MMA hosts ‘Municipal Finance 101’ webinar

An MMA webinar today featuring panelists from the Division of Local Services reviewed the basic building blocks of municipal finance.

Sean Cronin, senior deputy commissioner of the Division of Local Services, reviewed the four primary sources of municipal revenue: the property tax, state aid, local receipts, and other available funds.

Cronin began by explaining the components of Proposition 2½ and how the law caps local property tax revenue-raising capacity. Given the way the law works, for forecasting purposes, he said, it’s important to monitor trends in community economic activity and development.

State revenue-sharing, the next largest local revenue stream, includes the two most significant sources: Chapter 70 (education aid) and Unrestricted General Government Aid.

Local receipts include the motor vehicle excise, which is collected by all communities, and the local-option meals tax and lodging tax. These rates are established by state law.

“Other available funds” include “free cash” and the local stabilization fund. Free cash is unrestricted funds carried over from the previous fiscal year available for appropriation by the legislative body. The stabilization fund, or “rainy day fund,” can be used for any lawful purpose via a two-thirds vote of the local legislative body.

Cronin also reviewed general fund expenditures, departmental expenditures, reserves, non-departmental expenditures, debt, and capital investments.

Zack Blake, chief of the DLS’s Financial Management Resource Bureau, reviewed best practices for local government budgeting. He explained how a municipality’s budget represents the intersection of all aspects of municipal finance, and translates community needs and priorities into services.

Municipal budgets should provide short- and long-term fiscal context to guide decision-making, and serve as a community’s single most important policy statement.

Blake stressed that the local budget process is not exclusive to finance committees and teams. Other local officials, such as select boards, town managers, mayors, councils, and department heads, all play important roles.

Blake reviewed the essential concepts of the budget process: financial policies, a capital investment plan, and a multiyear forecast. He highlighted the role each element plays when projecting expenditures and revenues.

Once a budget has been adopted, Blake stressed the importance of keeping accurate data and monitoring spending.

Kasey Bik and Marcia Bohinc from the Division of Local Services offered written responses to nearly 30 questions in real time. MMA Deputy Legislative Director Jackie Lavender Bird moderated a brief verbal question and answer session, which addressed various questions about stabilization funds.

• Financing Local Government & Best Budget Practices presentation (1.5M PDF)