CHERRY SHEET: Printed on cherry pink paper, this annual statement from the Massachusetts Department of Revenue lists estimated state receipts to the town for the coming fiscal year and estimated county and state charges payable by the town. The figures are used by town assessors in setting the tax levy.
FINANCE COMMITTEE: This elected body reviews all budget requests and gives recommendations on warrant articles. It is the sole entity that transfers from the reserve fund. The power of its recommendations rests on members’ ability to make a persuasive argument on the town meeting floor.
FINANCIAL BUDGET: The annual warrant always calls for approval of the town’s OPERATING (DEPARTMENTAL) BUDGET for the coming fiscal year. It includes line-item budgets for every town department. It may be amended from the floor by majority vote.
FREE CASH: “It’s the amount you have in your checkbook after you’ve paid your bills,” says one selectman. Once referred to as AVAILABLE FUNDS, free cash is the balance remaining after the town has satisfied its debts. It does not include the amount of unpaid property taxes even if these are due. The amount is certified to the town by the state director of accounts, effective July 1 of each year. Free cash can be appropriated out by a majority town meeting vote.
GENERAL FUND: Comprises money from operating budget and warrant articles. Town also has a SPECIAL REVENUE FUND for income from grants, gifts, and other sources; TRUST FUND includes bequests and income to stabilization fund; AGENCY FUND includes money held but not to be used by the town such as escrow deposits.
LEVY LIMIT: Amount the town is entitled to raise and appropriate in a given fiscal year not relying on a proposition 2.5 override.
MEETING THE COSTS: The town has three ways to obtain funds to cover expenditures (1) RAISE AND APPROPRIATE articles on the town meeting warrant that take money raised by taxation and put it toward a specific expense. Requires a majority vote; (2) FREE CASH TRANSFER by majority vote; (3) BORROWING through a bond issue or notes, usually used for a capital expenditure such as construction project or equipment purchase. A warrant article asks voters to appropriate the sum and authorize treasurer, with approval of board of selectmen, to borrow. Requires a two-thirds majority vote.
PROPOSITION 2.5: Enacted by the Massachusetts legislature in 1981, this measure stipulates that towns can increase their budgets by only 2.5 percent over the preceding year.
PROPOSITION 2.5 OVERRIDE: In instances when a town calculates all its income and expenditures and finds the bottom line shows an increase larger than 2.5 percent, a ballot vote is required for approval.
GENERAL OVERRIDE Seeks approval for going beyond the 2.5-percent spending limit for the budget as a whole. The increase becomes a permanent part of the base on which the budget is calculated.Some towns have instituted a MENU OVERRIDE system, in which voters can pick and choose which capital expenditures they would approve beyond the spending cap.Voters are sometimes asked to EXEMPT certain expenditures, such as long-term capital projects, from the 2.5 limit. Known as a CAPITAL EXCLUSION or DEBT EXCLUSION, this allows the town to assess taxes in excess of the levy limit. The amount does not become a permanent part of the levy limit base. It allows the town to assess taxes for a specific period of time to pay for capital expenditures or service debt payments. Island towns routinely exempt school construction projects from the 2.5 cap.
RESERVE FUND: An account to be used for transfers for “extraordinary or unforeseen” expenditures by town departments. The amount is appropriated by voters at annual town meeting. Departments request an appropriation from the finance committee, which controls the fund.
SCHOOL BUDGETS: Each town must approve its share of the Martha’s Vineyard Regional High School budget which appears as a line item in each town’s budget. Approval by at least four towns is required. In addition, three up-Island towns act on the Up-Island Regional School District budget; Edgartown, Oak Bluffs, and Tisbury vote on their own individual school budgets.
STABILIZATION FUND: A “rainy day” savings account, a trust fund, sometimes used to hold appropriations toward future expenditures. Balance may not be more than 10 percent of the previous year’s budget. Earned interest is added to the account. Funds from this account may be used for any lawful municipal purpose and may be appropriated at town meeting by a two-thirds majority vote.
TAX RATE: Town’s net expenditures minus estimated receipts divided by total valuation of the town as determined by the assessors.