Ask DLS: The Budget Setting Process
This month's Ask DLS features frequently asked questions on the general roles and powers of city councils, select boards and finance committees in setting the annual budget, respectively. 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.
In a city, what authority does the city council have in setting the annual budget?
In a city, the mayor recommends a budget to the city council in advance of the fiscal year commencing. G.L. c. 44, § 32. The city council may authorize any recommended appropriation by majority vote and may also reduce or outright reject by majority vote any recommended appropriation, absent a statute, charter provision or bylaw to the contrary. G.L. c. 44, § 32. Reductions should be in clearly specified amounts for each item, as opposed to a flat dollar amount or percentage reduction to the overall budget. The council has 45 days to act on the mayor’s recommendation – otherwise, the recommendation is deemed accepted. G.L. c. 44, § 32. The city council may not increase a recommended appropriation or add a new appropriation and may not increase the overall amount of the proposed budget, unless the mayor recommends it. G.L. c. 44, § 32.
If the mayor has not recommended an appropriation for a purpose the city council deems necessary, they may request that the mayor do so. G.L. c. 44, § 33. If, after seven (7) days, the mayor has not recommended an appropriation for a purpose requested by the council, the council may make an appropriation for that purpose by two-thirds majority vote. G.L. c. 44, § 33. Further, upon request of the school committee or a regional school district committee, the city council may, by two-thirds majority vote, increase the appropriation for the school budget, so long as doing so will not raise the overall budget in excess of the levy allowed by Proposition 2 ½. G.L. c. 44, § 32; G.L. c. 59, § 21C. This exception only applies in cities that have accepted it. G.L. c. 44, § 32; Section 2 of Chapter 329 of the Acts of 1987.
If the mayor fails to submit a proposed budget within 170 days after annual organization of the city government, the city council must, by June 30, prepare a budget consistent with laws and rules governing the mayor’s budget recommendation. G.L. c. 44, § 32. In such an instance, the city council must adopt the budget within fifteen (15) days after preparing it. G.L. c. 44, § 32.
For further details on the city budget process please see DLS’ CITY BUDGET PROCESS FAQs.
In a town, what authority do the finance committee and select board have in setting the annual budget?
Any town with aggregate property valuation of more than a million dollars must have a finance committee responsible for advising on and recommending appropriations. G.L. c. 39, § 16. DLS valuation data demonstrates that currently every municipality in the Commonwealth has an aggregate valuation of more than a million dollars, so every city and town should have a finance committee. Accordingly, the finance committee is frequently responsible for developing a recommended budget. In towns where a bylaw provides otherwise or for any reason there is no finance committee, the select board is responsible for recommending appropriations. G.L. c. 39, § 16.
In the event the finance committee is responsible for preparing the recommended budget, the select board remains integral to the budget-making process in its capacity as the executive body of the town and having general supervision of the town’s departments. The select board should be actively engaged in the process of developing budget recommendations, as it is many times responsible for managing disbursement of those funds throughout the year.
Per G.L. c. 41, § 60, the town accountant must prepare a report after the end of the calendar year (midway through the fiscal year) summarizing the disbursements and receipts made and projecting expected disbursements and receipts for the remainder of the fiscal year. The statute indicates that the report should be delivered to the select board or the finance committee depending on who is responsible for recommending the budget, but as a practical matter, the report should be delivered to both. That report should assist the town’s officials, including any manager or administrator and department heads, in formulating budget requests for the coming year.
G.L. c. 41, § 60 further directs responsible officials to prepare their recommended budget in a form and with sufficient information to enable town meeting participants to understand the proposal. That document must be printed and distributed to the community prior to convening town meeting.
In a town, what authority does town meeting have in setting the annual budget?
Town meeting has authority to appropriate funds to finance the annual budget. Town meeting is not constrained by the recommendations of the finance committee or the select board. Young v. Town of Westport, 302 Mass. 597, 20 N.E.2d 404 (1939). However, the budget must conform with the strictures of Proposition 2 ½, G.L. c. 59, § 21C, unless there is an override or debt exclusion vote. Tax rates are set at a level sufficient to fund the budget town meeting passes. Town meeting must be convened before July 1 to vote on appropriations, but may meet thereafter to approve transfer of unexpended, unencumbered funds.
Beyond appropriating funds that comprise the annual budget, town meeting, in part:
• authorizes debt by the town;
• authorizes the creation, appropriation and expenditure from stabilization accounts; and
• enacts by-laws and policies governing budget management and organization of the town.
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Editor: Dan Bertrand
Editorial Board: Marcia Bohinc, Linda Bradley, Sean Cronin, Emily Izzo, Lisa Krzywicki and Tony Rassias
| Date published: | March 7, 2024 |
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