for an employee on our most popular plan, which is the Blue Cross Blue Shield standard HMO family plan. Under a 22.6% rate increase, that would mean a monthly increase of $148 a month or just under $1,800 a year. And this just graphically depicts kind of how our operating budget for health care has changed over time. So the red at the end, that very steep increase, is what we would be experiencing at the 22.6%.

It's by far the steepest year-over-year increase we've seen at least since 2001. are a number of plan design changes that could be made in order to impact this. As I mentioned, because we bargain for these benefits with our unions, it requires The first option that has been and again we do this in consultation with our actuary that helps us to understand the different levers would be to implement what's called utilization management. Utilization management is a standard cost control mechanism that

in the health insurance market that really just ensures that people who are taking drugs, it's a clinically appropriate prescription or drug for that person to be taking. And so there's some additional steps that happens to ensure that, again, it's clinically appropriate, people are meeting the goals, and that it makes sense for a person to be on a particular medication. We have this feature in our MGB plan, but it is not currently in our Blue Cross Blue Shield plan and we are currently the only account for Blue Cross Blue Shield. that does not have utilization management for non-specialty drugs included. And so if we were to implement this utilization management, it would bring that rate down to 20.3%. and save $9.2 million relative to that 22.6%.

The second option that are possible intervention that's been looked at is the possibility of Implementing utilization management and discontinuing coverage for GLP-1s for weight loss. Right now, about just under 8% of our non-Medicare plan members are utilizing these drugs. The impact of taking coverage away for GLP-1s for weight loss would be a 17.3% rate increase over last year and just under $18 million in savings, again, relative to what the cost would be. With no changes. And as Councilor Durkan mentioned just this morning, the GIC voted to discontinue coverage of these drugs for weight loss. And we're seeing similar trends. elsewhere. So I know that was fast. I know it was complicated and technical.

But I think that's what we have for you all today. We welcome questions. And thank you for having us.

Okay, the other panelists are here to answer questions. We've been joined by Councilor Worrell. Councilor Worrell, I gave everyone two minutes for an opening. No? Okay. So we'll just get... Right to questions. So it's Councilor Pepén, Councilor Flynn, and Councilor Murphy. Everyone's here. So set it at five minutes, and then If we need, because we already had two minutes for an opening, I'll set it at five minutes and then see how that goes. So, Councilor Pepén, the floor is yours.

Thank you, Mr. Chair.

I

Obviously, the concerns about the increase in the health insurance costs for the city is a lot. It's $80 million. How are we planning to be able to pay for that increase? What are you guys looking at to be able to balance that out with our budget originally? How are you guys looking to approach it?

Yeah, so this is just one of the many kind of pieces in the puzzle. So as I mentioned in the letter earlier, we're expecting our revenue growth to be somewhere between 1.5% and 2.5%. And when you have costs that are growing at this rate, you need to bring that into balance. I think this is part of why we've asked departments to propose reductions. We're looking at what other central levers do we have available to make this all fit together and balance. And then, of course, there's The options for plan design changes, which would bring this cost down a little bit, which would be helpful, right? So any savings we can take from here, if there are plan design changes that we're able to make with our union partners, is one less dollar we have to take from somewhere else, right? So it's all part of this large balancing act that we're doing right now.

Yeah. Kind of a follow up with a two-part question. Have you guys received the proposals from the cabinet chiefs of where? They think there would be potential cuts or where could they see that could fit? And then two, I guess to Lou about the unions and how they are foreseeing this health insurance. Is there a conversation that are happening that you think that could lead to a...

Compromise there yeah so on the your first part of the question yes we received proposals back from departments and this is exactly what the budget team is doing right now digging through them, understanding them, what's real, what's possible, what's the impact of taking this. It's a lot, weeks of work that they do. So we did receive them and are still going through. But the things that have been proposed really run the gamut. We don't need to send as many letters next year, so we took down postage versus... We need to cut this program in half. So it really depends. And every department has different levers and different amounts of flexibility. So that's what we're reviewing right now.

Uh, Councilor, if I can, uh, so your question was, uh, are we having conversations with the unions? Do we think there's ground for a compromise?

Yeah, like, have you guys started already to talk about that there is a possibility that we look at the health insurance?

The answer to your question is yes. And the other answer to your question is we certainly hope we can find a compromise. So in our course of collective bargaining over the life of our administration, we've settled 65 contracts. and we've solved some big problems in the process of doing that. This is another contract. You know, it's a distinct one. It's coalition bargaining with all the unions at the same time as opposed to a contract by contract situation. So yeah, I think we hope that there is a ground for a compromise, a common sense solution that allows us to provide for our employees but also protect the financial stake of the city. We certainly hope that that's the case.

Okay, and then my last question before I yield back my time is regarding Pilot. And I just know that on the latter half of last year, I think I saw an agreement with the city of Northeastern That Northeastern was agreed to I don't know forgot the exact number of lump sum and I think earlier this year there was an agreement with Wentworth I just want to know like How does that help us balance our operational budget moving forward with the fact that the housing taxes and revenues are not the same? How does that complement us and help us sustain our budget?

without speaking to the specifics of both agreement. Of course, any additional revenue beyond sort of what we normally collect is helpful, right? It's gonna help offset the need to do a reduction or just close that gap even more. So I think there's been a lot of great work that has happened in pilot to try and at least like solidify those and and clarify I think I think more than anything it kind of helps us with year-over-year planning and projecting out you know we've got a five-year agreement we know and many more. Thank you.

I would like to look at the different revenues that we can get from outside. And so I'm glad that I saw those two partnerships come into fruition and hopefully there's more in the future. But that's it for me, Mr. Chair. Thank you so much for being here again. I look forward to the continued conversation.

Okay, thank you very much, Councillor Flynn, and then Councillor Murphy, you're up next, followed by Councillor Culpepper, if you decide you have anything. Okay, Councillor Flynn.

Thank you, Mr. Chair. We heard from BPS and from the administration maybe possibly a $53 million deficit due mostly to spending more than we budgeted on health care and salary and benefits. Has BPS now budgeted? What impact is that going to have? That $53 million in BPS is also probably going to cut Several hundred full-time positions. Will City Hall cut that many positions as well?

So on the BPS side, the shortfall they're experiencing is a FY26 issue, and we think we've been able to work with them to fully reflect the costs of health care in their budget for FY27. So we're hopeful that we've addressed that issue on their side. On the city side, in terms of, sorry, is your question are we cutting

Yeah, BPS is probably going to cut several hundred positions. Will City Hall cut several hundred positions as well?

Yeah. It's a little early to say. I know that's not a very satisfying answer. I think we're hopeful that we don't have to do anything that extreme and that we're able to find ways to balance the budget responsibly that preserves services. And so the hope is that we don't need to do any extreme reductions like that.

With BPS, with their overspending, do we see any other city departments that have overspent their budget as well over the last year?

So I'd say, you know, every year we kind of have areas where there's overspending. So snow and winter management is going to be a big one, particularly for this year. So you'll see that in public works. Historically, we have public safety overtime that exceeds what's included in the budget. So we're constantly needing to manage through that to ensure that we have sufficient resources to cover those shortfalls throughout the year.

