Boston’s 2026 Budget: Prioritizing Stability in Uncertain Times

With Boston projected to lose about $1.4 billion in commercial property tax revenue over the next five years, the city’s new budget is less about growth and more about long–term stability. Property taxes are anticipated to make up 72 percent of the city’s total revenue in 2026, whereas in 2019 they comprised roughly 65 percent. As a point of comparison, New York City’s property taxes accounted for only about 44 percent of its 2024 budget. 

Boston Mayor Michelle Wu recently signed a $4.8 billion operating budget for FY2026, a 3.45 percent increase over the prior year’s appropriations. After a “change in tone from the infighting that occurred last year,” as described by Gayla Cawley of the Boston Herald, the city council approved the city budget despite ongoing concerns about reductions in federal funding, particularly for higher education and teaching hospitals. The increase for FY2026 is the lowest in the last five years, when growth averaged 7.27 percent.  

Priorities and Allocations: 

Figure 1: Top 10 departments with the most funding from the Boston city budget for FY2026. Data sourced from Pioneer’s Boston DataLabs.

In its budget announcement, the City of Boston articulated its goal to be the “safest, greenest, and most family-friendly city in the country,” as well as “to maintain strong fiscal health.” On that note, the budget includes a $46 million increase for public education (Boston Public Schools and Charter School tuition), making it about 32.92 percent of the total budget. Last year it comprised 33.03 percent according to Pioneer’s new Boston DataLabs. The recommended 2026 Education Cabinet, responsible for establishing the education agenda, has a budget bill that also includes a 67 percent increase in ‘current charges and obligations’ (+12.5 million dollars from FY25).

Figure 2: Investments allocated per service area in FY2026 Operating Budget and projects included in the FY26-30 Capital Plan.

Another central emphasis of the FY2026 budget is to increase city services through the FY26-30 Capital Plan, with a focus on improving road and bridge infrastructure and schools. As shown in Pioneer’s Boston DataLabs, departments with the highest allocation growth from fiscal year 2025-2026 include the People Operations Cabinet (7.9 percent) that acts as a human resources management for the Boston workforce and provides work benefits.  Further down the list is the Streets Cabinet (6.6 percent) that develops and maintains infrastructure, the Education Cabinet (3 percent), and public safety (0.8 percent).

Revenue

Figure 3: Gap between long term expected commercial property tax collections FY 2025-2029. Data is from Boston Policy Institute.

Wu’s budget is dependent on a 4.3 percent rise ($142 million), in revenue from property tax growth, while researchers project that the spread of empty offices throughout the city will result in the escalation of budget shortfalls in the near future. In 2024, property taxes accounted for 72 percent of Boston’s total revenue, making it the most reliant major city in the United States on property tax revenue. The budget for FY2026 underscores the pressure of maintaining and enhancing public services amid federal budget cuts and vulnerabilities related to the city’s reliance on commercial property taxes that are speculated to fall.

Figure 4: City of Boston total expenses and revenue from FY2023-2026 in millions of dollars. Data sourced from Pioneer’s Boston DataLabs.

Nationwide Shortfalls

The shift towards remote work has had a greater impact than previously thought. Many cities rely on revenue from taxes on property. If the value of those properties – and therefore city revenue from property taxes – declines, it could significantly impact city budgets. Indeed, cities across the country are expected to see revenue shortfalls.

Figure 5: Percentage share of commercial and residential property taxes from 2013-2022 in the top US cities most reliant on commercial property taxes. Data is from the Tax Policy Center.

One example of a city not at risk from falling commercial property values is Philadelphia. Boston has similar challenges to those of Philadelphia such as housing affordability, police reform, and economic recovery. Philadelphia’s FY2026 budget includes estimated revenue from property taxes to be about 20 percent — more than 50 percentage points less than Boston. Philadelphia faces fiscal gaps and deficits, but has a more diversified revenue base and a larger population than Boston. Because Philadelphia’s tax base is more diverse, the city can fund things like housing initiatives and is more protected from falling commercial property taxes. 

Overall, however, Boston is currently in a stronger fiscal position than Philadelphia, even though Philadelphia has more diverse revenue streams. Philadelphia relies on federal funds and income taxes that are more volatile than property taxes. This has led the city to make significant cuts in services due to the expected budget shortfalls. The anticipated decline in commercial property tax revenues in Boston could lead to a similar fiscal issue. Philadelphia’s ongoing struggles of budget shortfalls and public service cuts illustrate the importance of preparing for long-term fiscal challenges instead of only focusing on short-term recovery. 

Looking Ahead

Looking at the next few years, Boston may have to develop new models to fill the revenue gap caused by an over dependence on commercial property taxes. New approaches could include a rebalancing of taxes in other areas such as residential properties – which have already seen a 10 percent tax increase – and high-end real estate or hospitality and local business taxes. Or it means revenue expectations must change for the city and it should look for ways to cut bloat. The city has also included participatory budgeting, allowing residents to have a further say in where their tax dollars go. Giving citizens the opportunity to prioritize projects is increasingly important in times when the budget is tight.

Erin Moran is a Roger Perry Government Transparency Intern with the Pioneer Institute. She is a rising senior at College of the Holy Cross, majoring in Political Science. Feel free to contact via LinkedIn.