e Basic Law of
BUDGETING
A Guide for Towns, Village Districts and School Districts
2022
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The Basic Law of Budgeting – 2022 Edition
TABLE OF CONTENTS
About this Publication ............................................................................................................. 6
Introduction to the Municipal Budget Law.......................................................................... 7
Glossary of Terms ...................................................................................................................... 9
Seven Key Concepts
Chapter 1. Appropriations
First Key Concept 15 ....................................................................................................12
A. Appropriations Create Guiding Values ................................................................................ 12
B. Appropriations Are Acts of Legislative Policy .................................................................... 12
C. e Proper Purposes of Appropriations .............................................................................. 13
D. e Meaning of RSA 31:4 – Home Rule .............................................................................. 13
E. A Power to Act Implies a Power to Appropriate ................................................................. 14
F. Public Purposes Only ............................................................................................................. 14
G. How Specic Should a Proposed Appropriation Be? ......................................................... 16
H. Contingency Funds ................................................................................................................ 16
I. Tax/Spending Caps ................................................................................................................. 17
J. Procedural Requirements for Valid Appropriations .......................................................... 17
K. Inter-Municipal Agreements, Shared Services, and Voluntary Contributions .............. 19
Chapter 2. ‘Gross Basis’ Budgeting
Second Key Concept ....................................................................................................21
A. Care in Draing Warrant Articles ........................................................................................ 21
B. Examples of Mistakes ............................................................................................................. 21
C. Comparative Columns ........................................................................................................... 22
D. Individual Versus Special Articles ........................................................................................ 23
E. Special Articles and Recommendations .............................................................................. 23
F. Numeric Tallies and Recommendations on Other Warrant Articles
if Authorized by Town Meeting or Governing Body ......................................................... 23
G. Multi-Year Appropriations for Capital Projects ................................................................. 24
H. Estimated Tax Impact ............................................................................................................. 25
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New Hampshire Municipal Association
Chapter 3. Warrant Notice and Permissible Amendments
Third Key Concept .......................................................................................................26
A. Voters’ Ability to Amend Amounts ...................................................................................... 26
B. Later Transfers Cannot Be Restricted from the Floor ....................................................... 26
C. Amendment by Altering Mode of Funding ........................................................................ 27
D. ‘Stay-at-Home Test’ ................................................................................................................. 27
E. Appropriating Money at Special Meetings: e Requirement of ‘Emergency’ .............. 27
Chapter 4. No Spending Without an Appropriation
Fourth Key Concept .....................................................................................................29
A. Basic Rule of Budget Accounting ......................................................................................... 29
B. Exceptions to the Rule ............................................................................................................ 29
C. What About Spending Prior to Town Meeting? ................................................................. 30
D. Other Statutory Exceptions to No-Spending-Without-Appropriation Rule .................. 31
E. Multi-Year Contracts .............................................................................................................. 32
Chapter 5. When Do Appropriations Lapse?
Fifth Key Concept ....................................................................................................... 35
A. Source of the ‘Lapse’ Rule ...................................................................................................... 35
B. Don’t Confuse Appropriation Accounting with Cash Accounting or Tax Accounting ............. 35
C. Lapsing to ‘Fund Balance’ – Not ‘Surplus’ ........................................................................... 35
D. Unanticipated Revenue Is Not ‘Lost’ .................................................................................... 37
E. Exceptions to the ‘Lapse’ Rule: RSA 32:7 ............................................................................. 37
F. Statutorily Nonlapsing Funds................................................................................................ 40
Chapter 6. Transfers of Appropriations During the Year
Sixth Key Concept ....................................................................................................... 45
A. Special Warrant Articles Nontransferable ........................................................................... 45
B. Maintaining Records of Transfers ........................................................................................ 45
C. Line Item Voting? ................................................................................................................... 46
D. Failed Separate Article: ‘No Means No’’ ............................................................................... 47
Chapter 7. The Budget Committee
Seventh Key Concept.................................................................................................. 48
I. Composition and Creation of the Ocial Budget Committee ........................... 48
A. Ocial v. Advisory Budget Committee .................................................................................. 48
B.
Adoption of an Ocial Budget Committee ............................................................................ 48
C.
Membership .............................................................................................................................. 49
II. Role and Authority of the Budget Committee .....................................................50
A. Ocial v. Advisory Budget Committee .................................................................................. 50
B.
Adoption of an Ocial Budget Committee ............................................................................ 50
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The Basic Law of Budgeting – 2022 Edition
C. “e Budget” ........................................................................................................................... 51
D. Acquiring Information for Budget Preparation.................................................................. 51
E. e Default Budget ................................................................................................................. 52
F. Reviewing (Not Controlling) Expenditures ........................................................................ 52
G. Special Article Recommendations........................................................................................ 53
H. Failure of Budget Committee to Propose a Budget ............................................................ 53
I. Limit on Appropriations ........................................................................................................ 54
J. Right to Know Law ................................................................................................................. 56
Chapter 8. Appropriations under the Ocial Ballot
Referendum (SB 2) System .......................................................................................... 57
A. ‘Standardized’ Referendum System Versus ‘Customized’ Charter ................................... 57
B. Description of the SB 2 System ............................................................................................. 57
C. Dierent Deadlines................................................................................................................. 58
D. Default Budget ........................................................................................................................ 58
E. Recommendations/Altering Recommendations ................................................................ 62
F. Voting Issues ............................................................................................................................ 62
G. Special Meetings ..................................................................................................................... 64
Chapter 9. Basic Town, Village District and School District
Meeting Procedures ....................................................................................................65
A. Rules of Procedure ........................................................................................................... 65
B. Wording of Articles, Motions and Amendments ......................................................... 66
C. Dividing a Question ......................................................................................................... 67
D. Reconsideration and Limits on Reconsideration ......................................................... 67
E. Preventing Disorder ......................................................................................................... 69
F. Separating Voters from Nonvoters ................................................................................. 69
G. How Votes Are Counted and Declared ......................................................................... 69
H. Requests for Secret Yes/No Ballot .................................................................................. 69
I. Questioning a Vote ........................................................................................................... 70
Chapter 10. Capital Improvements Plans: An Important Financial
Planning Tool ...............................................................................................................71
A. Why Do We Need a Capital Improvements Program? ............................................... 71
B. Where Does the CIP Fit Into Local Government? ...................................................... 72
C. Where Do We Begin? ...................................................................................................... 73
D. What is a “Capital Improvement”? ................................................................................ 73
E. What Goes Into a Capital Improvements Program? ................................................... 74
F. Draing, Revising and Adopting the CIP ..................................................................... 77
G. Next Steps: Begin Again! ................................................................................................ 78
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Chapter 11. Understanding the Property Tax System ....................................... 79
A. Property Taxes Based on Appropriations ............................................................................ 79
B. Valuing Property: e Appraisal Process ............................................................................ 79
C. Increased Assessed Value Does Not Necessarily Mean Increased Taxes ........................ 80
D. Proportionality ........................................................................................................................ 80
E. e Assessing Process ............................................................................................................ 81
F. e Equalization Process ....................................................................................................... 82
G. Setting the Tax Rate ................................................................................................................ 82
H. Property Tax Bill ..................................................................................................................... 83
I. How Much Will at Add to the Tax Rate? ........................................................................ 83
Appendix A: Custody and Expenditure of Common Town Funds ........................... 85
Appendix B: Fees, Licenses, Permits & Penalties ..................................................... 86
Appendix C: Financing Options ................................................................................. 89
Appendix D: Assessed Value Illustrations ................................................................ 93
Appendix E: Tax Rate Impact Worksheet .................................................................. 95
Appendix F: Timetable for Special Town Meeting.................................................... 96
Appendix G: Due Dates for Municipal, School & Village District Forms ................. 98
Appendix H: Default Budget FAQ ........................................................................... 102
Table of Statutes ....................................................................................................... 107
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The Basic Law of Budgeting – 2022 Edition
ABOUT THIS PUBLICATION
is publication is intended for use in conjunction with the New Hampshire Municipal Association’s
(NHMA) Budget and Finance Workshops and as a reference throughout the year. We hope you nd
this survey of the Municipal Budget Law helpful as you carry out your duties as a municipal ocial.
Other NHMA publications are available to provide more in-depth information on town meeting and
other municipal law issues, including the Town Meeting and School Meeting Handbook and Knowing the
Territory: A Survey of Municipal Law for New Hampshire Local Ocials.
NHMA’s Legal Services attorneys focus on the laws of towns, cities, and village districts, but the scope of
their legal advice does not include school-specic issues. However, we recognize that in a town with an
ocial budget committee, that committee also serves the local school district. erefore, with the help of
Attorney William J. Phillips of the New Hampshire School Boards Association, we have included some
school- specic information, including information relevant to cooperative school districts, and we note
that in many cases school budgeting laws are similar to town, city, and/or village district budgeting laws.
For school tips, look for this icon throughout the book:
is edition also features a glossary to help you understand the “language” of budgeting law. e
information presented is not intended as legal advice and is not a substitute for consulting your municipal
attorney or calling on NHMA’s Legal Services attorneys. Local ocials in New Hampshire Municipal
Association-member municipalities may contact NHMA’s Legal Services attorneys with questions
and to receive general legal assistance. Attorneys are available by phone at 603-224-7447or by email at
legalinquiries@nhmunicipal.org.
No part of this publication may be reproduced, distributed, or transmitted in any form or by any means,
including but not limited to photocopying, recording, posting on a website, or other electronic or
mechanical methods, without prior written permission of the New Hampshire Municipal Association,
except in the case of quotations that cite the publication as the source or other non-commercial uses
permitted by law. e forms contained in this publication are available for your use
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New Hampshire Municipal Association
INTRODUCTION TO
THE MUNICIPAL BUDGET LAW
e information in this survey, in general, applies to the budget process in all towns, village districts
and school districts governed by the Municipal Budget Law, RSA chapter 32. All principles covered here
also apply to those towns and districts that have adopted the ocial ballot referendum system under
RSA 40:13 (SB 2), except for some special considerations under SB 2 that are covered in Chapter 8. In
general, the word “meeting” is used to mean action by the legislative body under either the traditional
town meeting or the ocial ballot referendum system. e special provisions of municipal charters and
cities are not covered in this publication.