Okay. Through the Chair, may I get a list of overspending of any city budget including BPS and how much they overspent and the reason they overspent, please? Yes. Okay. Thank you, Mr. Chair. Let me go to, I was just looking at the chart quickly. but based on page five, did the city impose a high enough rate

I believe the rate increase in FY26 was just under 10%. And for context, that was probably one of the higher rate increases we had seen many years prior. Because again, as I mentioned, we were able to use the surplus in the trust fund to help us subsidize the rates. I think what surprised us this year, and had we known this We would have definitely projected higher costs and therefore would have necessitated a higher rate. I mean, it's a projection, right? You can only project so well, but it was the Again, extremely high cost claims that you really have no ability to understand are coming.

They just come and we have to pay them. And then I think it was, again, the dramatic proliferation in usage of the GLP-1. Do I wish we had assumed those things were happening? Of course. But that is kind of the nature of being a self-insured entity is that you assume that risk. And as a result, we're needing to deal with that in this upcoming budget.

OK. And then my final question. I know you spent some time talking about the particular weight loss drugs and access for city employees. What does that I didn't catch the figure, but what is that costing taxpayers or how much is the city spending on that? I didn't catch that.

I don't know if I have the total figure. But at least what we have included as part of what we've presented to you today, should the city discontinue coverage for GLP-1s for weight loss, it would save us about $18 million.

and many more. A large number that the city is spending on that type of drug. Does that seem out of the ordinary?

I don't know kind of like how much we're spending on different, how that compares. I do know that these are expensive drugs. I mean, that is what we've heard from our consultant that these are sort of extraordinarily, can be extraordinarily expensive. and that is what's driving a lot of this cost, but how much we spend on this versus GLP-1s for diabetes or other types of drugs, I can't say, but we can certainly kind of try and provide you some of that context.

Thank you. Mr. Chair, thank you for giving me an extra minute. I appreciate it.

Okay. So, Councillor Murphy, followed by Councillor Culpepper, and then Councillor Fitzgerald. Councillor Murphy.

Thank you. When Councilor Flynn mentioned the shortfall that BPS has been open about, you said that you've been working with them and you think you've addressed the issue with them. What do you mean by that? Have we given them money? Because if I remember correctly back in, was it 24? We supplemented their budget with about $30 million.

Yeah, so what I meant by that is as we've been planning with them for FY27, and of course they've introduced their budget to school committee at this point, In working with them in the development of that budget, we believe that their budget appropriately reflects the cost of health insurance for FY27 such that we don't replicate the same issue that is happening in FY26.

So when we come this time next year, we're not going to see that they're also. In that deficit?

Yeah, our hope is that BPS will not be in a budget shortfall due to health insurance in 2017.

But it's not addressing the fact that we are right now in a 50-something million dollar deficit and we'll be cutting hundreds of jobs.

Yeah, again, the 27 budget does not speak to the 26 issue. That will require interventions during this fiscal year to address.

So that's future, trying to plan ahead to not be in the same situation. We always kind of know about snow, and if we get none, there's extra money, and when we get a lot, We spend more than we usually save, but that just makes sense. We also know if we have teams winning lots of championships, we spend more on overtime. And healthcare seems to kind of be a new, Everything that we're hearing is costing us more. Are there other things on that list in the past or you're concerned that could pop up as something? That could throw off your planning in such a way.

Right. We always do our best to think ahead and know what costs are coming. You never know what's going to surprise you. and we do our best to be really conservative so that when these things happen, we have some slack in order to absorb it. But I think in particular with health insurance, this was, really like I said a kind of trifecta of things happening all at once that had we known they were happening we would have done differently but are needing to address it now. I'm hopeful next year is less eventful in terms of weather and international events, but you never know.

We're going to be spending a lot of overtime, which we should be, for safety coming up this year. And we've budgeted for that.

So historically, you know, Public safety over time is one of those things that we historically need to overspend on just because, like you said, it's something we have to deliver. We have a duty to provide safety to residents and visitors. And so we've actually... and many more. So far, we've been able to deal with it, but it's something we track very, very closely.

And it seems like the culprit for this override for BPS, it seems like we're only looking at the BPS override in their budget due to health costs. But if this medication is something that the members are using and it's successfully keeping them healthy and costing less across the board on other health issues, Is it always you go to the original source or are there other ways to supplement the money keeping the benefit there if it's something like, so what's that conversation like? because it isn't always like when you have an expense somewhere, you know, heat's more for me this year. So what am I doing? Like going out to dinner less. So I'm not like not turning my heat on. I'm continuing to keep my house warm, but I'm spending money less other places. So have we looked to other places to supplement that override and not just wipe out this benefit? that it seems like many of our city employees are relying on?

Councillor, I could take that one. I think one of the central problems with these drugs, and this is a problem that everyone everywhere, and the GIC vote this morning exemplifies that, is struggling with. Federal Government, private sector employers, non-profit employers, employers everywhere. In terms of the cost of these drugs and what it's engendering for this spend on healthcare for various people. I think the other problem is that these drugs, while popular and very effective in a lot of ways for a lot of people, The literature does not yet support the idea or have any evidence that we're saving money, and we don't have it in our plan. on strokes, heart attacks, kidney failure. I mean, that may well, addiction, yeah. I mean, we don't, the drugs are too new to have the, Proof that they're offsetting much more invasive sort of surgical or medical procedures.

So that's the real challenge is you're paying for these, but you also don't know on the other end are you actually

If I could just put two, because I know my time's up, questions on the record. And like in my opening statement, if you could just share what was told to department heads and if that was told to all of them in the same room or the same way. just a thought like as we go into budget season with the amendments do you feel like it's going to be harder this time to approve amendments seeing as though our departments are already seeming to make cuts and Thank you. Thank you.

Okay, thank you. Thank you, Councillor Murphy. Councillor Culpepper, then Councillor Fitzgerald, and we'll see who's up after that. So, Councillor Culpepper, five minutes.

Thank you, Mr. Chair. Just a couple of questions that I didn't anticipate. Under the Public Employee Committee, Um, and I see it's been extended for two years. So did it end at five years and then you negotiated a two year extension? So in the two years, you're going to start negotiating next year. For the end of that two-year period. Correct. And under the employee, the cost-sharing employer, employee's percentage, what's that percentage now?

I think it's 80-20. 80, yeah.

And when you look at page 5, and you look at the employee impact that that has, 22.6%, The rate increase, and that for an employee, it's going to jump from $655 to $803, $148 per month for each employee, $1,700. How will that be included? Will that be included in the current cost sharing between the union employees?

Yes, so that is the... and many more.

assumed with regard to the cost sharing or is that yet to be increased because of the cost sharing agreement?

If I think I understand your question correctly, this is reflective of that 80-20. So, yeah, there's no assumed change to cost sharing. That's what it would result in.

So they won't be paying any more than the 148? Right.

