BOSTON — Boston Mayor Michelle Wu proposed a $4.9 billion budget for fiscal year 2027, saying that the 2% increase over last year’s spending represents the lowest growth in 17 years as the city continues to cut back amid a financial crunch.

Still, the budget is increasing by roughly $100 million, a spike that appears to be largely driven by an $88 million spending increase for Boston Public Schools.

Wu framed her budget proposal to the City Council Monday as a reflection of her administration’s “deliberate and disciplined approach to protecting the services our residents and businesses rely on while investing in the long-term strength and stability of our city,” in a letter to councilors.

“Across the Commonwealth and the country, cities and towns face a challenging fiscal environment marked by rising costs, slowing revenue growth, economic uncertainty, and inflationary pressure,” Wu wrote. “Boston is navigating these conditions within the constraints of the Commonwealth’s rigid limitations on municipal revenue generation and diversification, including Prop 2 ½.

“This is a difficult moment, but Boston meets it from a position of durability and determination. More than a decade of triple-A bond ratings, disciplined financial stewardship, and strong reserves have positioned the city to weather this environment. Because of the work we have done together over the past several years, the city approaches this moment from a place of stability,” Wu added.

Wu said the city is intentionally limiting spending this year, saying that this year’s proposed budget increase, at 2.1%, “is the lowest rate since FY10 and “well below the current rate of inflation.”

By comparison, the city’s budget grew by 4% this year, and 8% the previous year.

“This limited growth has required tough choices,” Wu said, “including targeted reductions.”

Wu officials said many long-term vacant positions won’t be filled, but the city is not anticipating layoffs at this point.

The mayor proposed her budget for FY27 a week after her administration shared that it was scrambling to close a $48.4 million budget gap for the current fiscal year, FY26, that ends June 30, by freezing some spending and delaying hiring.

The shortfall, her chief financial officer Ashley Groffenberger said last week, was driven by overspending on snow removal due to two major winter storms and public safety overtime.

Given the $53 million projected deficit for Boston Public Schools for this fiscal year, the city has a more than $100 million deficit to close FY26 as it pitches an increased spending plan for next year.

The mayor’s proposed FY27 budget for Boston Public Schools is $1.72 billion, which represents an $88 million, or 5.4% increase over last year’s spending.

On a call with reporters Monday, Wu defended the frugality of her FY27 spending plan amid calls for an audit of city and BPS spending by two city councilors.

The mayor was joined by Adam Chapdelaine, executive director and CEO of the Massachusetts Municipal Association, who insisted that the city’s budget challenges are not driven by overspending.

Chapdelaine cited a report the MMA released last fall that found in Massachusetts, “costs are rising faster than municipal revenues can keep up with,” and “it’s not a spending problem.”

Wu cited some key factors driving Boston’s financial challenges, including increasing health insurance costs for city employees, which are projected to increase by $97.3 million this year, compared to a $10.6 million average annual increase over the past eight years.

She also cited the end of federal American Rescue Plan Act funding that is leading the city to cut back on, or cease, funding for many discretionary grant programs that support small businesses and nonprofits, fill vacant storefronts and expand cultural programming.

She further spoke of federal uncertainty and post-pandemic challenges that have led to vacant office space and falling commercial property budgetary revenue.

Wu said the FY27 budget includes built-in containment strategies to try to prevent overspending again next year on snow removal and public safety overtime, and curb increasing health insurance costs — such as an agreement reached last month with city unions to limit GLP-1 drug coverage for weight loss that is projected to save the city $10.6 million.

Wu officials said they do not anticipate an “increased use” of the city’s roughly $1 billion reserve fund to balance the budget — as critics of city spending and double-digit tax increases for homeowners have urged in recent years— to avoid creating a structural problem in the budget.

While most city departments are seeing spending reductions and reduced hiring, some are anticipated to see “modest” growth, like the Streets Department; or “significant” growth, like Boston Public Schools, which is being driven by increased costs in healthcare, transportation, special education and collective bargaining.

Still, the BPS budget includes hundreds of layoffs, compared to public safety departments like police, fire and EMS, which will see funding for recruit classes to replace staff loss from normal attribution “to maintain Boston’s status as the safest major city in the country.”

Gregory Maynard, executive director of the Boston Policy Institute, a City Hall watchdog that has projected the city is staring down a $1.7-$2.1 billion budget shortfall over the next five years due to falling office values, said the city budget fails to offer any long-term solutions to address “an intense fiscal crisis.”

“Long-term solutions on the spending side would look like the steps that Mayor Menino took back in FY09 and FY10, the last time the city faced deficits, like layoffs and convincing public employees to waive annual salary increases,” Maynard said in a statement.

“Revenue is not addressed … outside of repeatedly blaming Proposition 2 ½ for the lack of new revenue growth,” Maynard added. “That blame is misplaced: there is significant and growing evidence that Mayor Wu’s own decisions like increasing inclusionary zoning requirements, hiking linkage fees, and dragging her feet on comprehensive up-zoning are responsible for the lack of new development and subsequent slow revenue growth in Boston.”

The mayor also pitched a $4.4 billion five-year capital plan that includes $135 million in spending for the White Stadium pro soccer rehab.

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