RSA Chapter 32 Applies to All Annual Meeting Forms of Government
e Municipal Budget Law governs in every town, village district and school district with an annual meeting
form of government, including those with the ocial ballot referendum form of meeting (SB 2). e rst
half of the chapter, RSA 32:1 – :13, applies to all such towns and districts. See RSA 32:2, Application.
RSA 32:14 – :24 apply only in the towns and districts that have established an ocial budget committee by
vote of the legislative body under RSA 32:14. RSA 32:5-b applies only to those towns and districts which
have adopted that section pursuant to RSA 32:5-c.
Advisory Committees
e Municipal Budget Law explicitly recognizes unocial or advisory budget and nance committees
that exist in many municipalities. e law does not require any town or district without an ocial budget
committee to have one. RSA 32:24. In this publication, the term “budget committee” means an ocial
Municipal Budget Law budget committee adopted according to RSA 32:14, not an advisory nance/ budget
committee. e role of the budget committee is covered in Chapter 7.
Removal from Oce
RSA 32:12 states that anyone who violates the provisions of the Municipal Budget Law may be removed
from oce by the superior court upon petition. is rule has been upheld in case law. For example, the New
Hampshire Supreme Court held that a police chief who overspent his budget was properly dismissed under
a “for cause” dismissal standard. Blake v. Pittseld, 124 N.H. 555 (1984).
If the town has an ocial budget committee, the budget committee can le the removal petition. RSA 32:23.
Removal is not automatic. In a case involving the Merrimack Village District, a superior court judge ruled
that where an over expenditure of the budget’s bottom line occurred as a result of good faith ignorance
and did not cause harm to the district, the court has discretion not to order removal. e New Hampshire
Supreme Court summarily armed this ruling.
Biennial Budgeting
Cities and towns can budget on a two-year cycle under the provisions of RSA 32:25. e idea is to reduce the
amount of time local ocials spend preparing budgets. e law must be adopted by vote of the legislative
body. If adopted, the following year the legislative body enacts a budget for two distinct 12-month scal
years or a single 24-month scal period. Each year’s budget has the same legal eect as a normal annual
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The Basic Law of Budgeting – 2022 Edition
budget, but the governing body can carry over appropriations from the rst budget year to the second.
Key Concepts
Some ocials, particularly those new to municipal budgeting, nd the Municipal Budget Law to be a
complicated set of unrelated rules. e key to understanding the municipal budget process centers on seven
fundamental budgeting and nance concepts. is survey highlights those seven concepts.
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New Hampshire Municipal Association
GLOSSARY OF TERMS
Appropriate: To set apart from the public revenue of a municipality a certain sum for a specied purpose
and to authorize the expenditure of that sum for that purpose.
Appropriation: An amount of money appropriated for a specied purpose by the legislative body.
Agents to expend: A public body or public ocial, usually the select board, given the authority to expend
funds without further legislative body approval.
Bottom line: e total amount of all appropriations for the scal year.
Budget: A statement of recommended appropriations and anticipated revenues submitted to the legislative
body by the budget committee, or the governing body if there is no budget committee, as an attachment to,
and as part of the warrant for, an annual or special meeting.
Contracts for Default Budget Purposes: As used in RSA 40:13, contracts previously approved, in the
amount so approved, by the legislative body in either the operating budget authorized for the previous
year or in a separate warrant article for a previous year.
Default budget: e amount of the same appropriations as contained in the operating budget authorized
for the previous year, reduced and increased, as the case may be, by debt service, contracts, and other
obligations previously incurred or mandated by law, and by reduced one-time expenditures contained in the
operating budget and by salaries and benets of positions that have been eliminated in the proposed budget.
Capital improvement: A high cost improvement with a useful life of several years, such as infra-
structure projects, land acquisition, buildings, or engineering studies for any of those projects, as well as
vehicles or highway maintenance equipment in some municipalities.
Capital improvements program: A planning tool used to aid the mayor or select board and the budget
committee in considering the annual budget. e program must classify projects according to the
urgency and need for realization, recommend a time sequence for their implementation, be based on
information submitted by the departments and agencies of the municipality, and take into account public
facility needs indicated by the prospective development shown in the master plan of the municipality
or as permitted by other municipal land use controls. e program may also contain the estimated cost
of each project and indicate probable operating and maintenance costs and probable revenues, if any, as
well as existing sources of funds or the need for additional sources of funds for the implementation and
operation of each project.
Capital reserve fund: A savings account established to fund a particular capital project or projects.
Emergency (under RSA 31:5): A sudden or unexpected situation or occurrence, or combination of
occurrences, of a serious and urgent nature, that demands prompt, or immediate action, including an
immediate expenditure of money. is denition, however, does not establish a requirement that an
emergency involves a crisis in every set of circumstances.
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The Basic Law of Budgeting – 2022 Edition
Encumbered funds: Funds that a municipality has a legal obligation to pay, created by contract or
otherwise, to any person for the expenditure of that amount.
Escape clause: See nonappropriation clause.
Fiscal year: For towns, January 1st to December 31st (RSA 31:94), unless the town has adopted the
optional July 1st to June 30th scal year in accordance with RSA 31:94-a – :94-e; for school districts, the
scal year begins on July 1st (RSA 194:15).
Fixed charges: Includes appropriations for principal and all interest and principal payments on bonds
and notes, except tax anticipation notes, as well as mandatory assessments imposed on town by the
county, state, or federal governments.
Fund balance: An account on the town’s balance sheet, accounting for lapsed appropriations, assets, and
liabilities; may be retained, used to reduce the tax rate, or appropriated by the legislative body.
Gross basis budgeting: e requirement that all anticipated revenue from all sources, not just tax money,
must be shown as osetting revenues to the amounts appropriated for specic purposes in the annual budget.
Lapse: e time at which an appropriation may no longer be spent, typically at “year’s end” unless the
appropriation is nonlapsing.
Line Item: A purpose for which money may be spent in the budget.
Nonappropriation clause: A provision in a contract that terminates the agreement automatically without
penalty to the municipality if the requisite annual appropriation is not made. Commonly referred to as an
“escape clause.”
Ocial budget committee: A budget committee adopted by the legislative body according to RSA 32:14
with the duties and authority set forth in RSA Chapter 32.
One-Time Expenditures: Expenditures not included in the default budget because they are
appropriations not likely to recur in the succeeding budget, as determined by the governing body, unless
the town meeting votes to delegate determination of the default budget to the budget committee.
Operating budget: e “budget,’’ exclusive of “special warrant articles,’’ as dened in RSA 32:3, VI, and
exclusive of other appropriations voted separately.
Purpose: A goal or aim to be accomplished through the expenditure of public funds. In addition, as
used in RSA 32:8 and RSA 32:10, I(e), concerning the limitation on expenditures, a line on the budget
form posted with the warrant, or form submitted to the department of revenue administration, or an
appropriation contained in a special warrant article, shall be considered a single “purpose.”.
Public purpose: As applied to appropriations, any purpose for which a municipality may act if such
appropriation is not prohibited by the laws or the New Hampshire Constitution.
Raise: To collect or procure a supply of money for use; the source from which an appropriation is made.
Revolving fund: A fund established pursuant to RSA 31:95-h, into which fees and charges for certain
services and facilities may be deposited and from which expenses for those services and facilities may be
expended by a board or body
designated by the legislative body at the time the fund is created.
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Sanbornizing: A term of art derived from the case of Appeal of the Sanborn Regional School Board, 133
N.H. 513 (1990), meaning sucient disclosure to the legislative body of the cost items in a collective
bargaining agreement, such that the multi-year costs of the agreement become binding on the municipality.
Separate warrant article: An article containing an appropriation that is set apart from the operating budget.
Special revenue fund: A nonlapsing fund established pursuant to RSA 31:95-c, restricting revenues from
specic sources to be expended for specic purposes by the legislative body.
Special warrant article: Any article in the warrant for an annual or special meeting which proposes an
appropriation by the meeting and which (a) is submitted by petition; (b) calls for an appropriation of an
amount to be raised by the issuance of bonds or notes pursuant to RSA 33; (c) calls for an appropriation
to or from a separate fund created pursuant to statute, including but not limited to a capital reserve
fund under RSA 35, or trust fund under RSA 31:19-a; (d) is designated in the warrant, by the governing
body, as a special warrant article, or as a nonlapsing or nontransferable appropriation; or (e) calls for an
appropriation of an amount for a capital project under RSA 32:7-a.
Surplus: See fund balance.
Tax year: April 1
st
– March 31
st
.
Ten percent rule: In towns and districts with an ocial budget committee, the total amount
appropriated, including amounts appropriated in separate and special warrant articles, cannot exceed
the total recommended by the budget committee by more than 10 percent. e 10 percent calculation is
computed on the total amount recommended by the budget committee, less that part of any appropriation
item which constitutes “xed charges.”
Town-funded trust fund: A “savings account” established pursuant to RSA 31:19-a for the maintenance
and operation of the town and for any other valid public purpose.
Unanticipated revenue: Revenue from an unexpected source, i.e., a source of money the municipality did
not anticipate it would receive any funds from.
Year’s end: e end of the scal year.
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The Basic Law of Budgeting – 2022 Edition
CHAPTER ONE
First Key Concept
APPROPRIATIONS
Once an understanding of the concept of an appropriation is mastered, the municipal budget process is
easier to understand. e words “appropriate” and “appropriation” are dened in RSA 32:3, as follows:
I. “Appropriate” means to set apart from the public revenue of a municipality a certain
sum [of money] for a specied purpose and to authorize the expenditure of that sum
for that purpose.
II “Appropriation” means an amount of money appropriated for a specied purpose by
the legislative body.