There's no proposal to change the cost sharing for this next year.

Okay. So for at least the next year, it's only going to be $148 increase.

Per month. For this one particular plan.

Right, right. And then next year it could go up more depending on health care costs?

Exactly. When we do rate setting next year, we'll know.

And I saw the Boston Public Schools there, of the 80 million there, The cost was 53 million of that 80 million?

No, the 53 million that has been referenced is the expected I don't know off the top of my head. I'd have to check with the BPS team. Could you let us know? Yep, I will. I think they mentioned that.

And they're hearing what their portion was. And the Boston Public Health Commission, what's their percentage of that $80 million?

Relatively small compared to the city and BPS. I can get that for you. Okay. Exactly how much of that they represent. Okay.

Thank you. And just one final question. So at the end of the year, if a department has Five vacancies all year long. Five vacant positions at Unfield all year long. At the end of the year, they're going to have an excess for that department. What was the total excess that the city had last year?

So across all of our departments? Yes. Well, I don't know. I will tell you the end of the year net-net, we had a budget surplus, and the number is... Thank you. Thank you. Thank you. Thank you. we uh to close out the year where the city auditor moved surpluses from one department to cover shortfalls and others so that um we've sent that to you and i'm happy to Worrell. I will tell you, though, we saw very few of those instances. I think in past years, and Councilor Worrell will remember, the urine transfer list was multiple pages long. I think this year it fits on one page.

because there were a lot fewer opportunities to do that. So we're seeing less year-end savings in departments than we used to.

So from last year's budget excesses, You took those excesses. They didn't get rolled over to this year. You used them for last year's expenses and costs.

We're able to use those surpluses to cover Shortfalls in other areas like public safety overtime or snow or things like that that's we're allowed to do that under state finance law right and so for this year there's no surplus well that can be applied to So we track expenses all throughout the year, monthly. And so it's obviously things bounce around. You get a better picture of things as the year goes on. So there are definitely some departments that are and we've put expenditure controls into place. So there are some departments that are going to have more excess at year end, but then again, snow, public safety over time, those types of things kind of soak up and many more.

Do you have an estimate of what the end of the year might look like in terms of budget?

Not yet, no. Be you know again it's like when we've got it we've got a factor in these snowstorms into that whole picture so it's a little it's a little too soon to say what this year will look like for us.

So what I was trying to get to was Let's say you have this surplus at the end of the year. Maybe using some of that surplus to pay for some of the increased healthcare costs?

Yeah, so we're not allowed to roll over from year to year.

No, no, no, I was talking about this year. I was talking about at the end of this year.

Oh, I see.

Yes. Taking the surplus at the end of this year and then applying it to some of the increased healthcare costs to lower what's Oh, I see.

So the health insurance trust fund is what we would, the surplus in the health insurance trust fund is what allows us to subsidize The premiums, typically. I hear what you're saying. If we had year-end surplus, could we apply that to bring down the rates? Maybe. I don't know if we've ever done it that way before. But I will say, from a kind of We like to ensure that we are constantly building up our fund balance and our reserves. And at the end of every year, any amount of surplus at the end of the year goes into our reserves essentially. So we're always, you know, mindful about making sure that those are being replenished and that we're building those up.

Can you get back to us and let us know whether or not that is possible? Yes. Okay. Thank you. Thank you, Mr. Chair.

Okay, thank you, Councilor Culpepper, Councilor Fitzgerald, and then Councilor Durkan.

Thank you, Chair. So I don't, I mean, this is talking about budget and finance, but much more focused on the healthcare benefits piece of this. So while the numbers are very sobering overall, I'll focus on on the context of the health benefits. So how would we feel if the GLP-1 was not utilized? When I'm looking at in FY25 the three reasons given, If the GLP-1 drugs were not as utilized, how much better in shape would we be? How big of the hit is this specific drug versus the increasing nationwide health care costs and a series of unusually high cost claims? Is it possible to break that out?

It is. I don't think I have it at my fingertips, but I think we have information like that from our actuaries, so we can follow up on that.

We'd be feeling better, I would imagine.

I mean, yeah, obviously it's a big piece of it. I think about it, it's a third, a third, a third. It's probably not that neat, but I think it would still be a challenging year given, again, just the cost of health care, these claims, et cetera.

That was all I was trying to say. It would still be challenging. So with other insurance companies now dropping this, does it matter if we do it or is that decision made for us? If the larger insurance companies have said, we're not including this now in our plan, and it's an option, one of our options of how to minimize is to drop the weight loss only, Does that make... Does that sort of... Are they making that decision for us? No. Or is that something we can still do?

No, we still decide because we're self-insured. So if we were, you know... and many more. Thank you.

Okay, Councilor, if I could add to that. The PEC and the PEC bargaining process also makes it, you know, we've got to deal with the unions that reach agreement to make a change like that. That's a plan design change. So, you know, not only is the, as Ashley said, You know, the self-insurance piece relevant to that, but the PEC piece is relevant to that too. That makes it hard to make changes.

Right. So we're not beholden to the insurance companies themselves is what I was making sure. Thank you. My only concern is even if one of these solutions is dropping the weight loss only, I'm going to go on a limb here, but it's almost like when People are getting medical marijuana and you would just, people would just go to their doctor and say, I have anxiety. And they'd say, well, here's the prescription. Like how much, even if we drop it, how much does in reality will it reflect where I could just go to my doctor and say, I'm pretty diabetic. and so just apply it. You know what I mean? It kind of takes that solution that we put forth if we go that route and almost do you really see Will people find their way around it?

Yeah. One thing I will say is in that option where we drop coverage, it sounds very dramatic, but I think it's important to know that it still preserves access. And so there's an option and an opportunity in those types of situations where people can go to basically like a direct-to-consumer platform. in order to get the drugs and my colleagues who know more about these things should say things too. But then you're purchasing it directly from the pharmacy or from a pharmaceutical company and in a lot of cases, The direct-to-consumer costs are a lot less on the commercial side than what we would be paying if it was covered through insurance. So there's still access to them. And I don't know if people will...

go and try and characterize themselves as having a particular illness that would necessitate getting the drug, but there would still be an access option in a world where you're not covering it in the plan.

I would also add to the sort of mid-course option that we have here, the utilization management option is the kind of thing that is designed to tackle exactly what you are talking about, which is the doctor and the provider of care are the ones who guide you in what medicine you get. As opposed to one of the problems you have with these drugs in general, like direct-to-consumer advertising. Ozempic's on TV, so everybody wants it. But in utilization management, the doctor and the provider are making the decision about, is there something that helps you Thank you very much. that it's going to get the results you want and that there isn't some other less costly way of achieving the same results. That's what utilization management does. It's a really vital tool in running a health plan.

Great. And just to hop on Councilor Culpepper's last point, the only way that we can shave that down is through the trust fund. We don't know. There might be other ways if there's excess funds at the end. But right now, the only way we've done it is through the trust fund.

