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School Finance and District Support

Fiscal Intervention and Oversight — Guidance for Regional School Districts

Introduction

Massachusetts General Law (M.G.L.) and the state Regional School District regulations outline the financial circumstances under which the Commissioner of Elementary and Secondary Education (Commissioner) is required to intervene in and assume fiscal oversight of a regional school district. This Guidance is provided to help all stakeholders, including regional school committees, regional school district leadership and staff, city council and select board membership, and local citizens, understand these requirements and navigate the process of state fiscal intervention and oversight, in accordance with provisions of Massachusetts law and regulations and Department of Elementary and Secondary Education (Department) practice.

Regional School District Budget Process

In order to understand the Massachusetts law and regulations that govern fiscal intervention and oversight of a regional school district, it is helpful to have a general understanding of the regional school committee budget process. The state of Massachusetts, as well as all school districts, operate on a fiscal year that begins on July 1 and ends on June 30. While the development of an annual district budget is part of an ongoing planning process, budget preparation generally begins in the fall with priority-setting, revenue and student enrollment projections, and expenditure forecasts, and ends with the adoption of the budget in time for the new fiscal year, on July 1.

Unlike municipal school committees, whose budgets are part of a single municipal budget process, regional school committees are independent entities and must not only develop and propose their own budgets within the parameters of law and regulations1, but must also navigate the multiple budget processes of their member municipalities for a final budget to be adopted for a fiscal year. Because the regional district budget process is subject to many stakeholders and timelines, the regional school committee and member municipalities may not always reach agreement on a final fiscal year's budget by the time the fiscal year begins. Accordingly, the law provides for state interventions to ensure that if a regional school committee budget process stalls, the regional school district will continue to operate and serve its families and students.

State Interventions

The ability of the state to intervene in a regional school district budget is authorized by law and regulations that provide the state with incrementally more oversight in response to a regional school district's increasing fiscal vulnerability.

1/12th Budget

Massachusetts law requires that after an annual budget is adopted by a regional school committee and proposed to its member municipalities, the appropriating authorities of two-thirds of the member municipalities must approve the budget when assessments are calculated under the statutory method and all of the member municipalities must approve the budget when assessments are calculated under the alternative (agreement) method.2 If, after the submission of the regional budget to its member municipalities, the regional school committee budget is not approved by July 1 of the fiscal year, the first level of state intervention is triggered.

In this instance, law and regulations require that the regional school district superintendent notify the Commissioner of the district's failure to secure a budget by July 1. The Commissioner, through the Office of Regional Governance, will request that the district provide information about the regional school committee's proposed budget and assessments for the upcoming fiscal year, the status of the local votes, and the approved budget and assessments for the prior fiscal year. After review of this information, the Department, under the Commissioner's authority, certifies an interim monthly budget sufficient for the operation of the district for the beginning of the new fiscal year. The interim monthly budget shall not be less than one-twelfth of the total budget approved by the region in the most recent fiscal year or such higher amount as the Commissioner may determine. This process establishes what is known as an interim monthly "1/12th budget."

Whenever the Commissioner establishes a 1/12th budget for a regional school district, the treasurer of the regional school district must calculate and certify to the member municipalities their respective assessments based on the statutory assessment method. In doing so, the treasurer must use the final or most recent state aid amounts, general fund revenues and minimum local contributions for the budget year. Since state aid and the minimum local contributions for member municipalities may change between the time the initial budget is proposed by the regional school committee and the time a 1/12th budget is established by the Commissioner, the final or most recent minimum local contribution and state aid amounts must be used in calculating assessments under a 1/12th budget. Each member municipality shall then pay its respective assessment to the regional school district in accordance with the payment schedule in the regional district agreement.

The Commissioner's 1/12th budget remains in effect until the annual budget is adopted and approved by the regional school committee and approved by two-thirds of the member municipalities or until December 1, whichever comes first.

State Fiscal Oversight

Between the time the 1/12th budget is established and December 1, the Department will remain in contact with the regional school district administration to discuss the regional school committee's progress toward adoption and approval of an annual budget for the fiscal year. Law and regulations detail the requirements related to the reconsidered budget.3 If the regional school committee's proposed budget is not approved by the member municipalities by December 1 of the fiscal year, the second level of state intervention is triggered. At that time, the Commissioner must assume fiscal oversight of the operations of the district, must establish a final district budget for the fiscal year and must assume responsibility of specific fiscal functions.