A. Appropriations Create Guiding Values
An appropriation is a fundamental exercise of governmental power. Both taxing power and spending
power ow directly from the power to make appropriations. Appropriations give a governmental unit
purpose and direction. ey form the guiding values of the governmental entity. When local ocials
make spending decisions, they are carrying out those policy values.
B. Appropriations Are Acts of Legislative Policy
An appropriation is a policy decision to set aside a specic amount of public money, which typically has
not been collected yet, for a specic stated governmental purpose. It is a legislative act. RSA 32:6 provides
that appropriations can be made only by vote of the legislative body (the voters) at a properly noticed
annual or special meeting.
Appropriation and spending should not be confused. An appropriation is not the actual spending
of money. It is the underlying authorization to spend money. An appropriation is also different
from the authorization to tax (raising money). “Raising” indicates the source of the revenue;
“appropriating” indicates how the money will be spent. The New Hampshire Supreme Court has
described the difference:
To ‘raise’ money, as the word is ordinarily understood, is to collect or procure a supply of money for
use…. To ‘appropriate’ is to set apart from the public revenue a certain sum for a certain purpose.
Frost v. Hoar, 85 N.H. 442 (1932).
A vote of the legislative body (assembled meeting or ocial ballot referendum vote) is required for a valid
appropriation. A proposed budget or warrant article presented to the voters by the governing body or budget
committee is only advisory. It is not nal, and it is not an appropriation. Indeed, the only legally binding
eect of a proposed budget or warrant article is that the warrant notice requirement does not permit any
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Chapter 1. Appropriations
new subject matter to be added by the voters (see Section J.) e budget prepared by the governing body or
budget committee is similar to a legislative bill that has been introduced but not voted on yet.
C. The Proper Purposes of Appropriations
“Purpose” means a goal or aim to be accomplished through the expenditure of public funds. RSA 32:3, V.
1. SCHOOL DISTRICTS
e state law setting the proper purposes of school appropriations, RSA 198:4, is an old statute. It
limits school appropriations to “the support of the public schools, for the purchase of textbooks,
scholars’ supplies, ags and appurtenances, for the payment of tuition of the pupils in the district
in high schools and academies in accordance with law, and for the payment of all other statutory
obligations of the district.”
2. VILLAGE DISTRICTS
A village district or precinct must be explicitly created for one or more of the specic purposes
found in RSA 52:1, such as “the supply of water.” Once that happens, the district has “all the
powers in relation to the objects for which it was established that towns have or may have in
relation to like objects, and all that are necessary for the accomplishment of its purposes.”
RSA 52:3, II.
3. TOWNS
While the purposes to which school district and village district money may be appropriated are
limited, the statute governing town appropriations is broader. RSA 31:4 authorizes a town to
appropriate money “for any purpose for which a municipality may act if such appropriation is not
prohibited by the laws or by the constitution of this state.” However, as explained in the sections
below, towns have only the powers that the State gives them. erefore, it is important to nd
authorization somewhere in the law for a purpose, as well as to understand whether and how the
state laws and/or Constitution limit the purposes for which towns may appropriate public funds.
It is also useful to note that towns are not limited to the purposes printed on the MS-636 and
MS-737 budget forms. e town budget forms required by the New Hampshire Department of
Revenue Administration (DRA) contain line items for most valid public purposes. ese items
now correspond to the “uniform system of accounts” developed by DRA. It is, however, possible
to insert numbered line items for purposes that are not on this chart of accounts, so long as the
purposes are otherwise legal and are not prohibited by state law or the state constitution.
D. The Meaning of RSA 31:4 – Home Rule
New Hampshire is not a home rule state in the constitutional sense. We have a long tradition of local
control, but unlike many state constitutions, the New Hampshire Constitution does not grant power
directly to towns and cities. It grants power only to the legislature. In New Hampshire, towns have “home
rule” only if the legislature gives it to them, and the legislature is free to decline to grant that authority at
any time.
Towns have only such powers as are expressly granted to them by the legislature and such as are
necessarily implied or incidental thereto. Girard v. Allenstown, 121 N.H. 268 (1981).
Under the ruling in cases like Girard, the most basic rule of local government in New Hampshire is
that a town cannot undertake any action unless a statute authorizes that action. With that rule in
mind, the legislature has granted authority for towns to appropriate money “for any purpose for which
a municipality may act….” RSA 31:4. is means that a town may only appropriate money if there is
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The Basic Law of Budgeting – 2022 Edition
authority somewhere in the law for that purpose, and only if there is no law or constitutional principle
that prohibits it.
e pre-1983 version of RSA 31:4 contained 43 separate paragraphs of permitted types of appropriations.
is list is still found in the older, pre-1988 hardbound edition of the statute book. e legislature got
tired of adding to the list to keep up with town needs. Now the list is open-ended. For example, can towns
appropriate money to help with the expansion of a local nonprot private hospital? e answer is yes.
First, running a hospital is something the town or city itself could do, and many municipalities across the
country do so. Second, the old version of RSA 31:4 contained a specic paragraph (VI) that allowed aid to
hospitals and clinics. However, even this broad power to appropriate money has its limits. As explained in
Section F, our state constitution requires public money to be appropriated only for “public purposes.”
E. A Power to Act Implies a Power to Appropriate
Any statute granting authority to municipalities also impliedly authorizes municipalities to appropriate
money to carry out that action. For example, RSA 31:39 authorizes a town to pass ordinances. e power
to appropriate money to enforce those ordinances is implied.
F. Public Purposes Only
Receipt of public money entails an obligation to benet the public. Under the New Hampshire
Constitution, public money can be appropriated only for valid public purposes, but not to create a purely
private benet. is issue can be confusing at times because even something that may have a “public
benet” does not always constitute a “public purpose” as required by the New Hampshire Constitution.
While the public might benet from the use of municipal appropriations to a private entity, such as a
private ambulance service, the “public purpose” requirement means that municipalities have to go one
step further and secure the ability to enforce or obtain that benet for the public. As a general rule, town
money cannot be granted to a private person, company or organization unless that private person takes
on some obligation to benet the town. Opinion of the Justices, 88 N.H. 484 (1937). In other words, there
must be a quid pro quo (literally, “this for that”). Oen the obligation is contractual, as in the purchase of
goods or services. Even where there is no express contract, the obligation must exist. For example, a grant
to a private ambulance service is usually permitted under the law because the ambulance service knows
and agrees that it is expected to use that money to provide a public service.
A written contract is not always necessary. Some legally enforceable obligations are not in writing, but
a written agreement is a good idea. e governing body (select board, school board or village district
commissioners) is responsible to the voters for making sure money is used for the appropriated purpose.
If money does go to private parties or organizations, the governing body must do whatever is necessary to
be assured that the voters’ directives are carried out and the money is not diverted to other purposes.
In draing warrant articles for appropriations to private organizations, state the purpose of the money in
the warrant article. Doing so creates an implied contract if a private organization accepts the money. e
private organization becomes obligated to use it for the purpose stated in the article.
In a few specic cases, the legislature has carved out particular purposes of appropriation which
may appear to benet private parties, but which a statute declares to be a proper public purpose for
which towns or cities may appropriate money. For example, if the legislative body votes to adopt
the provisions of RSA 36-A:4-a, the conservation commission may expend funds to facilitate a
conservation easement transaction, even if the municipality will not hold any interest in the property
or the easement. RSA 36-A:4-a; RSA 36-A:5, II.
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Chapter 1. Appropriations
1. INCIDENTAL PRIVATE BENEFIT IS PERMITTED
e legal validity of an appropriation is not defeated if a private person incidentally benets,
so long as the main purpose of an appropriation is to promote the public welfare. Hampton v.
Hampton Beach Improvement Co., 107 N.H. 89 (1966). In Hampton, the town had granted a 99-year
lease on town-owned beach land in 1897 to a private company because the land was otherwise
not yielding any income to the town. e lease included an agreement that the town would pay
the taxes on the leased land during the lease. By the 1960s the land had been improved and was
extremely valuable, but the town was obligated to abide by the very low 1897 lease amount and its
promise to pay the taxes. e lease was held valid, however, because at the time it was made, it was
projected to serve a proper public purpose over its life, with private prot merely incidental.
2. SPECIAL TAX TREATMENT
e Hampton case implies that contracts for special tax treatment may be legal if a town (a)
agrees to pay the tax and (b) is getting some benet as quid pro quo. erefore, giving a tax
abatement to a particular prot-making business just to aid the local economy clearly violates the
constitution because the town is not paying the tax and there is no specic quid pro quo benet to
the town.
RSA chapter 79-E was enacted to encourage the revitalization of downtown municipal areas. If
the legislative body votes to adopt the program, a municipality may oer property tax incentives
by not increasing taxes for a certain amount of time if a property owner substantially rehabilitates
a structure in a downtown, central business district or town or village center area. “Substantial”
rehabilitation costs at least 15 percent of the assessed value prior to the rehab, or $75,000,
whichever is less. In certain cases, this tax relief may also be available for the replacement of
under-utilized structures in these areas. See RSA 79- E:1, II-a. is tax relief can remain in eect,
at the discretion of the governing body, for up to ve years with provisions for extensions for
certain types of projects. Tax relief is granted only to assessment increases attributable to the
rehabilitation of the property and is not available when more than 50 percent of construction
costs are being funded through grant programs.