Right, and I guess kind of like in thinking about it, okay, if you wanted to do that, you would appropriate, you know, all the surplus from 26 will become fund balance. You would just appropriate more fund balance to essentially offset The cost to the, so I don't know if, actually, sorry, no, I shouldn't be brainstorming this live, but I'll get back to you, yeah. But we previously have subsidized it through the trust fund.

Councilor I can add one more thing to the other question I mean the other thing that we need to excavate and this is probably in the in the process of negotiating the next pack agreement Are there savings that can offset the cost of having these drugs? You know, at the end of the day, are there other things that we can consider we should have considered that we shouldn't? I mean, the fact that we don't have utilization management is kind of a telltale sign that there's low-hanging fruit potentially out there. And so at the end of the day, I mean, I think the thing that is most important to know, I should say I ran a health insurance plan for years for a large construction union before coming here. Spending more money on a health insurance plan doesn't make it a better plan. It means you're spending more money on a health insurance plan. is a very important thing in doing this.

That's fair. And I know I'm out of time, which is good, because my next question was going to be, is insurance in general just a scam? But you guys don't have to answer that. I appreciate it, Councilor. Thank you.

Okay, thank you very much. We'll leave that one just hanging out there. So, Councilor Durkan and Councilor Louijeune and then Councilor Worrell. So, Councilor Durkan, five minutes. Thank you so much, Chair Weber.

I mean, my advocacy on this has not been shy. I actually led the council in a resolution An emergency resolution calling on the Healey administration to protect access to GLP-1 medication. I am distraught by the decision this morning because realistically it makes little sense to defend NIH funding if we don't also defend people's access to those that that what comes of life-saving of NIH Research. What is good in funding breakthrough science if ordinary people can't afford it? I do need to, with all respect to my dear friend Lou Mandarini, The difference between this direct to consumer is paying $30 with your health care insurance versus $300 a month.

And I think the idea that, oh, you can just go online and get access to certain medications, that is, I would like to clap back against that point, I think. The idea that these medications are a luxury is not accurate. It's life changing for a lot of people. My health care plan, the one that I'm on, is the MGB. and so forth. It is a comprehensive plan and utilization of management is essentially you having to defend your health insurance that you should continue to be on We've all had to jump through those hoops. We've all had family members. I mean, my grandfather, who passed away last year, who was like a very important person in my life, he was given six days to die from his healthcare insurance company. He was given six days, and luckily a nonprofit stepped in to pay for the rest of his hospice.

We know how inequitable health care is, and I think what I'm asking here is that we put employees and public employees in particular at the center of this to make sure that we are operating equitably is incredibly important here. We're not talking about No offense, chiefs getting access to certain medications. We're talking about the person at Public Works who wants to make a change in their life, wants to be healthier, who once they're on these medications is going to be more productive, They're going to offer better services to City of Boston residents because they're going to feel healthier. They're going to have their blood sugar under control. They're going to avoid type 2 diabetes. The stakes here could not be higher. And nobody's going to shut me up about this. This is so incredibly important to the city. Utilization management is, it's a tough, it's a really tough, it's hoops. I understand we've got to get healthcare under control.

I also need to advocate for the folks that, now that I've been open about being on these medications, city employees are coming to me. These medications have been life saving for them. These medications have been life saving for them and life changing. And I think if we are going to be a leader in science in Boston, our city employees should have access to everything that I do think there is cost savings down the line. The idea that there's not a ton of research about these medications is also a farce. So, let me get into my question. So, how many employees of the City, BPS, and BPHC are using GLP-1 medications?

Is there an opportunity to respond to any of that? Yes. Go ahead. So there's a lot. But I do want to say I don't remember saying, and I hope I didn't, and I don't believe that these drugs are a luxury. I didn't mean to in any way convey that. I didn't. I'll say this, utilization management.

No, and I think what I was specifically saying was that the idea that the direct consumer is attainable for most City of Boston employees is not accurate. That's what I'm saying.

Okay, well, I don't think we, I mean, we'll agree to disagree on that, but I think the other issue is the characterization of utilization management is a problem. In the Blue Cross Blue Shield book of business, we are the only plan that doesn't have it. So it is a common sense.

Well, I mean, yeah, go ahead.

It is a common sense cost control mechanism that every health plan everywhere has. So it is not about jumping through hoops. It is not about subjecting people to scrutiny that they don't deserve. It is a common sense middle step. It is. And it can't be mischaracterized as, Being some kind of a thing that is an onerous burden. It just, it's not accurate to say that?

And I'm also not saying we shouldn't do that either.

Okay, and then the final thing I will say, and No one will argue that these drugs are life-changing and can have wonderful results for the people who use them. The problem is this. We can't bankrupt the city to provide them. That is the problem. So the problem at the end of the day is how do we provide all the other services, how do we do all of the things that we need to do in the budget and the operation of the government, When this much money is being allocated to this, it's encroaching this much and crowding out this much stuff. This is a real problem and it is a hard choice, but the cost of this, the escalation of this, The answer to your question as we started, by the way, is 7%. But the difficulty is...

So it's 7%, but I want to know how many people...

It's around 4,700. Okay. Sorry, specifically who are on... Who are... GLP-1 users, sorry, that is not just for weight loss, that is total. So specifically for weight loss, it's about 3,000.

And so that's, they are currently on it as of last month? Because I think the actual stats on GLP-1 medications is that a lot of people are not on it past a year. So I just am curious if the cost would go down naturally. But I do want to get my questions on the record because this is something that I've been, and Chair, I would ask for a little bit of time just to get my questions on the record.

Yeah, that is fine. I'm just, we're not going to get them in. Yeah, I know, yes.

Come back for a second round and get them answered. I'll reserve it. There was one more thing I wanted to address, but I'll...

Okay, I just want to ask who is at the table at the PEC and when is the next meeting of the PEC?

So the PEC meets monthly. There are co-chairs that are met with more frequently, but all of the various unions partake in the PEC. It's a little bit of a different arrangement with the Health Commission. They don't directly sit. The unions there don't directly sit in the PEC, but they adopt the agreements after the fact.

And I just want to ask, has this decision already been made? Okay. Yeah, I'll wait for a second round. Go ahead, Chair.

Sure, you can also, I hear you. Okay, Councilor Louijeune and then Councilor Worrell.

Thank you, Mr. Chair. I really just have one question I want to thank. The admin and for being here in my college for their questions. Are we still on track to meet our OPEB obligations, I believe, by 2027? And is there any relationship between The rising healthcare costs and our ability to meet our OPEB obligations.

Are you referring to our pension obligations? Yes, so we are still on track to meet that by 2028.

And that's 2027?

2028, yes. That's the current schedule.

Okay, thank you. No further questions.

Okay, thank you. Councilor Worrell? Thank you, Chair. Thank you for the panel for being here. On the employee stipend program, for those who don't Use the city plan. What is the cost when they don't opt in? It's like $1,500 or is it $2,500 for those employees?

The opt-out program?

Opt-out program, yep. All right, well, that's fine if you don't know the cost, but have we explored increasing that opt-out stipend? to see if that can...

