Author: Municipal Finance Legal Guidance
This month's Ask DLS features frequently asked questions concerning the role of the finance committee and selectboard in drafting and presenting the annual budget to town meeting. 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.
What is the role of the finance committee?
G.L. c. 39, §16 provides that towns whose aggregate property values exceed one million dollars shall, and in small towns may by bylaw, establish an appropriation, advisory, or a finance committee (collectively finance committee). The finance committee shall make reports and recommendations to the town and is primarily responsible for submitting its recommendations on the annual budget to town meeting. G.L. c. 39, §16. In towns that do not have a finance committee, the selectboard is responsible for submitting its recommendations on the annual budget to town meeting. G.L. c. 39, §16. Additionally, towns may provide by bylaw that the selectboard is responsible for submitting its recommendations on the annual budget to town meeting. G.L. c. 39, §16. Many towns have enacted specific bylaws that establish its local finance committee in order to meet the community’s specific needs.
The finance committee is typically involved in budget preparation, developing budget forms and, in many communities, establishing budgetary guidelines for department heads. Prior to town meeting, the finance committee often conducts budget hearings to allow a more extensive review of the budget. The finance committee “shall after due consideration designate the amounts which in their opinion should be appropriated for the ensuing fiscal year, and shall accompany the same with such explanations and suggestions in relation thereto as they may deem desirable for the proper information of the inhabitants.” G.L. c. 41, § 60. The finance committee, in addition to presenting the proposed annual budget, is responsible for considering and making recommendations to town meeting on all other non-budgetary articles. G.L. c. 39, §16. It may reasonably be argued that little comes before town meeting that does not have a potential fiscal impact on the town.
What is the role of the selectboard?
A major role of the selectboard should be to coordinate the roles of all players in the financial management process and to promote a team approach in resolving fiscal issues. The selectboard should participate in the budget process, directly reviewing budget requests and having input at all levels of the process. As the chief executive body of the town, the selectboard members develop and implement policy. It is important that they develop consistent budget guidelines, at the same time taking into consideration the available financial resources of the municipality.
Because the budget is usually the single most important policy document a town develops each year, participation by the selectboard is essential to their leadership role in town government. The selectboard should have input concerning the budget’s format, they should review all budget requests and familiarize themselves with the finance committee’s position on the budget. The selectboard, in cooperation with the finance committee, should also establish policy priorities and provide leadership in the ongoing debate between the needs of municipal departments for sufficient resources to deliver public services and the needs of the taxpayers to receive adequate services at a cost they can afford.
How do town officers cooperatively fulfill their roles in the budget process?
Coordination among department heads and the major fiscal officers of the town is very important. The selectboard, department heads, and other officers authorized to spend money must furnish detailed estimates of expenses and revenues in their department for the ensuing fiscal year by 10 days before the end of the calendar year or 90 days before the start of the annual town meeting, whichever is later. G.L. c. 41, § 59. These estimates must be provided to the town accountant, or if none, to the finance committee, or if none, to the selectboard. G.L. c. 41, § 59. The accountant tabulates the data and provides the results to the finance committee or selectboard. G.L. c. 41, § 60. The finance committee or selectboard considers and submits a written report of recommended appropriations at or before town meeting. G.L. c. 41, § 60.
The finance committee and selectboard should both be aware of and cooperate with the actions of each other as their responsibilities are intertwined. There are many opportunities for cooperation between the selectboard and the finance committee, including the following: developing financial forecasts, establishing an appropriate budget and capital planning process, developing joint guidelines by which departmental requests will be reviewed, holding joint budget hearings with department heads and establishing policies regarding the use of free cash and stabilization funds. In addition, the selectboard with the approval of the finance committee may make some budget transfers during the last two months of the fiscal year and first 15 days of the next fiscal year in order to close out the town’s financial records. G.L. c. 44, § 33B. The two bodies should work together closely. By agreeing on processes and procedures ahead of time, both boards will save time and can resolve disagreements during the budget process.
What is the role of the town meeting?
The town meeting is the appropriating authority and is not bound by the finance committee’s recommendations. Young v. Town of Westport, 302 Mass. 597, 20 N.E.2d 404 (1939). As the appropriating authority, town meeting approves the annual budget and — by approval of appropriations — authorizes specific expenditures. The initial town budget is approved at annual town meeting prior to the July 1 commencement of the fiscal year. The town meeting may subsequently on its own initiative transfer appropriations by majority vote, if not expended or encumbered.
Town meeting must also approve the issuance of debt. A two-thirds vote of the meeting is required for this purpose. Approval of town meeting by two-thirds vote is also necessary to establish a stabilization fund or change the purpose of the fund. A majority vote of town meeting is required to appropriate money into the fund and a two-thirds vote of town meeting is required to make appropriations from the stabilization fund. Town meeting may also enact additional by-laws concerning the financial management and organization of the town. As the legislative body, town meeting ratifies major policies concerning the financial management of the municipality.
Note: The above summary does not reflect an exhaustive summary of all relevant laws and is only intended as general guidance. As stated above, each town may further define its local process through bylaw, and for this reason, town counsel should be consulted with respect to interpreting a town’s charter, bylaws, procedures, and requirements.
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Editor: Dan Bertrand
Editorial Board: Marcia Bohinc, Linda Bradley, Tracy Callahan, Sean Cronin, Emily Izzo, Paula King, Jennifer Mcallister and Tony Rassias
| Date published: | May 2, 2022 |
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