Harvard is unlikely to see a repeat of this year’s $1.3 million free cash windfall anytime soon. That’s the conclusion of Finance Director David Nalchajian and Town Administrator Tim Bragan, who provided a more nuanced view of this year’s bonanza in presentations to the Finance Committee and the Board of Selectmen during the past two weeks.
Nalchajian told the Press Tuesday that more than a third of fiscal 2017 free cash is the result of two occurrences that won’t be repeated in fiscal 2018, the current budget year. First, one-quarter of the fiscal 2017 amount, $350,000, is money that was disputed by the Massachusetts Department of Revenue (DOR) and withheld from last year’s $1.6 million total. This year, the DOR reversed course and included the money. Another $195,000 is money that remains from a one-time $250,000 transfer to the town’s Reserve Fund to cover an expected spike in health benefit costs. Neither will be a factor in fiscal 2018. In the future, Bragan said this week, the town can expect free cash totals of between $600,000 and $700,000, or approximately 2.5 percent of the annual town budget.
Nalchajian presented these details to the Finance Committee at its Wednesday, Feb. 21, meeting, and Bragan repeated them at the selectmen’s Tuesday, Feb. 27, meeting. Other contributors to this year’s free cash total, according to the two officials, include $495,000 left unspent in departmental budgets, $276,000 in higher-than-forecast collections of local taxes and fees, and $141,876 in unused reserve funds. For a more complete picture see the pie chart.
Free cash, as the DOR explains it, is money that results from the calculation, as of July 1, of the uncommitted amounts that remain from a town’s operations of the previous fiscal year. Getting to this number is a two-step process. First, the town submits its accounting of free cash to the DOR, which then does its own calculations and certifies a final number. This year the town’s submission was $1.54 million; DOR certified $1.3 million.
Free cash typically includes actual receipts in excess of revenue estimates and unspent amounts in departmental budget line items for the year just ended, plus unexpended free cash from the previous year. Free cash is offset by unpaid property taxes and certain deficits, and as a result, can be a negative number. Once the amount is adjusted and certified by the state, it can be spent in the current fiscal year or saved. It must be appropriated by July 1 or else it rolls into the following year’s free cash calculation. Fiscal 2017 free cash, for example, must be appropriated by July 1, 2018.
Harvard’s bylaws require that the selectmen place an article on the Annual Town Meeting warrant to transfer a given year’s free cash—barring a fiscal emergency—to the town’s Capital Stabilization and Investment Fund to help pay for future town projects.