So that's an issue that's handled in a sort of a collective bargaining agreement by collective bargaining agreement basis. So we just made a change, for example, With the BTU on that so I mean on and the idea is that the theme of your question is You can go get your health insurance somewhere else and that will help us save money, right? I mean We have not explored that necessarily as a strategy, but I'll say this, one problem that we face, and this is something that we see in bargaining again and again, it's not really a problem, it's just a sort of a fact of life in the city of Boston, our employees are married to one another. So you're gonna have a situation where they opt out and it's a firefighter opting out for a teacher or a teacher opting out for a cop. So I mean that's a really common phenomenon in the city of Boston employment.

All right, and then just some questions around revenue. Miscellaneous reoccurring, what, like that revenue, is that street occupancy permits? Like what makes up that? Revenue, Miscellaneous, Reoccurring.

Can I ask what you're referring to? Under revenue, so there's like a few... Are you looking at the budget book or the...

I don't know where this spreadsheet is from.

Oh, okay. Yeah. Okay.

But it has all the revenues like motor vehicle excise, meals.

I can get back to you.

Okay. and Free Cash. I know it was around 552 million in free cash. Do we have an up-to-date number?

We don't. We have not yet submitted our certification for this year.

All right.

We will this spring.

All right. Are we able to use free cash to fund our health trust fund?

I don't know. I can find out.

Okay.

I can get back to you. Do you want the opt-out numbers? I have them now. The benefit itself, most unions have an enhanced benefit, which is $1,500 for an individual, $2,500 for a family. There are a couple unions that have a slightly different benefit. We've been working on standardizing those. and we paid out about 385 of those last year for about $800,000 annually.

And can I just, thinking about your question, Councilor, about using free cash to subsidize, I will find out if it's possible. I would say I don't think it would be a very wise thing for us to do because we're sort of coming off of an experience where we're using a one-time source to subsidize rates and that went very poorly for us ultimately this year. and so to utilize a one-time source our only source of reserves to pay for something that is you know going to be a recurring growing cost while not addressing the underlying issues I think would be a mistake.

That makes sense. And I was thinking more of like a combination of the strategies plus just like the initial investment. Do we, can we get, or do you have revenue projections for FY27 yet?

In my letter that I sent earlier, overall, we're expecting it to be about a 1.5% to 2.5% increase. I don't have the line by line for everything, but at this point, that's what we're Got it.

And through your quarterly reporting, do you see, like, any decrease in revenue in any particular line item? I mean, probably permanent, but any other?

Yeah, I think there's a couple of areas of weakness for sure that we're tracking at this point. Yeah, I think some of those types of permitting revenues are performing a little bit less than we had expected.

All right. And in FY25, do you know what our actual revenue versus our projection was?

I can get you that. I'm sure we've submitted that to you. My team reminds me that you've The ultimate year-end surplus for FY25 was about $22 million. Okay.

And then is revenue then projected off an actual or past projection?

We true up our projections to actuals.

Okay. Awesome. No further questions.

Yeah, and thanks for that line of questioning. I have a hearing scheduled for March 5th where CFO Grafenberger is going to be here to kind of go over the sort of non-healthcare related questions which I think We had a hearing last year sort of pre-budget. We got all that data and so we're gonna work on getting the data as soon as we can hopefully to discuss by March 5th. But thank you for that. Okay, so we're going to have a second round. I have a couple questions. I'm just going to put up five minutes. So in terms of So just for Lou, I guess. So the PEC, all the unions, they all have the same. We have two plans.

One, Blue Cross Blue Shield, and the other one is run by MGB. So that's what we... Those are the two plans we have. And all the various unions are part of the PEC, so they negotiate over the plan design for those.

And so those agreements, we can't just change those plans. We've got two more years before we can make them. and in terms of the agreements, are those for The use of those plans, how granular do they get?

Remarkably granular. It's all about plan design. At the end of the day, all the aspects of plan design... You know, the cost shifting and utilization management, that kind of thing. That's all subject to and, you know, what we go for. That's all subject to PEC marketing. Okay. And that's all outlined, like, in our agreement, right? Okay, I can't necessarily say it's in the agreement, but it's outlined in certainly the law around the PEC and what it is and what it covers and all that.

Not a super important clarification, but we have two Blue Cross plans as well as one Mass General plan. Okay. So three plans total.

Well, in terms of sort of bargaining on the components of these plans, like have we looked into cost savings and I guess the I spoke to somebody who runs HR for a very large company here in Boston and they looked at the pharmacy benefit manager. You can find and less expensive pharmacy benefit managers. That was with Blue Cross Blue Shield. Have we tried to negotiate on things like that?

So that is the work we will be doing in the sort of next phase of plan design in designing our future insurance plans.

Okay. I would also say, Councilor, I think the specific problem with these drugs is that the cost set by the manufacturer is the issue. So every pharmacy benefit manager is subject to the costs that are set by the companies that make these drugs. So you can switch your pharmacy benefit manager. You can try to do that, but at the end of the day, the cost is the cost of these drugs. There are different rebates, there are different savings, but they're very expensive drugs, and that's set by the manufacturer.

Okay, yeah, no, I think that there might be a couple. There's a different model maybe out there. where they have like a flat fee. Anyway, but I leave you to negotiate that kind of thing. For retirees and their we provide health care benefits, how much do you know is that cost and what is the plan with their benefits? And I assume it's in like the OPEB sort of cost for pensions. I don't know. We also do some health care. Yeah.

I guess we have sort of five different specific retiree plans that covers about 12,000 people.

Okay. And do you know how much we spend on that? It's in addition to the $410 million we budgeted last year for healthcare. Okay.

I think that's inclusive. Sorry, we'll have to get back to you on that specifically.

We should also say, Council, retirees are in the pack, so they are part of, in terms of their bargaining strength, they're part of the coalition that bargains this.

Okay, I'm curious impacts on them. Can you just explain the math? 22% rate increase and in your slide presentation it results in an $80 million increase. The 22% applies to our contribution. Is that how that works?

It's part of it. So the city's, you know, the line for health insurance and the operating budget is kind of, is made up of a couple of things. It's our non-Medicare plans, which is what we've been talking about today, our Medicare plans. Our life insurance and our dental insurance. So it's a blend of everything that's happening with those. Whereas the 22.6% we've been talking about is just the rate for the non-Medicare plan. So they're related but it's a little like apples and oranges.

Okay, and then in terms of the increase, we're projecting $80 million increase, how does that increase, How will that impact our thinking for FY28 and 29? Does that mean there has to be another $80 million increase the next year because of some formula that I'm not aware of? How does this impact that?

It's a great question. I think as we update our FY28 forecasting, we will probably be a little bit more aggressive about the assumptions for health insurance growth. I don't know how much we will assume but as I mentioned part of the strategy here is to build up our catastrophic reserve over time so in addition to ensuring that we're putting enough revenue into the trust fund to cover our We need to also be adding a little bit more to rebuild our reserves so that will push our rates maybe a little bit higher than they otherwise would be as we're rebuilding that catastrophic reserve.

