Friday, June 30, 2000
What is the role of the finance committee?
The Carlisle Finance Committee is a seven-member board appointed by the selectmen. Each member's term is three years and no member can serve more than three consecutive terms. The finance committee, comprised of a representative group of taxpayers, is the official fiscal watchdog for the town. Because it is difficult for all taxpayers to be completely informed about every aspect of the town's finances, the finance committee conducts a thorough review of municipal finance questions on behalf of the citizens.
The committee's role is to hear all town department budgets and to recommend a level of expenditure for each. A booklet containing the Warrant articles with finance committee recommendations is mailed to all households before Town Meeting. The committee holds a public hearing for discussion of the Warrant and FinCom recommendations no later than seven days prior to Town Meeting. The committee also states its recommendations for each expenditure at Town Meeting. However, it is the Town Meeting, not the finance committee, that votes the actual appropriation of funds.
Impact of Proposition 2-1/2
The passage of Proposition 2-1/2 by the Massachusetts Legislature in 1980 established limits on yearly tax levy increases. The maximum amount a town can levy in a given year is referred to as the levy limit. A town cannot levy more than 2.5 percent of the total full and fair cash value of all taxable property in the community. The town's maximum levy is also constrained in that it can only increase by 2.5 percent over the previous year's levy limit. Proposition 2-1/2 allows a town to increase its levy limit annually by new growth resulting from building construction and parcel subdivisions.
A town can assess taxes in excess of the automatic annual 2.5 percent increase plus new growth by passing an override. An override permanently increases the levy limit of the town to cover what are considered ongoing expenses. An override ballot question specifies the dollar amount and spending purpose and requires a majority vote for approval. Once approved, the override is included in the levy limit base that is increased annually by 2.5 percent.
Proposition 2-1/2 also allows towns to exceed the levy limit for payment of certain capital projects and debt service costs. An exclusion for the purpose of raising funds for capital project costs is referred to as a capital exclusion; an exclusion for debt service costs is referred to as a debt exclusion. Unlike overrides, exclusions do not become part of the base upon which the levy limit is calculated for future years.
Capital exclusions allow voters to raise property taxes for a single year to fund capital projects such as fire trucks, computer equipment or repairs to municipal buildings. The approved amount of the exclusion is added to the levy limit only for the year in which the project is undertaken or acquisition made.
A debt exclusion allows voters to approve a temporary increase in the levy limit to fund the payment of special debt service costs. The additional amount for debt service is added to the levy limit for the life of the debt only. Reimbursements, such as state funds for school building construction, are subtracted from the amount of the debt exclusion. Both capital and debt exclusions require a two-thirds vote of Town Meeting. A majority vote at an election is required for both types of exclusion.
The finance committee's statutory authority is limited to making transfers from the town's reserve fund to other line items in the budget. The reserve fund, an amount of money for extraordinary or unforeseen expenditures, is voted annually. The committee may authorize the transfer of reserve funds to the general fund if a budget is exhausted. Free cash is generated when actual revenue collections are in excess of estimates or when expenditures are less than appropriations. The finance committee can recommend the use of free cash for budget purposes contingent on voter approval at Town Meeting.
In sum, the role of the finance committee is to hear all town department budgets and provide expenditure guidelines, to make recommendations on any Warrant article calling for the appropriation of money and to control the reserve fund.
FinCom member Dave Ives prepared this summary for Carlisle's "Know Your Town" booklet which is being revised.
© 2000 The Carlisle Mosquito