As of July 5, 2011, municipalities may also decide to extend the tax incentive to include the
rehabilitation of buildings that have been destroyed by re or act of nature, including buildings
destroyed up to 15 years before the municipality adopts this incentive. RSA 79-E:2, II. In
these cases, for the incentive period designated by the governing body, the property tax on the
structure will not exceed the tax on the assessed value of the structure that would have existed
if it had not been destroyed. RSA 79-E:13, I (b). Eective October 9, 2021 municipalities may
designate a “residential property revitalization zone” and grant community revitalization tax
relief under RSA 79-E to the owner of a residential property in the zone with not more than four
units if the structure is at least 40 years old and if the owner signicantly improves the quality,
condition, or use of the structure. Eective April 1, 2022, municipalities may create “housing
opportunity zones” and apply the community revitalization tax relief incentive to housing units
constructed within a housing opportunity zone. To be eligible, at least one-third of the housing
units constructed must be designated for households with an income of 80 percent or less of
the area median income, or the housing units in a qualifying structure must be designated for
households that are deemed to be of “very low, low, or moderate income” under RSA 204-C:57, IV.
e governing body must determine, for each property for which an exemption is sought, that
there is a public benet to granting the tax relief, that the public benet is preserved through
a covenant, and that the proposed use is consistent with the master plan or development
regulations. e purpose of the covenant is to ensure that the structure is maintained and used in
a way that furthers the public benet for which the tax relief was granted. e covenant must be
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at least coextensive with the tax relief period but can be up to twice the duration of that period.
It must include provisions requiring the owner to maintain certain insurance coverage and can
include a lien against the proceeds from insurance claims. All transferees and assignees are
subject to the provisions of the covenant, so it is recorded in the registry of deeds and runs with
the property. e applicant for tax relief is charged with the reasonable expenses in draing,
reviewing, and executing the covenant and there are provisions to protect the municipality
should the property owner not live up to the agreement. A municipality’s denial of the application
for this tax relief is discretionary and may not be set aside by the Board of Tax and Land Appeals
(BTLA) or a court except for bad faith or discrimination.
3. REIMBURSEMENT FOR PURELY PRIVATE BENEFIT
If the town spends money in a way that benets only private individuals (for example, plowing
private roads or private driveways), the town’s costs must be reimbursed by those who benet
so that no burden falls on the taxpayers. In addition, such work on behalf of private individuals
is permissible only if it is incidental to work performed primarily for a public purpose. Clapp v.
Jarey, 97 N.H. 456 (1952).
G. How Specic Should a Proposed Appropriation Be?
When preparing the budget or separate warrant articles, always be sure the wording of an appropriation is
clear enough to let the governing body know how much exibility it has. e degree of specicity is up to
the legislative body and is oen based on political considerations. e amount of freedom the governing
body has depends on how specic the purposes in the warrant article or on the budget form are.
For example, consider a special article which states: “… to raise and appropriate $____for a new grader
to be purchased from Town Graders, Inc. of Concord.” is wording is probably too specic because it
limits the options of the ocials making the purchase. It could be construed to prohibit purchasing from
another dealer. What if that vendor does not have any graders at that price? What if can be obtained for
less money from another vendor? On the other hand, an article that says “equipment” instead of “grader”
may not be specic enough and may lead voters to amend the article to more specically dene the action
that may be taken by the governing body, thus keeping the reins on their ocials.
As a general rule, a warrant article should be draed to be specic enough to set the policy but broad
enough to allow the governing body discretion on the details of carrying out that policy. e dollar
amount must always be exactly specied, but it serves as an upper limit, not as a mandate for spending
the entire amount.
It is also important to consider who legally is required to have custody of the funds being appropriated
and which ocial(s) or board will have legal authority to spend those funds. See Appendix A for a chart
outlining some of the more common types of funds created by towns, who may have custody of the funds
and who may authorize expenditures of those funds.
H. Contingency Funds
As of August 24, 2013, towns may establish a contingency fund by an article separate from the budget
and all other articles in the warrant for the annual meeting. e fund may be used by the governing body
during the year to meet the cost of unanticipated expenses that may arise during that year. e fund may
not exceed one percent of the amount appropriated by the town during the preceding year, excluding
capital expenditures and debt service. A detailed report of all expenditures from the contingency fund
must be made each year by the select board and published in the annual report. RSA 31:98-a; RSA 32:11, V.
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Chapter 1. Appropriations
RSA 198:4-b, I authorizes school districts to establish contingency funds in like manner as towns.
However, school contingency funds are not subject to the one percent rule that applies to towns.
I. Tax/Spending Caps
Towns and cities (as well as school districts) may adopt limits on spending or tax increases. For a city,
or for a town with a town council form of government, the charter may be amended to include a limit
on annual increases in the amount raised by taxes in the city or town budget. e limit must include
a provision allowing for override of the cap by a supermajority vote as established in the charter.
RSA 49-C:12, III; RSA 49-C:33, I(d); RSA 49-D:3, I(e). Amendments eective August 20, 2021 provide
that city and town charter exclusions, ordinances and accounting practices that have the eect of an
override of a tax cap require a supermajority vote of the legislative body.
In other towns with traditional town meeting or ocial ballot referendum town meeting (SB 2), and
other political subdivisions adopting a budget at an annual meeting of the voters, the voters may adopt
a limit on annual increases in the estimated amount of local taxes in the governing body’s or budget
committee’s proposed budget. RSA 32:5-b; RSA 32:5-c. e cap must be either a xed dollar amount or a
xed percentage. If the taxes raised for the prior year were reduced by the use of fund balance (explained
in Chapter 5), the amount of the reduction is added back and included in the amount to which the tax
cap is applied. RSA 32:5-b, I-a (eective August 5, 2013). If a cap is adopted, the estimated amount to
be raised by local taxes as shown on the proposed budget certied by the governing body or budget
committee and posted with the warrant may not exceed the local taxes actually raised for the prior
scal year by more than the cap. e cap does not, however, limit the amount the voters may actually
appropriate at the meeting; it is only a limit on the budget submitted to the voters for consideration. In a
traditional town meeting, the voters may still amend the proposed budget up or down in the same way
they ordinarily would. In a town using the SB 2 form of town meeting, adoption of a cap does not prevent
the voters at the deliberative session from amending one or more warrant articles (or all of them) to
increase the amount of a proposed appropriation or the total amount of all proposed appropriations. It is
important to note, of course, that in a town with an ocial budget committee, the ten percent limitation
(explained in Chapter 7) will still apply and eectively cap the total amount that may be appropriated.
A cap can be adopted by a town with either traditional town meeting or an SB 2 meeting. In either case,
the question of adopting a cap must be placed on the warrant by the governing body or by citizen petition
under RSA 39:3. In a town with traditional town meeting, voting on the question is by ballot conducted
at the business session of the meeting, not by ocial ballot with the election of ocers. In an SB 2 town,
the question is voted upon on the ocial ballot with all other questions. In either case, adoption of the
cap requires a three-hs majority of those voting. If a cap is adopted, it takes eect beginning with the
subsequent scal year. A cap can be repealed in the same manner in which it is adopted.
e law also raties all tax or spending cap provisions previously adopted in any city or town charter.
RSA 49-B:13, II-a.
J. Procedural Requirements for Valid Appropriations
An appropriation must comply with several procedural requirements to be valid. Each procedural
requirement is explained in more detail throughout this book. ey include:
• a public budget hearing;
• disclosure of all purposes and amounts at the hearing;
• budgeting on a gross basis (See Chapter 2);
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• recommendations of the governing body and, if there is one, the budget committee (See Chapter 2,
sections D, E and F);
• warrant notice (See Chapter 3); and
• listing of all appropriations and separate warrant articles on the posted budget.
1. BUDGET HEARING
All towns and districts must hold at least one public hearing on each budget not later than 25 days before
any annual or special meeting. Additional hearings may be held fewer than 25 days before the meeting.
RSA 32:5, I. In ocial ballot referendum (SB 2) towns and districts, the 25-day requirement does not
apply; instead, the budget hearing is held on or before the third Tuesday in January for a March annual
meeting. (See RSA 40:13, II-b and II-c for SB 2 hearing requirements for April and May town meetings.)
If there is a budget committee, that committee conducts the public hearing(s); otherwise, the governing
body (select board, school board or village district commissioners) does so. RSA 32:5, I. Public notice
of each hearing must be given at least seven days in advance, not counting the date of the hearing.
e statute does not specify how the notice must be given, but the best practice is to give notice by
both posting in two public places and publishing. If a public hearing is recessed to a later date or time,
additional notice is not required for the next session if the date, time and place are made known at the
original session. RSA 32:5, I.
2. DISCLOSURE OF ALL PURPOSES AND AMOUNTS AT HEARING
Aer the public budget hearing, no new purpose or amount can be added to the proposed budget unless
that purpose or amount was “discussed or disclosed” at that hearing, or unless a further hearing is held.
RSA 32:5, II. is statute prevents the budget committee or governing body from adding new purposes
to, or increasing amounts in, the proposed budget that were not discussed or disclosed at the hearing. e
legislative body (the voters), however, may increase or decrease proposed amounts or delete (but not add)
purposes of appropriation at the meeting. is topic is covered in more detail below.
e law does not require the proposed budget to be posted with the notice of the budget hearing, but
without at least a dra proposal, the public has no realistic opportunity for input. Also, while the law does
not technically require the proposed budget to be prepared in time for distribution at the hearing, all line
items and amounts must be “disclosed or discussed” at the hearing. Having a prepared form helps ensure
all items will be “disclosed.” However, eective September 21, 2021, if a town or district uses subaccounts to
budget or track nancial data it shall make that data available for public inspection at the public hearing.
e hearing requirement also applies to appropriations included in petitioned warrant articles. erefore,
at least one budget hearing must be scheduled aer the nal day for submitting petitioned articles. is
is the h Tuesday prior to the meeting in traditional meeting towns (RSA 39:3), the second Tuesday in
January for March SB 2 meeting towns (RSA 40:13, II-a), or 30 days prior to the meeting in traditional
school districts (RSA 197:6). at leaves a very narrow window within which at least one of the budget
hearings must be held.
e governing body or the budget committee, if there is one, is not required to vote on the nal proposed
budget at the public hearing. e law says the budget must be nalized “aer the conclusion of public
testimony.” at could mean immediately aer, or several days later at a properly noticed public meeting.
If a member of the public, at the public hearing, makes a suggestion for a new appropriation, the
governing body or budget committee can add it to the proposed budget without a second hearing because
it was “discussed” at that rst hearing.