Okay, but I guess just to follow up, like, do you think that there'll be a similar increase in 28 or is this a, do you think this is?

I couldn't confidently say how much it's going to be. I hope it's not more, but it's too hard for us to say at this point.

Okay. Thank you very much. We'll go for a second round. To my colleagues, Councillor Flynn.

Thank you, Mr. Chair. Thank you to the administration team that is here. Ashley, just on the health care... Trust Fund. The city pays for claims and other expenses directly as opposed to paying insurance premiums to help insurance companies. Does the City of Boston have any outstanding liabilities in terms of making payments on that? Can you just give me a little bit of background information on how that goes?

Meaning, well, I can tell you we have to pay claims We don't have a choice. I don't know if I'm getting at your question.

Yeah, but are the claims significantly high? Are they in the millions every year? Are there outstanding bills maybe that we haven't paid or does it reach a certain number that it's really so expensive that you have to figure out I'm just trying to get a little bit of background information on that.

Yeah, so we do have some outstanding claims. That's a little bit of that incurred but not yet and so forth. We do hold some money in reserve for claims that we're anticipating but haven't yet come to us. Here is that we are based on our claims experience from this year approaching a point where that trust fund is going to be negative. And we still have to pay claims. So we are able to manage that. Thank you. Thank you. Thank you.

Is that the city paying it or is that employees paying it or is that the union paying it or is it everybody paying it?

It's the fund, which is a contribution of employee premiums, employer contributions to that. So the fund pays the claims ultimately, but the revenue that supports that payment comes from the employer and employees.

Okay. Okay. Thank you for answering that question. I want to get back to the school department with their significant cuts. But if the school department is planning to cut several hundred jobs, is it Is it 200? Is it 300? Or is it higher than that?

I don't know exactly how many I know. BPS will be coming in to talk about that.

But they go to the school committee soon though, don't they? They'll release that information publicly that night.

I don't know exactly what they're planning to present when, but they would be, you know, they would present those plans presumably at the school committee.

Okay, well, just say it's several hundred. Say it's 300 full-time jobs. Maybe it's not that high, but say it is 300. Are we looking at a similar number, and I know I asked this earlier, are we looking at a similar number here in the city of Boston in if we are or if we're not and it's not that big? and many departments are going to see the biggest cuts.

It's too soon to say what we'll ultimately need to do in the budget.

But the only thing, Ashley, you asked the city departments already send you what they want in their budget and you know what figure you can live with. So there's a number that you can subtract their request to what you can pay and it might be a difference of you know 10 million dollars and of that 10 million dollars it's going to impact services but you're not you're not at this time you're not able to say the That significant cuts are going to take place.

We'll certainly need to make reductions to departments. The form of those, whether it's in programming, whether it's in contracted services, whether it's in vacancies, remains to be decided.

That's one of the reasons I did want to see a decrease in participatory budget. I think it's what, $2 million? I did want to see it go down to maybe $100,000, $200,000, keep the budget, keep the department going. I do think during these challenging times, some of those programs and some of that spending does have to be on the table. I know it's politically incorrect to say that, You know, I don't support 11 and 12 year old kids making major decisions on millions of dollars in the budget. This is taxpayer money and we have to be accountable for it. Residents want us to be fiscally disciplined, fiscally responsible, and be transparent. And I do think that department should be significantly cut. Thank you, Mr. Chair. Okay, thank you. Councillor Murphy.

Thank you. Because I'm still here, just if you could answer the question about the message that was shared to departments.

Yes, so in December we issued guidance to our departments as we do every year on what they should put into the submissions that they sent to us in January. and we asked all departments to propose budgets that would be 2% less than the prior fiscal year. So that's the guidance we've provided.

So 2%, like in my opening statement across the board, you weren't choosing which departments you felt should Thank you.

Thank you.

We're not going to see 2% across the board. And did all of them, because it was guidance, right, did all of them come back with that?

I would say most departments did put in a good faith effort to comply with the guidance. Every department has different flexibilities, right? Our public safety departments, for example, are predominantly personnel-based, whereas we have other departments that have more non-personnel expenditures.

And can that be shared with us so we can see before a budget and amendment polls? What departments were, what they said they were willing to cut? Because that would be helpful when we have to fill in that second column that nobody ever wants to fill in about where will we pull it from.

Yeah, we'll have to think about what form this exists in, but I think these would also be good questions to ask to departments when they come during the hearings.

Yeah, but they could choose. So through the chair, could I ask for the list of all of the, you know, Any proposals they sent back when they were asked to make 2% cuts?

Yes.

That would be helpful. And have there been any conversations about, I mean you probably have them every year, but more so this year around the amendments that we may be proposing or not?

At this point, we're very focused on finalizing the mayor's budget and balancing it for April 8th. So that's what me and my team are very focused on. Perhaps others have been having those discussions, but we're very focused on.

But are you concerned, seeing as though you're going to have to have a very tight budget, that if you're then seeing amendments that may pass here on this council, that would put pressure on departments to then maybe even make bigger cuts?

Well, I think we do our best every year to give the council information on what you all are proposing and what the impact of that could be. I've said to a few of your colleagues in a couple of our meetings that obviously we've done a lot of work together over the last couple of years to rein the budget in, control costs, make reductions in order for Thank you. Thank you. Thank you. Thank you. and then of course we're going through our budget process and trying to close the gap so we've gone to some of the same wells a couple of times right so I think it'll just continue to get a little bit tighter and tighter but of course we'll share information on impacts of what the council is thinking when we get to that point in the process.

Right. And from the beginning, I've always advocated that we should know our amendments before we even start the budget because we don't get that second chance to call them back in. Even though they did promise, I know under Councilor Worrell's leadership, I had a few departments that I did want to call back in because I wanted to hear those exact questions on the record, like what is this impact if we do vote in favor of an amendment? So when were conversations had where colleagues were shared the impact? Because that is, I feel, a missing link that we listen to the departments. They tell us, advocate for why their budget should stay the same. then we go through an amendment process and then we don't get them back in to say hey we're going to pull 500 or we think that this is something you could cut this is why and so they don't get that chance to advocate for us not to vote in that way

Well, you said that you do have conversations to let people know what the impacts would be. So I'm just wondering, are those with councillors or are those with just like the chair of the committee? I'm not sure.

Yeah, again, I feel like in the past there's been conversations with the chair and others.

Because I've just never heard, and that's something when we go to vote I often say, like, why are we not having this information? So when, you know. Fire comes to sit down, our colleagues say, like, we see, you know, that we could maybe pull 500. Can you defend why this isn't a good idea or whatever needed? So, okay, and thank you. So that question's on the record, right, Chair?

Yes.

Thank you.

Okay. Councillor Fitzgerald.

Thank you very much, Chair. Just one follow-up question. Councilor Louijeune mentioned the year of 2028, filling out the pensions. Correct me if I'm wrong, but the actual date, the last date given is 2040 for that, right? And so is there any idea of do we use the, hey, we're finishing our homework early? Do we kind of like... I think that's more of an overall budget balancing question.

