Municipal Finance / Budget Glossary

Glossary Terms
All term are as defined by Massachusetts Department of Revenue.

Available Funds
Balances in the various fund types that represent non-recurring revenue sources. Examples of available funds are free cash, stabilization fund, and overlay surplus.

Capital Assets
All tangible property used in the operation of government which is not easily converted into cash and has an initial useful life extending beyond a single financial reporting period. Capital assets include land and land improvements, buildings and building improvements, machinery and equipment.

Chapter 70 School Funds
Chapter 70 refers to the school funding formula created under the Education Reform Act of 1993 by which state aid is distributed through the Cherry Sheet.

Cherry Sheet
The official notification to cities, towns and regional school districts of the next fiscal year’s state aid and assessments.

Collective Bargaining
The process of negotiating workers’ wages, hours, benefits, working conditions, etc., who are represented by a recognized labor union.

Debt Exclusion
An action taken by a community through a referendum vote to raise the finds necessary to pay debt service costs for a particular project from the property tax levy, but outside the limits under Prop 2 ½.

The excess of expenditures over revenues during an accounting period.

Enterprise Funds
A separate accounting and financial mechanism for municipal services for which a fee is charged for goods or services. Enterprise funds allow surpluses to be used to reduce fees for the services or to pay for capital improvements. Ashland has three Enterprise Funds: Water, Sewer, and Trash.

Fiscal Year
Since 1974, Massachusetts has operated on a budget cycle that begins July 1 and ends June 30.

Fixed Costs
Costs that are legally or contractually mandated such as retirement, FICA/Social Security, insurance, and debt service costs.

Foundation Budget
The spending target imposed by the Education Reform Act of 1993 for each school district as the level necessary to provide an adequate education for all students.

Free Cash
Remaining, unrestricted funds from operations of the previous year. Unpaid property taxes reduce the amount that can be certified as free cash. Free cash is certified by the State Bureau of Accounts and is not available for appropriation until certified


The amount a community raises through the property tax. The levy can be any amount up to the levy limit, which is re-established every year in accordance with Prop 2 ½ provisions.

Levy Ceiling

A levy ceiling is a tax restriction imposed by Prop 2 ½. It states that, in any year, the real and personal property taxes imposed may not exceed 2 ½ % of the total full and fair cash value of all taxable property.

Levy Limit

A levy limit is a tax restriction imposed by Prop 2 ½. It states that the real and personal property taxes imposed by a town may only grow each year by 2 ½ % of the prior year’s levy limit, plus new growth and any overrides or exclusions.

Local Aid
Revenue allocated by the Commonwealth to cities, towns, and regional school districts.

Local Receipts
Locally generated revenues, other than real and personal property taxes. Examples include motor vehicle excise, investment income, fees, rentals and charges

Minimum Local Contribution

The minimum that a city or town must appropriate from property taxes for the support of schools.

Net School Spending
School budget and municipal budget amounts attributable to education, excluding long-term debt service, student transportation, school lunches and certain other specified school expenditures. A community’s net school spending must equal or exceed the requirement established annually by the DOE.

Net School Spending Requirement
Sum of a school district’s minimum local contribution and the Chapter 70 aid received in a given fiscal year. Besides the requirement, funds need to be appropriated to support costs such as student transportation, fixed assets, long-term debt service, etc.

An account established annually to fund anticipated tax abatements, exemptions and uncollected taxes. The over is not established by the normal appropriation process, but rather is raised on the tax recap sheet.

Overlay Surplus
Any balance in the overlay account of a given year in excess of the amount remaining to be collected or abated can be transferred into this account. At the end of each fiscal year, unused overlay surplus id “closed” to surplus revenue; in other words, it becomes a part of free cash.

Reserve Fund
An amount set aside annually to provide a funding source for extraordinary or unforeseen expenditures. The Finance Committee can authorize transfers from the reserve fund.

Revolving Fund
Allows a community to raise revenues r from a specific service and use those revenues without appropriation to support the service.

Stabilization Fund
A fund designed to accumulate amounts for capital and other future spending purposes, although it may be appropriated for any lawful purpose. A 2/3 vote of ton meeting is required to establish, amend the purpose of, or appropriate money from the stabilization fund.

Surplus Revenue
The total amount of cash, accounts receivable, and other assets that exceed liabilities and reserves.

an authorization for an action. A town meeting warrant establishes the matters that may be acted on by that town meeting.