RSA 32:5, IV specically requires all appropriations to be listed on the posted budget, which includes
special warrant article appropriations and other warrant article appropriations not included in the
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Chapter 1. Appropriations
operating budget. e DRA will invalidate any appropriation not included on the posted budget
form (MS-636 and MS-737). Special warrant articles also require a notation of whether or not
they are recommended by the governing body and, if there is one, the budget committee.
3. COLLECTIVE BARGAINING AGREEMENTS
RSA 32:19-a creates a submission date aer which the cost items of a collective bargaining
agreement (CBA) reached between employee unions and the governing body may not be included
in the proposed budget. RSA 32:5-a requires a negotiated agreement on cost items by the nal
date for submitting petitioned warrant articles. Cost items not negotiated by that date cannot
be submitted to the legislative body at the annual meeting, but may be submitted later at a
special meeting held under RSA 31:5 or RSA 197:3. e law also allows a special town or district
meeting, without the requirement of superior court permission, to consider CBA cost items
rejected by the annual meeting, if authorization is included in the original warrant in the form
of a contingent warrant article, inserted by petition or by the governing body, as follows: “Shall
[name of municipality], if article ___ is defeated, authorize the governing body to call one
special meeting, at its option, to address article ___ cost items only?” RSA 31:5, III and
RSA 197:3, III. Cost items are dened by RSA 273-A:1, IV.
In budget committee towns, RSA 32:19 exempts CBA cost items from the 10 percent rule, but
only that portion of the CBA cost items that is not recommended by the budget committee. See
Chapter 7 for more information about budget committees and the 10 percent rule.
K. Inter-Municipal Agreements, Shared Services, and Voluntary Contributions
RSA chapter 53-A authorizes municipalities to enter into agreements with other municipalities, counties,
school districts, school administrative units (SAU’s), and village districts for the purpose of providing
services and facilities in a cooperative manner that is mutually advantageous to all parties. It also
authorizes the appropriation of funds necessary to carry out the contractual obligations that are incurred.
Any powers, privileges, or authority exercised, or capable of being exercised, by a municipality may be
exercised jointly with any other public agency of the state, such as providing water and sewer services or
entering into public works mutual aid agreements. Several laws enacted in 2016 claried and expanded
this “joint exercise of powers,” granting specic authority to do the following:
• cooperate with school districts and SAU’s for activities such as, but not limited to, conducting
nancial, human resources, information technology, and other managerial and administrative
functions. RSA 53-A:2, 53-A:3;
• enter into agreements with adjacent municipalities and nonprot entities to provide suitable
cemeteries. RSA 289:2; and
• voluntarily contribute funds, services, property, or other resources toward any county or state
project, program or plan, subject to annual renewal of the voluntary contribution by the legislative
body. RSA 44:1-b, RSA 31:103-a.
In 2019, the legislature passed legislation to allow two or more municipalities to enter into an agreement
under RSA 53-A to issue bonds for any purpose permitted under RSA 33 as well as claried that
municipalities may enter into an agreement under RSA 53-A to jointly establish a tax increment nancing
district under RSA 162-K (regardless of a climate emergency).
RSA chapter 53-A outlines the statutory requirements and procedures for an inter-municipal
agreement, including the purpose; duration and termination; creation of an administrative entity,
administrator, or joint board; manner of nancing; indemnication; manner of acquiring, holding, and
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disposing of real and personal property used in the cooperative undertaking; ling requirements; and
state agency approvals.
An important cautionary note is that the New Hampshire Retirement System (NHRS) strongly
encourages participating employers to call for guidance with respect to enrollment, eligibility,
creditable service, and earnable compensation for “shared personnel” in agreements with both other
NHRS participating employers, as well as non-participating employers. NHMA is aware of at least one
inter-municipal entity that has contacted NHRS and received guidance on this issue.
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Chapter 2. ‘Gross Basis’ Budgeting
CHAPTER TWO
Second Key Concept
‘GROSS BASIS’ BUDGETING
RSA 32:5, III requires all appropriations to be stated on a “gross basis,” meaning that all anticipated
revenue from all sources, not just tax money, must be shown as osetting revenues to the amounts
appropriated for specic purposes. Revenues other than taxes raised may include grants, gis, bond issues
and proceeds of the sale of municipal property. With a few exceptions revenues not appropriated cannot
be spent. is rule follows logically from the principle that all expenditures—not just tax expenditures—
must be supported by legislative body appropriations RSA 32:8.
A. Care in Drafting Warrant Articles
If the town wants to buy a new re truck for $360,000 and intends to pay for it with $280,000 of tax
money and $80,000 from selling the old re truck, the total amount of $360,000 must be appropriated,
disclosing both sources of revenue. In other words, always set forth the grand total in the “raise and
appropriate” clause, and then go on to break it down by listing the amount to be drawn from each
separate revenue source, including any non-tax revenue that is to be used. When draing warrant
articles, care should be taken to observe this requirement because DRA has the authority to invalidate
appropriations that fail to follow it. It is helpful to have dra warrant articles reviewed well in advance by
DRA and/or the town’s attorney.
B. Examples of Mistakes
Here are some examples of votes taken in recent years, collected by the DRA (names omitted to protect
the innocent):
1. TOTAL AMOUNT
“To see if [the town] will vote to raise and appropriate the sum of $75,000 to renovate [a
particular building] and to authorize the withdrawal of $75,000 from the Capital Reserve Fund
created for this purpose; and further to combine this $150,000 with the $20,600 appropriated last
year for [another purpose] and to authorize the select board to apply for a matching amount from
the CDBG program.”
Problems: First, the total amount of the appropriation was never stated. It is impossible to
determine the total cost of the renovation project, and we cannot determine how much in
matching CDBG funds to anticipate. Gross basis budgeting requires all anticipated revenues,
whether from grants or other sources, to be included in the total amount appropriated. Second,
DRA disallowed the $20,600. e fact that it was appropriated last year for another purpose does
not exempt it from the requirement of being appropriated this year for this new purpose (and
the language that was used did not do this clearly enough). Remember that an appropriation
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normally “lapses” at the end of the year. (Lapse is covered in more detail in Chapter 5.) e belief
that a prior year’s appropriation has a continuing existence and need not be included in the new
total appropriation is a common mistake.
2. APPROPRIATE REVENUES, TOO
“I move to raise and appropriate a supplemental appropriation of $20,000 for the cost of replacing
[the roof of a certain building]; and further to authorize the withdrawal of $4,000 from the
Building Capital Reserve Fund; the balance of $14,500 is to be funded by current excess revenues
received in the current year [an insurance settlement].”
Problem: Again, the total amount of this appropriation is impossible to determine. e $14,500
insurance settlement may be revenue already received, but it must be appropriated to meet
the gross basis appropriation requirement. Is the total amount of the appropriation $34,500?
$20,000? $18,500? e total amount of the appropriation should be stated rst, so there is no
misunderstanding. If the numbers within the article do not add up to the total stated at the
beginning, there will be a problem.
3. INCLUDE THE APPROPRIATION, NOT JUST THE PURPOSE
“To see if the Town is in favor of the select board conducting a local resident survey on the
manner and quality of street maintenance in the town, to assist the select board’s operation of the
public works department.” e article was then amended on the oor of the meeting, so that the
end of the last sentence said, “and to raise and appropriate the sum of $10,000 for the cost of the
resident survey.”
Problem: e original article contained no appropriation. Although the voters attempted to
amend the article on the oor of the meeting to include an appropriation, it was not proper
because all purposes of appropriation must be disclosed or discussed at the budget hearing,
and all proposed purposes of appropriation must be included with the warrant that is posted
before the meeting. In this case, it is likely that DRA would disallow the $10,000 attempted
appropriation in the amendment. Had the original article included an appropriation amount, the
meeting could have amended that amount up or down.
4. PROPER WARRANT ARTICLE DRAFTING
Always set forth the grand total amount in the “raise and appropriate” clause, including any
amount from trusts or capital reserve funds and any amount from anticipated revenue or existing
fund balance. en break it down. Be certain that the math works; all the component parts of
the appropriation should add up to the grand total amount at the beginning of the article. An
example of a well-worded article is as follows:
“To see if the town will raise and appropriate the sum of $100,000 to repair the town’s war
memorial statue; of this amount $20,000 is authorized to be withdrawn from the War Memorial
Statue Trust Fund, $30,000 is anticipated revenue from a settlement with War Memorial
Insurance Company, and the balance of $50,000 is to be raised from general taxation.”
C. Comparative Columns
RSA chapter 32 requires the budget to include comparative columns showing the prior year’s
appropriations and prior year’s expenditures. DRA forms contain the information for the comparative
columns. RSA 32:5, III and IV.
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Chapter 2. ‘Gross Basis’ Budgeting
D. Individual Versus Special Articles
Appropriations may be made in a variety of ways. Many appropriations are part of the line-item operating
budget (that is, what appears on the MS-636 and MS-737 forms). Others may be part of warrant articles
that propose an appropriation. ese are referred to as individual or separate warrant articles because
they separate out a proposed appropriation from the line item budget. Generally, the governing body may
choose to propose an appropriation that would otherwise appear in the line item budget as an individual
appropriations article instead.
ere are ve specic types of individual appropriations articles that are treated in a special way, and
those are referred to as “special warrant articles.” Under RSA 32:3, VI, special warrant articles are dened
as follows:
• petitioned warrant articles;
• articles calling for issuing bonds or notes;
• appropriations into or out of separate funds, such as capital reserves or trust funds;
• any other separate article designated and labeled by the governing body as “special,” “nonlapsing”
o
r “nontransferable;” and
• an appropriation of an amount for a capital project under RSA 32:7-a.
us, all “special” warrant articles are separated out from the operating budget, but not all of these
individual warrant articles are considered “special.”
Appropriations in special warrant articles are treated as nonlapsing at the end of the year. ey cannot be
transferred to other purposes under the transfer power of the governing body. (See Chapter 6.)