I wouldn't necessarily Thank you. Thank you. Thank you. Thank you. Some of our greatest credit positives have been that we've aggressively tackled our long-term liabilities, and I would be concerned that if we were to meaningfully deviate from that, that that would have an impact on our bond rating.

No, I understand. My second question was just going to be explain to me what would be the negatives of doing that. So it's more that is the bond rating kind of takes a look at because we're tackling that early that Right, exactly.

They like to see that. And then further, we have a large unfunded OPEB liability, our other post-employment benefit liability. That is well over $2 billion. That doesn't have a date on it but is a big liability that we need to start tackling once we've dealt with the pension issue.

So might as well get one done. Understood. Okay. All right. We'll try and continue to help thinking of other budget balancing strategies. But thank you so much for all you guys do. Appreciate it. Thank you, Chair.

Okay, thanks. Just to follow up on that, I think last year, under Chair Worrell, there was some testimony about You know, sort of free cash or the unrestricted fund balance, sorry, for 15% of city expenditures and I think that, but our amount now is like, and many more. Thank you.

Gosh, was it a year ago now? Appropriated $110 million for the Housing Accelerator Fund. And so that was out of that pot. But the expectation is that that will revolve back to us as we've created housing.

Yeah, one of the questions, and feel free to ask about that, Councilor Orrell, but For the next hearing was going to be, have we been getting money back? If you want to talk about that now.

Yes, so I will I think that would be great for the next hearing on housing but It's not a quick process, because we have to invest the money into the projects, they have to be built, they have to go through whatever transactions they go through, and then that's when the money revolves back to us, so it is a bit of a multi-year plan, and we always expected it wouldn't be Quick, year-over-year turnaround.

Sorry, I apologize to my colleagues for that interlude. Councilor Durkan, you're up, and then Councilor Worrell.

Thank you, Chair Weber. I just wanted to get some clarification on the possible intervention slide. So on the second option, it says discontinue coverage of GLP-1 for weight loss only and implement UM. So that's you know 17.7 million dollars in Savings. How much of the first intervention, the UM for non-specialty medications, how much of that is GLP-1 medications?

So utilization management will apply to all non-specialty drugs, which I think you are referring to. How much of that savings is associated with GLP-1 specifically? I don't know. I think we could maybe tease that out.

and essentially the second, discontinue coverage of GLP-1 for weight loss only and implement UM. So if you were to subtract, The $9.2 million from the $17.7 million, that's $8.5 million. So that's the savings of just deleting GLP-1 medications.

Yes. It's a little more complicated because the utilization management, again, applies to all drugs. Thank you. Thank you. The coverage for GLP-1s for weight loss, it's a slightly different savings calculus because you're not covering the drug anymore. So the UM savings are coming from and many more.

So because we're self-insured, do we have the option to set co-pays for GLP-1 specifically to change co-pays for GLP-1 medications? So that would be a plan design change that we would need to bargain. And so I would love the city to look into potentially heightening the co-pays instead of complete I think the reason I'm reacting so I guess poorly to the idea is really just The idea of having people go on to an online marketplace to access medication, I do think that has disparate impact. Who are the union reps that are on the PEC?

Oh, I mean, we have 30 plus unions in the city, so.

Can I get a list of the representatives who show up to the meetings?

I think you can get a list of the unions that are part of it. They... Sometimes it's a rotating cast of characters, but we can do our best to compile that for you.

Okay. Yes. Do you know their opinion on the possible interventions? Have you brought this to the PEC yet?

We have, yeah. We made a presentation at the last PEC meeting last month laying out these various options.

And what was the reception?

Well, we provided the opportunity, and then the unions caucused directly, so we have not had an opportunity to circle back with them about what their reaction is. We did provide it to them and they're in the midst of talking. I mean, we've had one-off conversations with various unions, but that's not something I'm going to betray in a city council hearing.

Yeah, I don't think there's any decision that honestly has been brought to me since I've started that directly impacts the health of public workers the way that this decision does. And so I just want that gravity to be

Absolutely, if I may say. And the points you make are valuable ones. I mean, these drugs are life-changing. There's no question about that. But the cost increases that are going to be borne by our employees More than half of whom make less than $60,000 a year are going to be absolutely onerous. And a number of the unions that we deal with are very, very worried about what's coming for people who can't afford to take this hit. So the conversation we have to have can't simply be about the life-changing benefits of these drugs. It has to be about all the equities. It has to be about what it's going to do to our employees. That's the conversation. And unfortunately, you know, we've got to cover all the issues. Yeah.

No, I get it. But it's just that obesity is a lifelong condition. Prevention. We have a drug at our fingertips that solves this issue. Now there's stuff coming out about alcohol and drug addiction. There being benefits to that. I feel the gravity of the GIC's decision this morning. I think they made the wrong call, and so did seven of the members of the GIC, so I'm in good company. But it is inequitable for some people to have access and others to not. And so I understand the decision that's at our doorstep. And I just want to advocate for those that I've heard from who do make

who this life-changing, potentially lifelong drug for some people, they have access to it and under a plan where option two is taken, they will not have access to it. So thank you.

Thank you very much. Councilor Worrell, just one quick point. I was reminded in law school I took a week-long seminar on health care fraud. We were presented with a trial that was held with a Health Insurance Company. And in the trial, they reproduced a meeting that they had a video of. and then at the head of the healthcare insurance companies was talking to the employees and said, look, we have too many claims and too many people going to emergency rooms. Just for chest pain. So when someone calls and they just have chest pain, have them lie down on the floor or do something rather than go to the emergency room. and they had people who died of heart attacks because they were trying to keep people from going to the emergency room. Something we haven't been talking about is the other party to this. Who is driving up these costs like this and what are we doing? This is obviously a bigger conversation than City Hall on all these things.

And I know we're trying to handle our part of it, but there are These larger organizations out there that are driving up these costs and having us having to make these tough decisions. Anyway, sorry. Thank you. Councilor Worrell.

Thank you, Chair. Just an update on the Housing Accelerator Fund, which was like $110 million. $50 million of that was to public housing. Another $50 million was for rentals, which To my understanding, it still hasn't gone out yet. And then $10 million hasn't gone out yet either. So it is going to be a multi-year project. I have another revenue question. You said revenue growth of approximately 1.5% to 2.5%. Is the 1.5% the possibility of, because property taxes grow by 2.5%. Right, every year, and that's 70% of our revenue. So why isn't it like 2.5% or more?

Why are we thinking that it could possibly be 1.5%? Would the mayor not collect the 2.5%? Is that what you're?

No, that's not what I'm saying. So property tax can grow by 2.5%, as you note, and we will continue to maximize that. and then we also factor in new growth. We're fortunate that we have new growth. We have development that happens in the city. So that's what allows us to collect more than that 2.5%. So I don't know off the top of my head, Our current projections for property tax revenue are higher than 2.5% because we're factoring in that new growth amount. So we've got that, which is growing. but then all of the other revenue sources are either flat or going down. And so when you take the growth in property tax with the flat or decrease in our other revenue sources, that blends together to be overall one and a half to two and a half percent growth.

