Author: Municipal Finance Legal Guidance
This month's Ask DLS features frequently asked questions concerning prepayment from prior fiscal year funds. Please let us know if you have other areas of interest or send a question to cityandtown@dor.state.ma.us. We would like to hear from you.
Can a department's current year’s appropriation be charged or encumbered for services to be performed entirely next year?
Services that will be performed entirely next year must be charged to that year's appropriation. However, this year's budget may be charged or encumbered to pay bills for services or recurring expenses performed in both years, e.g., leases, membership dues or subscriptions. The school department may also charge this year's budget for prepayment of special education or educational collaborative tuitions due this year, even though the services will be performed next year, e.g., a bill for tuitions for 7/1 to 9/30 due on 6/30, as described further below. G.L. c. 40, § 4E; c. 71, §71D. No more than 12 months of services or recurring expenses should be charged to any year's budget. See also Chapter 198 of the Acts of 2022 as described in DLS Bulletin 2022-8.
If monies were included in departmental salary items to cover expected raises from collective bargaining agreements during the year and the year ends without agreements, may the funds be encumbered until the contracts are settled?
Not if negotiations are ongoing as of June 30 as there is no contractual obligation to pay any additional amounts to employees. This applies to monies appropriated in salary line items or collective bargaining reserves voted to fund amounts owed in that particular fiscal year after the contracts were settled. To be able to appropriate those monies for any raises negotiated next year, the legislative body may transfer them to the line items in next year's budget, a general stabilization fund or a contract reserve special purpose appropriation not limited to any particular year. If a contract is settled and ratified by union members by June 30, however, the monies are available until July 15 for transfer by the school committee to fund school contracts or for appropriation or transfer by the legislative body to fund the first-year cost items of other contracts.
Is there authority for school committees to pay from a current budget the tuition costs for services to be provided to special needs students in the following fiscal year?
G.L. Ch. 71 §71D, states:
"A school committee of any city, town, or regional school district may authorize the prepayment of tuition for a period not exceeding three months to any approved private school or approved program source which a student is attending under the provisions of chapter seventy-one B, and the city, town or regional school district treasurer shall be required to approve and pay such monies in accordance with the authorization of the school committee."
This statute institutes a limited exception to the basic rule set out in G.L. c. 41 § 56, i.e., that municipalities may not make advance payments for either goods or services. The statute expressly authorizes prepayments, for periods not exceeding three months, of tuition costs for special needs students. School Committee of Wilmington v. Town Accountant of Wilmington, 19 Mass. App. Ct. 964 (1985) ruled that school committees may properly prepay special needs students' tuition costs for the subsequent fiscal year from the current year's budget.
Special needs students' tuitions are recurring costs which must be paid year after year. As with other recurring costs, such as those for utilities and insurance, school committees should endeavor to pay only one year's worth of charges from each year's school budget. Therefore, if a school committee prepays special needs tuition costs from a current budget for the ensuing fiscal year, its payments from that budget should, within reasonable limits, cover only one year's costs for such services.
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| Date published: | August 14, 2025 |
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