E. Special Articles and Recommendations
All special warrant articles require a notation of whether or not they are recommended by the governing
body. In budget committee towns and districts, special articles should contain both governing body and
budget committee recommendations. RSA 32:5, V. Articles regarding cost items for collective bargaining
agreements also require a statement of the recommendation or non-recommendation of the governing
body and budget committee. RSA 32:19. However, RSA 32:5, V provides that “defects or deciencies in
these notations shall not aect the legal validity of any appropriation otherwise lawfully made.”
ese statutes do not (nor does any other statute) expressly extend the recommendation requirements
to non-money articles, and there has been debate over whether the select board has such authority.
At least one superior court judge has determined that a select board does have the authority to place
recommendations on non-money articles. Olson v. Town of Graon, 168 N.H. 563 (2016). In Olson, the
Superior Court sided with the town and decided that RSA 32:5, V-a gives a governing body the authority
to insert recommendations aer any warrant articles, not just non-budgetary articles. e N.H. Supreme
Court agreed that the language in the statute permits the select board to place its recommendations on
the warrant for any warrant article including non-money articles.
F. Numeric Tallies and Recommendations on Other Warrant Articles if Authorized by
Town Meeting, Governing Body or Ocial Budget Committee
RSA 32:5, V-a allows any town operating by traditional town meeting to require that the numeric tally of
all votes of an advisory or ocial budget committee and all votes of the governing body be printed in the
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warrant next to that article. A vote to include the numeric tally under this law also authorizes a town to
include these recommendations on individual warrant articles, not just special warrant articles and those
relating to cost items in a collective bargaining agreement.
RSA 40:13, V-a allows any town operating under the ocial ballot referendum (SB 2) town meeting to
require that the numeric tally of all votes of an advisory or ocial budget committee and all votes of the
governing body be printed on the ballot next to the aected article. A vote to include the numeric tally
under this law also authorizes a town to include these recommendations on separate warrant articles
as well as ballot questions, in addition to special articles and those relating to cost items in a collective
bargaining agreement.
In either case, the town may authorize this by a vote of town meeting, or if the town has not voted to do
so, the governing body or an ocial budget committee may take a vote at a public meeting on their own
initiative. RSA 32:5, V-a. e “numeric tally” means the total result of the vote on the item, such as “Budget
Committee recommends this article by a vote of 9 to 2. Select board does not recommend this article
by a vote of 3 to 2.” Unless and until such a vote of town meeting or the governing body has occurred,
recommendations should continue to appear without the numeric tally and only with special articles and
cost items of collective bargaining agreements.
G. Multi-Year Appropriations for Capital Projects
As of August 23, 2013, towns may make multi-year appropriations for “capital project.” RSA 32:7-a.
A capital project for this purpose is one for which bonds could be issued under RSA 33:3 or RSA 33:3-a.
ese include:
the acquisition of land;
planning relative to public facilities;
the construction, reconstruction, alteration and enlargement or purchase of public buildings;
for other public works or improvements of a permanent nature including broadband
infrastructure;
for the purchase of departmental equipment of a lasting character;
for the payment of judgments;
for economic development (including public-private partnerships involving capital
improvements, loan and guarantees); and
preliminary expenses associated with proposed public work or improvement of a permanent
nature (including public buildings, water works, sewer systems, solid waste facilities and
broadband infrastructure).
e article authorizing the appropriation must (a) identify the specic project, (b) state the term of years
of the appropriation (up to ve years), (c) state the total amount of the appropriation, and (d) state the
amount to be appropriated in each year of the term. e article must pass by a 2/3 vote (3/5 vote in ocial
ballot referendum towns).
For each year aer the rst year, the amount designated for that year as provided in the original warrant
article shall be deemed appropriated without further vote by the legislative body. In other words, once
town meeting has authorized a capital project multi-year appropriation, no warrant article is needed in
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Chapter 2. ‘Gross Basis’ Budgeting
any other year of the term; each year’s amount will be treated as appropriated automatically in the future
years of the term. In ocial ballot referendum towns, that year’s amount is also automatically included in
the default budget.
If the amount appropriated in any year is not spent in that year, it will not lapse. e money will
remain available for use for the project during the term stated in the warrant article. However, a capital
project appropriation does not create a capital reserve fund. It is simply accounted for as a nonlapsing
appropriation from year to year. At the end of the term stated in the original warrant article, any unspent
amounts will lapse into the fund balance.
At any annual meeting before the end of the term of the project, the legislative body may rescind the
appropriation by a simple majority vote on a warrant article. If the project is rescinded, any unexpended
appropriations for the project will lapse into fund balance immediately.
H. Estimated Tax Impact
e legislative body (town, school or village district meeting) may vote to require that the annual budget
and all special warrant articles having a tax impact include a statement of the estimated tax impact of that
appropriation. RSA 32:5, V-b. e law species that it is up to the governing body (select board, school
board, or village district commissioners) to determine whether an article has a tax impact. In addition,
the determination of the estimated tax impact is subject to approval by the governing body, even if
someone else actually performs the initial calculations.
It is important to remember that the estimated tax impact will always be just that: an estimate. e tax
rate is set in the fall, many months into the scal year and many months aer the annual meeting. During
that time, several issues will be at play. Property tax rates are based on the amount of appropriations
approved, less non-tax revenues that are received, divided by the equalized property value of the
municipality. However, the municipality’s property value is based on an assessment that does not occur
until April 1 (and is not fully compiled for several months aer that). e actual revenues received from
sources other than taxes may be greater or less than the estimates on the budget forms voted on at the
annual meeting. All of this means that the true amount to be raised by taxes, and the total property
values on which the tax rate will be determined, may be quite dierent from the estimates used in March
to determine the estimated tax rate.
erefore, if the estimated tax impact is going to be included in the warrant and/or ballot, it is strongly
advisable to explain to voters that it is only an estimate based on the information available at the time.
Having said that, however, it can be useful to know if a particular proposed appropriation might have an
impact of pennies, dimes, or dollars on the tax rate, even if the actual impact varies slightly.
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CHAPTER THREE
Third Key Concept
WARRANT NOTICE AND
PERMISSIBLE AMENDMENTS
RSA 32:6 and RSA 39:2 prohibit an annual or special meeting from appropriating any amount for any
purpose unless that purpose appears in the warrant or in the posted budget (whether as a line item in
the budget or as a separate article). e posted budget can be thought of as part of the warrant for notice
purposes. New line items — “purposes” — cannot be added from the oor of town meeting or under an
“other business” article.
For traditional meetings, the warrant and budget must be posted in two public places in the town or
district at least 14 days before the annual or special meeting, not including the day of posting or the
day of the meeting. (The official ballot referendum law (SB 2) has its own schedule. See Chapter 8 for
more information.) In the case of special meetings, the warrant and budget must also be published
in a newspaper in circulation in the town or district within a week after the posting. RSA 39:4 and
RSA 197:7 and :8.
A. Voters’ Ability to Amend Amounts
RSA 32:6, RSA 32:10 and RSA 39:2 give the voters authority to appropriate more or less than was stated
on the warrant or posted budget, or to delete a line item entirely. is authority has long been established
through case law. It is only new purposes that cannot be added from the oor. RSA 32:6; RSA 39:2.
In ocial ballot referendum towns or districts, any amendments are made at the rst session, not at the
ocial ballot session. However, the rst session’s ability to amend articles has been sharply limited by
the legislature. Under RSA 40:13, IV(c), “No warrant article shall be amended to eliminate the subject
matter of the article. An amendment that changes the dollar amount of an appropriation in the warrant
article shall not be deemed to violate this subparagraph.” In other words, an article may still be amended
to change the dollar amount, including reducing it all the way to zero, but it may not be amended by
deleting everything aer the words “to see” as became the fashion over the past several years. For more
information on amending warrant articles in ocial ballot referendum towns, please see Chapter 8,
Section H.
Remember: In the school budget, there are particular line items that cannot be “zeroed out” (deleted) due
to state and federal laws.
B. Later Transfers Cannot Be Restricted from the Floor
Note that the ability to amend warrant articles does not include the authority of the voters to designate an
appropriation as nontransferable. McDonnell v. Derry, 116 N.H. 3 (1976). In other words, the voters cannot
make a special article out of an appropriation that was not a special article in the original warrant, at least
not without submitting a petitioned warrant article in advance. Only the governing body can designate
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Chapter 3. Warrant Notice and Permissible Amendments
an article as “special,” “nontransferable” or “nonlapsing,” thereby prohibiting the transfer of all or a part
of that appropriation to another purpose. RSA 32:3. See Chapter 6 for more on transfers.
C. Amendment by Altering Mode of Funding
An appropriation to a capital reserve or trust fund (essentially, savings accounts) for a specic purpose
is not the same as an appropriation to spend money now on that purpose. Voters oen attempt to add or
remove references to a capital reserve fund or trust fund on the oor of the meeting. For example, assume
a warrant appropriates a certain amount to a capital reserve fund for a certain purpose, and a oor
amendment attempts to appropriate the money to accomplish the purpose this year. DRA has held this
type of amendment improper and has disallowed such expenditures as a change in purpose that fails the
notice requirement.
However, DRA has found it generally acceptable when a clear-cut switch from one mode of funding to
another is propsed, such as an amendment changing the funding source from a withdrawal from a capital
reserve fund to funding by taxation.
D. ‘Stay-at-Home Test’
In general, try analyzing the issue of proper amendments by using the “stay-at-home” test. In other words,
suppose a voter had read the original article, decided he or she was not interested and stayed home instead
of attending the meeting. e question then is, does the proposed amendment add a new subject matter,
such that the voter might have reconsidered his or her decision not to attend? If so, the amendment is
probably improper.
E. Appropriating Money at Special Meetings: The Requirement of ‘Emergency’
Special meetings may be called by the governing body as a result of a board vote to do so, or to respond to
a citizen petition for a special meeting. RSA 39:1; RSA 39:3. However, money cannot be appropriated at a
special town or district meeting unless either 50 percent of all voters on the checklist attend the meeting
or the superior court grants permission for the meeting. It is quite unlikely that 50 percent of the voters
on the checklist will attend the meeting in any municipality and, therefore, most towns, village districts
and school districts will need to seek superior court permission before holding the meeting. e judge
must nd that an “emergency” exists in order to authorize the meeting. RSA 31:5 and RSA 197:3.