Prior to the Commissioner's setting of a final budget, the Department will contact the chair of the regional school committee, the superintendent, and the chairs of the City Councils and/or Select Boards of the member municipalities to seek input on the final budget for the remainder of the fiscal year. Following consideration of the input from stakeholders, the Commissioner will set a budget for the remainder of the fiscal year. It is important to note that the final budget may be more than or less than the interim 1/12th budget previously set.

Whenever the Commissioner establishes a final budget for a regional school district, the treasurer of the regional school district must calculate and certify to the member municipalities their respective assessments based on the statutory method. Every member municipality shall pay its respective assessment in accordance with the payment schedule in the regional district agreement. Note that the appropriation of funds to pay an assessment ordered by the Commissioner shall not be deemed approval by the municipality of the district's budget.

While under fiscal oversight, certain fiscal actions taken by the superintendent, school committee or other officials of the district are subject to the Commissioner's written approval. These include:

  • Adoption or reconsideration of the district budget,
  • Transfer of budgetary authority between line items,
  • Encumbrance or expenditure of funds not included in the general fund budget,
  • Borrowing,
  • Execution of new or amended collective bargaining agreements,
  • Execution of new contracts or amendments to existing contracts with a value of $25,000 or more, and
  • Establishment, increase, or decrease of user fees.

During the period of fiscal oversight, the Commissioner may also impound any unencumbered funds for such period of time as he determines and may undertake any initiatives that he deems necessary to secure the financial stability of the district.

The regulations allow for the Commissioner to designate a person to implement these responsibilities on his behalf. In order to facilitate the Commissioner's fiscal oversight of the district, the superintendent and other officials of the district shall promptly provide the Department with such information and reports as may be requested by the Commissioner or his designee. The Commissioner's fiscal oversight shall continue until the end of the fiscal year or until the member municipalities have approved a budget for the subsequent fiscal year, whichever is later.4

Special Legislation

The next level of intervention has historically been triggered when a regional school district is in financial crisis (e.g., deficit spending). In such cases, special legislation has been passed pertaining to a particular regional school district that is intended to restore the fiscal solvency of the regional school district as soon as possible. This state intervention has been developed on a case-by-case basis, and details and requirements of special legislation have been established by the Department in consultation with the Department of Revenue and the legislature. Such special legislation has historically included additional oversight and responsibilities (beyond that outlined in M.G.L. c. 71, § 16B and 603 CMR 41.00), and additional authority for the Commissioner.

For example, state fiscal oversight of a regional school district was recently established through a special law that set borrowing limits for the regional school district to address the immediate financial crisis. In addition, the special legislation required that the district employ a fiscal overseer, whose appointment was subject to the approval of the Commissioner, to perform specific responsibilities with respect to the district. The fiscal overseer works with local officials in the district and reports to the Commissioner as part of a larger strategy of fiscal oversight, monitoring, support, and intervention. In this case, the special legislation required that the fiscal overseer would remain in place for not less than three years (or while any debt authorized by the special law is outstanding). Additionally, if at any time the Commissioner believes that a finance control board should be established, the Commissioner, in consultation with the Director of the Accounts at the Department of Revenue, may recommend that the Secretary of Administration and Finance establish such a board.

Conclusion

In Massachusetts, state fiscal intervention in regional school districts ranges from the establishment of an interim monthly 1/12th budget as a stopgap measure that enables the district to continue to operate while the school committee and member municipalities continue to work on an annual budget, to complete state fiscal oversight through a fiscal overseer hired by the district that reports to the Commissioner or, in the most severe cases, by a finance control board.

Regional school districts face complex fiscal and governance challenges. Regional school districts facing higher fiscal risk (e.g., difficulty in securing budget approval, scarcity of general fund resources) are encouraged to take advantage of the technical assistance offered to school districts and the new data and finance tools available on the Department's website.

For more information, please contact the Office of Regional Governance at 781-338-6515.


1 Note that the regional school committee budget process is outlined in law and regulations. This process is beyond the scope of this Guidance. For an in-depth review of the regional school district budget process, see: Regional School District Budget Process: Preparing a Regional Budget Download Word Document (Massachusetts Department of Elementary and Secondary Education 2010).

2 For more information on calculating member assessments, please see the Department's guidance: Preparing Member Assessments: Guidance for Regional School Districts.

3 See M.G.L. c. 71, §16B and 603 CMR 41.05(3).

4 See 603 CMR 41.07.





Last Updated: March 2, 2020



 
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