When you're doing your projections for the upcoming year, are you taking the actual revenue numbers for the first two quarters, or are you taking the actual numbers from the previous year? So for like FY27, are you looking back at FY25? or are you looking at the first two quarters in FY26?

We kind of look at everything and see what makes sense. We could have an unusual quarter for one reason or another so we try not to Model that out if that feels either it's too low or too high. So we really try and look at the whole picture and put something together that is reasonable but also builds in some conservatism so that we are able to deal with unanticipated costs throughout the year.

Okay, and then have we thought about folding in vision into our regular healthcare? I know we have vision assurance and then... Yeah.

Do that through the state plan. I'm not entirely sure what the history has been there, but I can look into that for you.

And then for Lou, what are the costs that we can really control generally on health insurance or other insurance benefits?

Well, I mean, look, we have to go into bargaining for a new PEC agreement in a couple months' time, so... We're still in the process of taking a look at that. I mean, I think, look, that is a matter of taking a look at the spend and taking a look at where there is low hanging fruit. We're still in the process of doing that and I also would say you know I think it is appropriate to share that first with our bargaining partners you know that they should see that stuff before we All right. No further questions. Thank you.

Okay, thank you very much, Madam President. I have a couple questions.

You go ahead, because I had to step out for another meeting, so go ahead and I'll

Okay, so in terms of how this works, and maybe you said this already, but the projected 500 million for healthcare spending, how much of that will go to the trust fund?

All of, so I think all of the, and the operating budget, our employer portion goes into the trust fund.

Okay, and so this is, this entire amount would go into the... into the Trust Fund, eventually.

I believe so.

Yeah, okay. And do you know... How much retirees pay for their health care coverage? Do you have? Don't do that.

I believe they'd be subject to that same 80-20 cost sharing that exists.

Okay. And what have we done, I guess, to... to promote less expensive generic drugs or what kinds of negotiations have happened in maybe the last round.

Well, the last round simply extended the agreement that was in place between 2020 and 2025. So there was nothing we changed. We carried forward the agreement for another two years. That kind of a thing, what you're talking about, is going to be the kind of stuff we discuss in the next PEC, or can discuss in the next PEC agreement. The negotiation for the next PEC agreement.

Have we tried, like, for telling, for example, Blue Cross Blue Shield, like... This has to be cheaper or we're going somewhere else?

Well, I mean, the thing, the situation we deal with here is that Blue Cross Blue Shield is the insurer and you know their contracts with providers and contracts with the you know and the you know the PBM situation that's defined by a lot of that stuff that's proprietary that we're not necessarily subject to so I mean There are things that you can do to get at that, but telling an insurer, you know, I mean, one example we discovered in the process of this is, you know, the state of North Carolina tried to do that, you know, and the companies, you know, the manufacturers, said no. I mean, think about the amount of purchasing power that an entire state has. So that's stuff we will investigate in the next negotiation for the PEC agreement, and it's a fine suggestion.

Do we use a broker when we're... Are you negotiating with the insurance companies?

So we do RFP, right? They're competitively procured.

Okay. Yeah, one of the other pieces of advice I got was that you could just consult or bring on a broker on a temporary basis, but you may have enough experience. Some of these companies will have a broker, but then also bring in a broker to be able to bounce ideas off of, and they've kind of seen maybe More of these are, you know, anyway, just something to think about. And then, yeah, I guess, so in terms of, Our pension liabilities and the OPED liabilities, like how will this impact, we projected to, At least for the pension liabilities to fully fund or to adequately fund those by 2028.

I don't know if we had a number on the OPED. because it's not state mandated. No, there's no mandate. But I guess is this going to impact the pension or pension funding and or how will that impact the pension?

So it's all part of the larger balancing picture we need to evaluate. If we do have to absorb an $80 million increase in health insurance costs for next year, While also balancing all these other needs against, you know, slower revenue growth, we'll have to evaluate what central levers we have, including, you know, whether there's some Fitzgerald, we have been very committed to meeting those liabilities and sticking to those schedules, so my intention is to do everything we can to avoid having to

We have our health care consultant, which currently Our contract is with a company called Segal, and they also serve as our broker during this negotiation.

Okay. And then just in terms of, so our retiree, just one last question on the retirees. You know, so we think they're going to receive the, they're going to also have a 22% increase in their, around that, in their premiums. Breadon, Madam President, do you have anything?

I think I have to go away and think about it. I'm sure my colleagues have asked a lot of the questions. There's also a fundamental question and it's way beyond our pay grades at the city level. I think just thinking about how we need to restructure our healthcare system generally and get, you know, if you have one hospital that charges 60,000 for a surgery where another hospital you know a routine like an elective surgery that you know what the costs are and then you have another hospital that can charge half the prices there has to be something We spend so much on healthcare and we really don't have outcomes that justify the cost. But that's a philosophical conversation for another day. I think the healthcare issue is such an important part of our employment.

People depend on health insurance from their employers and I think We find ourselves in a difficult situation that's sort of really unsustainable in the longer run. We can't keep doing this, so we maybe have to have a bigger conversation in the bigger world, outside municipal government. I know we're all in this together, trying to wrestle with it to see if we can come up with some solutions. Hopefully we'll make progress. Thank you.

I just had one, did you have something?

Sorry, I wanted to, sorry, just to make sure we're answering your questions correctly. So for retirees, there's a difference whether they're on Medicare plans or non-Medicare plans, depending on their split. So for Medicare plans, The retiree split is 14.5% for the retiree and 85.5% for the city, whereas it's different splits for our regular plan that we described earlier.

So just to follow up, I think Councilor Fitzgerald and Councilor Worrell, CFO Groffenberger, so in your letter you talk about maybe 1.5% to 2.5% increase. and a 3.5% in revenue and a 3.5% increase in cost. While maybe we don't know what that number is, is the projection that the overall budget or the... is going to increase over last year. So in terms of this $80 million increase in health care costs, You know, I think, is there some place specifically where that is going to impact in the budget or, you know, we should take this information

and when we're looking at the entire budget yeah I think it's providing larger context around the choices that will ultimately need to make in order to bring the budget into balance so if we need to absorb If we need to fit an $80 million increase in health insurance plus increases in our pension contributions plus contractual increases for trash pickup and those types of things, We've got to make all of that fit in that one and a half to two and a half range. And so because our revenue levers are very limited, as we all have talked about at length in the last couple of years, The choices to bring that budget into balance are really going to happen on the expenditure side. And so it's really just about laying out the choices so that we present a budget to you in April. You understand the situation we've been grappling with.

And I think, as you pointed out in other proceedings, the majority of our expenditures are on personnel, right? And we're paying salaries.

Benefits, yep.

Okay. Okay, well, thank you. Fitzgerald, Vice Chair. Okay, so thank you very much for your testimony. There's some words I need to say to allow me to leave and central staff, but is there anyone? Signed up online. Great. Okay. So this hearing on docket number 0201 is now adjourned.