1. ‘EMERGENCY’ DEFINED RSA 31:5 denes “emergency” as “a sudden or unexpected situation
or occurrence, or combination of occurrences, of a serious and urgent nature, that demands
prompt, or immediate action, including an immediate expenditure of money. is denition,
however, does not establish a requirement that an emergency involves a crisis in every set of
circumstances.”
e superior court will consider several factors in determining whether a request for a special
meeting shall be granted, and any petition to the court seeking a special meeting should address
these factors. e factors, as provided in RSA 31:5, are:
• the severity of the harm to be avoided;
• the urgency of the petitioner’s need;
• whether the claimed emergency was foreseeable or avoidable;
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• whether the appropriation could have been made at the annual meeting; and
• whether there are alternative remedies not requiring an appropriation.
Under RSA 197:3, I (d), the court may not grant permission for a special school district
meeting if the emergency involves a collective bargaining agreement that was voted down at
the annual meeting.
2. NO COURT PERMISSION NEEDED EXCEPT FOR MONEY ITEMS
If the special town meeting is called for a purpose that does not involve appropriations of money,
the requirement of either 50 percent attendance or permission of the superior court does not
apply, nor does the requirement that an “emergency” exist. ose requirements apply only to
special meetings at which money is to be appropriated.
3. NON-EMERGENCY SPECIAL MEETINGS FOR COLLECTIVE BARGAINING
When a town or district enters into a collective bargaining agreement (CBA), the legislative body
must vote on the “cost items” of the contract in order for the town or district to be bound by the
contract. RSA 32:19-a. “Cost items” are any benets acquired by a covered employee through
collective bargaining whose implementation requires an appropriation. RSA 273-A:1, IV.
RSA 31:5, III and RSA 197:3, III allow an annual meeting that has rejected the cost items of a
CBA to authorize a later special meeting to act on a revised contract without court approval for
a special meeting. is option is available only if a contract is ready for submission to the annual
meeting on or before the submission date set by RSA 32:19-a, the date by which a negotiated
agreement on CBA cost items must be completed. e article to authorize the special meeting
should appear in the warrant immediately following the CBA article and should read: “Shall [the
town or district], if article #____ is defeated, authorize the governing body to call one special
meeting, at its option, to address article #____ cost items only?”
It is helpful to explain to the voters that a second vote on the same cost items is not being
requested, but that a special meeting will be called only if the parties return to the bargaining
table and reach an agreement for revised cost items.
When the cost items of the CBA are not agreed upon and submitted to the governing body or
budget committee (as appropriate) by the budget submission date, the CBA cannot be voted upon
at the annual meeting. RSA 32:19-a. e town or district will need to get permission from the
superior court under the “emergency meeting” statute discussed above in order to have a special
meeting to vote on the CBA.
See Appendix G for a timetable on appropriating money at a special meeting.
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Chapter 4. No Spending Without an Appropriation
CHAPTER FOUR
Fourth Key Concept
NO SPENDING WITHOUT
AN APPROPRIATION
A. Basic Rule of Budget Accounting
Once the budget and other appropriations have been voted on, what is their legal eect? RSA 32:8
provides that no town, village district or school district ocial can spend any money for any purpose
unless that amount was appropriated for that purpose by an annual or special meeting. is basic rule of
budget accounting ows directly and logically from the very meaning of “appropriation.”
is requirement that no money be spent without an appropriation applies to all municipal expenditures,
not just tax money. For example, if the town sells an item of equipment, the proceeds from that sale
cannot be spent unless the amount of the proceeds from the sale has been included in an appropriation in
the budget. is is “gross basis” budgeting, which is discussed in Chapter 2. is requirement also means
that an ocial who overspends the budget improperly may be subject to dismissal. RSA 32:12; Blake v.
Pittseld, 124 N.H. 555 (1984).
B. Exceptions to the Rule
e statute allows for certain exceptions to the rule that no money can be spent without an appropriation.
ey include the following:
1. TRANSFER
e governing body may make transfers of amounts from an unexpended balance in some
other appropriation to a purpose that is already in the budget. RSA 32:10. (See Chapter 6 for
more on transfers.)
2. LEGAL JUDGMENT
RSA 32:9 permits a town to spend money to pay a legal judgment (ordered by a court) against
the town without an appropriation. On the other hand, ocials cannot agree to settle a claim by
paying unappropriated funds (overspending the bottom line of the budget), unless the agreement
is made conditional on voter approval.
3. DRA Permission
Permission may be granted by DRA for expenditure in excess of an appropriation that may
result in over-expenditure of the budget’s bottom line, or for expenditure when no appropriation
has been made by the town or district meeting for that purpose (emergency expenditure). is
exception applies only “when an unusual circumstance arises during the year which makes it
necessary” to overspend the budget or spend money on a purpose for which no appropriation
has been made. School districts can apply for similar permission to the Department of Education
commissioner. A special town or district meeting is not necessary. e governing body must
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hold a public hearing on the request and, in towns with a budget committee, a majority of
the committee must approve the application to DRA. e application must be made to and
authority granted by DRA before the expenditure is made. In the case of a sudden or unexpected
emergency, the application may be approved aer the expenditure has been made, but DRA
generally does not grant “aer-the-fact” approval if there was reasonable time and opportunity
to apply for permission before spending the money. Instructions, information, and application
forms are available from DRA. In addition, DRA will only grant permission if the town or
district designates a source of revenue for the expenditure. If there is no source of revenue, the
only option is to petition the superior court for permission to hold a special meeting to raise
money. Neither DRA nor the Department of Education can raise the tax rate to pay for such an
“emergency” expenditure. RSA 32:11.
As a general matter, it is the better practice to contact DRA sooner rather than later if it appears
the municipality may need to overspend the budget. DRA may be able to assist with nding
alternative solutions, avoiding violation of the Municipal Budget Act, and navigating the approval
process under RSA 32:11.
4. CONTRACT OR MANDATE
Municipalities have no special authority to overspend the budget to pay for contractual expenses
or valid mandates. RSA 32:13 says, in essence, that if a municipality runs out of budgeted
appropriations to pay obligations under a contract that the legislative body has previously ratied,
the lack of funds is not a reason to be excused from the contract (and, as a result, the municipality
may face a lawsuit for breach of the contract). Provided, however, that the agreement is
“otherwise valid under the New Hampshire law of municipal contract.” In addition, a lack of
budgeted appropriations to pay a validly mandated expense, such as local welfare assistance, does
not excuse the municipality from responsibility for those expenses.
However, neither of these situations alone justies overspending the budget. To remain in
compliance with the Municipal Budget Law, local ocials should consider the available legal
options: transferring other appropriations to cover that expense (RSA 32:10); asking DRA for
emergency spending authority (RSA 32:11); or holding a special town meeting to appropriate
funds (RSA 31:5). RSA 32:13 underscores the importance of appropriating adequate funds
to cover these expenses, because a municipality may nd itself in the unenviable position of
being unable to overspend the budget for an expense that a court may later impose upon the
municipality as a legal judgment.
C. What About Spending Prior to Town Meeting?
e governing body may spend money during the period between January 1 and the annual meeting
when no amount has yet been appropriated. RSA 32:13, II says that expenditures during that period shall
be “reasonable in light of prior year’s appropriations and expenditures for the same purposes during
the same time period.” is means that the governing body can approve expenditures during that time
that are generally the same as those that were approved and expended during the same period in the
previous year. Under the ocial ballot referendum system (SB 2), RSA 32:13, II allows such “reasonable”
expenditures until the “date a budget is adopted.” us, if a budget is not adopted at the annual meeting,
government does not come to a halt. Even if the budget fails on the ballot, the default budget has thereby
been adopted (as discussed in Chapter 8).
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Chapter 4. No Spending Without an Appropriation
D. Other Statutory Exceptions to No-Spending-Without-Appropriation Rule
1. UNANTICIPATED REVENUE
RSA 31:95-b, if the town has voted to adopt it (RSA 198:20-b for school districts), allows the
governing body to apply for, accept and spend unanticipated money received from a federal,
state or private source, so long as the money is spent in a way that does not require other
unappropriated town funds to be spent. is can be problematic if the grant has a “matching
fund” requirement under which the town must provide a certain amount of its own money
toward the project in order to receive the grant. In those cases, the governing body may only
accept the grant if the matching funds have been properly appropriated.
Other requirements include:
• If the amount of unanticipated revenue is $10,000 or more, the governing body must hold
a public hearing on the action to be taken and publish notice in the newspaper at least
seven days prior to the hearing. Acceptance of the funds must occur in a public session of
the governing body.
• If the amount of unanticipated revenue is less than $10,000, the governing body must
post notice of the funds in its meeting agenda and include notice in the minutes of the
board’s meeting at which the funds are discussed. Acceptance of the funds must occur in
a public session of the governing body. e statute seems to indicate that the governing
body may establish an amount of less than $10,000 at which it will hold a public hearing on
acceptance of the funds, in addition to the required notice in the board’s meeting minutes.
In addition, RSA 202-A:4-c allows a town to adopt an article authorizing the library trustees to
apply for, accept and expend unanticipated money from a federal, state or private source without
any further action by town meeting. Just as with authorization for the select board under RSA
31:95-b, the authorization for library trustees continues until town meeting votes to rescind it,
and the funds may not be spent in a way that requires other unappropriated funds to be spent.
e same procedural requirements as those in RSA 31:95-b for public hearings and notice apply
to library trustees under RSA 202-A:4-a.
RSA 198:20-b, II and RSA 198:48 make clear that funds disbursed from the state’s education trust
fund (that is, the adequate education grants from the state education property tax) cannot be
treated by school districts as unanticipated revenue and are subject to the normal appropriation
requirements. e law also reiterates that these monies can only be spent for educational purposes.
