Author: Municipal Finance Law Bureau
This month's Ask DLS features answers to frequently asked questions concerning municipal treatment of anticipated settlement payments from opioid defendants in connection with opioid settlements, including recent statewide opioid settlements. 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 municipality that anticipates receiving settlement funds from the recent opioid settlements set up a special revenue account to record them?
No. All money received or collected from any source by a city, town or district belongs to its general fund and can only be spent after appropriation unless a general or special law provides an exception, i.e., expressly restricts use for a particular purpose or allows expenditure by a department or officer without appropriation. G.L. c. 44, § 53. At present, there is no general or special law that provides an exception for these settlement proceeds. Accordingly, statewide opioid settlement funds received by a municipality belong to its general fund.
Is the Legislature considering an amendment to create an exception to G.L. c. 44, § 53 for statewide opioid settlement funds paid to municipalities?
Yes. The Legislature is currently considering an amendment to G.L. c. 44, § 53 that would permit municipalities to deposit statewide opioid settlement funds in a separate fund, outside of the general fund, upon the approval of the Director of Accounts. Under the proposed amendment, municipalities would still be required to appropriate the funds for their intended purposes. The Division of Local Services linked to and summarized the proposed amendment in its May 19, 2022 issue of City & Town.
Can a municipality that received opioid settlement proceeds prior to June 30, 2022 make an appropriation directly from those proceeds for their intended purpose at a meeting of the legislative body?
No. Funds received prior to the end of FY22 (June 30, 2022) will close to the general fund. In the ordinary course, the funds will then become part of the free cash certified by the Director of Accounts and once certified, may be appropriated. Free cash is traditionally certified in late fall in most communities. If certified by the time a town has their fall town meeting, the funds could be appropriated at that time. If a town does not have a fall town meeting or free cash is not certified until after a fall town meeting, presumably the spring town meeting could then vote to make the appropriation. A city could likewise make an appropriation once free cash is certified. However, it is important to note that free cash can be appropriated for any lawful purpose and difficulties can therefore arise when mandating that the settlement portion of free cash must be used for specific purposes. An additional issue arises if the community chooses not to certify their free cash or has a negative free cash balance.
How can a municipality that receives opioid settlement proceeds after July 1, 2022 use those funds in FY2023?
A city or town may classify settlement funds received in FY23 as general fund estimated receipts (Page 3 Local Receipts) and make an appropriation for the settlement purposes by amending their existing FY23 budget to reflect that new source of revenue before their tax rate is set. The amount they estimate should be the equivalent of what they raised and appropriated from taxation for the purpose, otherwise the excess will simply be reducing the tax levy.
If a municipality does not follow the above-described process, is there anything else they can do with these proceeds in FY2023?
If the settlement proceeds are received by March 31, 2023, a municipality can request that the Director of Accounts update their free cash certified as of the previous July 1 to include the unappropriated proceeds and make them available for appropriation on or before June 30, 2023. If the request is approved before the spring town meeting, the town could then make the appropriation at their spring town meeting or, in a city, at their subsequent regularly scheduled meeting.
Can a municipality vote to dedicate to a special purpose stabilization fund some or all of the opioid settlement funds it receives?
Yes. IGR 17-20 outlines the procedures that a municipality can follow to create and dedicate funds to a special purpose stabilization fund. If a municipality receives opioid settlement funds before establishing a stabilization fund, it would need to utilize the processes noted above to appropriate into the stabilization fund after it is created. IGR 17-20 notes the required votes of the legislative body to effectuate these actions.
Must amounts appropriated from free cash for opioid remediation purposes be closed to the general fund if they are not expended prior to the next year end?
No. These funds may be reserved as a fund balance reserved for continuing appropriations until the purpose of the appropriation has been fulfilled.
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Editor: Dan Bertrand
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| Date published: | July 7, 2022 |
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