Friday, April 13, 2007
Budget basics to know before Town Meeting
Both the Finance Committee (FinCom) and the Board of Selectmen make recommendations on Town Meeting Warrant Articles (and sometimes they disagree) but it is the voters at Town Meeting who have the final say. Town Meeting, composed of ordinary registered voters, is the legislative body empowered to appropriate all funds and authorize spending.
The FinCom serves as the official fiscal watchdog for the town. The role of the FinCom 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.
Public hearing April 23
A booklet containing the Warrant Articles with FinCom recommendations is mailed to all households shortly before Town Meeting. The committee will hold a public hearing on the Warrant Articles on Monday, April 23, at 7:30 p.m. in the Clark Room of Town Hall. The FinCom also states its recommendations for each expenditure at Town Meeting.
What is the reserve fund?
The reserve fund, an amount of money for extraordinary or unforeseen expenditures, is voted annually. The FinCom may authorize the transfer of reserve funds to the town's 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 FinCom can recommend the use of free cash for budget purposes contingent on voter approval at Town Meeting.
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. The town's maximum levy is constrained in that it can only increase by 2.5% over the previous year's levy limit. (Another facet of this statute is that a town cannot levy more than 2.5% of the total full and fair cash value of all taxable property in the community.) Proposition 2-1/2 allows a town to increase its levy limit annually by new growth resulting from building construction and parcel subdivisions.
What is an override?
A town can assess taxes in excess of the automatic annual 2.5% 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.
Proposition 2-1/2 exclusions
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.
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