2. CAPITAL RESERVE FUNDS OR TOWN-FUNDED TRUST FUNDS
If a town or district meeting has properly voted to name agents to expend a capital reserve fund
or a town-funded trust fund, money that has already been appropriated to one of these funds may
be spent without further appropriation. Agents may be named at the time the fund is created or
at a later town meeting. See RSA chapter 35 for more on capital reserve funds and RSA 31:19-a for
more on town-funded trust funds. Both are covered in more detail below.
3. SPECIAL STATUTORY FUNDS
Certain statutory funds, such as the conservation fund (RSA 36-A:5), heritage commission fund
(RSA 674:44-d), airport fund (RSA 423:6 and :7) and recreation revolving fund (RSA 35-B:2, II),
can be spent by those various bodies without a legislative appropriation. See RSA 41:29 for the
treasurer’s authority to pay such funds.
4. WATER AND SEWER RESERVES
Money in a properly created sewer reserve fund (RSA 149-I:10, III and RSA 35:7) or water
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reserve fund (RSA 35:7 and RSA 38:29, III) received from the collection of sewer or water rates
may be spent without town meeting appropriation. However, funds appropriated to the sewer
or water departments by the town or district meeting are fully subject to the Municipal Budget
Law process. In addition, a sewer department run by a commission must also remit to the
municipality those costs incurred by the municipality in support of sewer operations, including
but not limited to nancial audit, facility insurance, treasurer compensation and oce support.
RSA 149-I:10, II. ese departments cannot overspend their legislative body appropriations,
except in the case of excess funds collected in sewer or water rates placed in a capital reserve
fund, created under RSA 149-I:10, III or RSA 38:29, III and held in the custody of the trustees of
trust funds. e governing body (sewer/water commissioners or select board, as the case may be)
may create these reserve funds without an annual meeting vote.
5. REVOLVING FUNDS
Recreation revolving funds established by town meeting vote under RSA 35-B:2, II accumulate
from year to year and may be expended for recreation purposes upon order of the recreation or
park commission, or other board or body designated by the legislative body at the time the fund
is created. However, if the recreation revolving fund is rescinded by vote of the legislative body,
any remaining amounts in the fund automatically become part of the general fund accumulated
surplus. RSA 35-B:2, II.
Revolving funds established by vote of town meeting under RSA 31:95-h may be expended for
the specic purpose for which the fund was created with no further approval of the legislative
body. Permissible fund purposes include those designated for facilitating, maintaining or
encouraging recycling activities; ambulance services or re services or both; public safety service
special details or other public safety purposes deemed appropriate by the municipality; cable
access for public, educational or governmental use; creating aordable housing and facilitating
transactions relative thereto; and nancing energy conservation and eciency and clean energy
improvements by participating property owners in an energy eciency and clean energy district
established pursuant to RSA chapter 53-F, or, facilitating transactions relative to municipal group
net metering. For each such fund, the legislative body can vote to place all or part of the revenue
derived from that particular activity into the fund, along with any other revenues town meeting
may approve for deposit into that fund. e money in the fund accumulates from year to year and
may be spent on order of the governing body, or other board or body designated by the legislative
body. However, at the time the fund is created or at any time thereaer, the legislative body may
place limitations on expenditures from the fund, such as:
• restrictions on the types of items or services that may be purchased from the fund;
• limitations on the amount of any single expenditure; and/or
• limitations on the total amount of expenditures that may be made in a year.
E. Multi-Year Contracts
Municipalities are set up to handle business one year at a time. So, it is not surprising that there is a good
deal of uncertainty when it comes to authorizing contracts that will oblige a municipality to expend
money for more than one year going forward. e most common examples are extended equipment
leases and multi-year collective bargaining agreements (CBAs). For leases, typically the issue is whether
the agreement constitutes long-term debt under RSA chapter 33. For CBAs, the problem is adequate
disclosure of the nancial terms of the agreement, the “cost items” under RSA chapter 273-A. e
term for such disclosure is “Sanbornizing” the agreement, aer the leading case, Appeal of the Sanborn
Regional School Board, 133 N.H. 513 (1990).
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Chapter 4. No Spending Without an Appropriation
1. COLLECTIVE BARGAINING AGREEMENTS
In Sanborn, the Supreme Court upheld the validity of multi-year collective bargaining
agreements under RSA chapter 273-A, which comprehensively governs the public employee
collective bargaining process. e statute provides that once an agreement is reached between the
employer board and union, the “cost items” of the agreement, dened as “any benet acquired
through collective bargaining whose implementation requires an appropriation by the legislative
body of the public employer with whom negotiations are being conducted,” must be submitted to
the legislative body for approval. Although multi-year agreements are authorized by RSA chapter
273-A, the Court in Sanborn held that the school district was not bound to fund the second and
third-year terms of the CBA because the voters at the district meeting who were supposed to
ratify the cost items had not been adequately informed of the nancial terms by the language
of the warrant article or by other means. Accordingly, in Appeal of Alton School District, 140
N.H. 303, 309 (1995), a section of the CBA provided that a pay plan with periodic step increases
based on experience would continue in eect aer expiration of the agreement (an “evergreen
clause”). e Supreme Court held that the provision was unenforceable against the school district
because, under Sanborn, the cost of the evergreen clause had not been adequately disclosed to the
voters. Under the new statute, such pay plans would typically continue to operate automatically
aer expiration for all CBAs, and it would seem that the cost of the built-in “evergreen clause”
would need to be disclosed to the voters. Consult your municipal attorney on the important and
complex issue of what is adequate Sanbornizing of the cost items of your CBA.
2. EQUIPMENT LEASES
RSA 33:3 authorizes municipalities to issue notes and bonds to nance, among other things, “the
purchase of departmental equipment of a lasting character.” Issuance of debt requires a three-
hs vote, by ballot, of the legislative body . RSA 33:8. Multi-year lease-purchase agreements for
equipment are regarded as long-term debt (like a bond, they require a stream of payments to pay
principal and interest over time) and thus also require a three-hs ballot vote. However, lease-
purchase agreements with so-called “escape” or “nonappropriation” clauses, which terminate
the agreement automatically if the requisite annual appropriation is not made, are not long-term
debt and thus may be approved by majority vote. RSA 33:7-e. An amendment to RSA 35:15,
eective August 30, 2021, allows a capital reserve fund to be used to make payments under a
lease/purchase agreement, regardless of whether the agreement contains an “escape” or “non-
appropriation” clause.
3. SOLID WASTE DISPOSAL
Under the provisions of RSA 149-M:17, IV, the legislative body can approve a contract with
a term of up to 40 years with the owners or operators of solid waste disposal facilities for the
disposal of solid waste. e legislative body may also transfer any land interest to the owner or
operator of solid waste disposal facilities by deed or by lease with a term of not more than 40
years. RSA 149-M:17, V.
4. OTHER MULTI-YEAR AGREEMENTS
ere are other types of multi-year expenditure agreements that a municipality may want to enter
into that do not fall within the specic statutes governing CBAs or lease agreements. Naturally,
these are the types of agreements that create the most questions, but there is case law that helps us
determine how and when municipalities can enter into such agreements.
As a general principle, one legislative body cannot bind a successor legislative body on procedural
matters. Exeter v. Kenick, 104 N.H. 168, 171 (1968). In addition, the rule of lapse means that
appropriations are usually adopted on an annual basis. However, there is signicant case law
to support a municipality’s authority to enter into a multi-year contract. First, in Blood v.
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The Basic Law of Budgeting – 2022 Edition
Manchester Electric Light Co., 68 N.H. 340 (1895), the New Hampshire Supreme Court held that
towns and cities are authorized to make multi-year contracts under the basic statutory power to
“make any contracts which may be necessary and convenient for the transaction of the public
business of the town,” quoting what is now RSA 31:3. Second, the New Hampshire Supreme Court
has upheld a governing body’s authority to bind the municipality to a multi-year contract as long
as “it knew about the cost items for each year of the [contract] at the time it voted to appropriate
money for the contract’s rst year.” Foote v. Manchester Sch. Dist., 152 N.H. 599 (2005) (quoting
Appeal of Franklin Education Assoc., 136 N.H. 332, 334 (1992)). See also Childs v. Hillsboro Electric
Light and Power Co., 70 N.H. 318 (1900); Bedford Chapter-Citizens for a Sound Economy v. School
Administrative Unit #25-Bedford School District, 151 N.H. 612 (2005).
Based on these cases, as a general principle, a municipality can bind itself to a multi-year
agreement as long as the total cost items for the full life of the agreement are fully disclosed and
adopted by the legislative body. Essentially, this is the same process for Sanbornizing collective
bargaining agreements that is discussed above. So, for example, imagine the select board has been
oered a “great deal” to provide the town internet and IT services by a vendor, but the agreement
must be for a three-year term. e select board could agree to the three-year term, contingent
upon the legislative body agreeing to the total cost of years two and three. In the alternative,
the agreement could provide an escape clause, requiring the cost of the subsequent years of the
agreement to be submitted to legislative body for approval.
Another example, which is becoming more common, is the long-term energy contract. e duty
to adequately inform the legislative body of all the nancial terms of such a purchase power
agreement would likely require that the yearly cost of energy be disclosed for each year of the
agreement. e per kilowatt hour cost of electricity would be stated and xed for the term of the
contract, so that component is certain. However, the remainder of the energy cost equation would
require some reasonable estimate of the municipality’s annual electrical energy consumption. So
long as the estimated energy consumption was a reasonable approximation of the municipality’s
energy consumption on an annual basis, combined with the xed cost per kilowatt hour, this
would permit the presentation of the probable total cost of the purchase power agreement for the
full term of the agreement. Such information would likely constitute an adequate disclosure of the
nancial terms of the agreement and satisfy the requirement that the agreement be Sanbornized.
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Chapter 5. When Do Appropriations Lapse?
RSA 32:7 contains the rules for when appropriations “lapse” and may no longer be spent. e general rule
is that all appropriations lapse at the end of the scal year. e amount of any appropriation not expended
generally lapses to fund balance. It may then be appropriated for the following year.
“Year-end” refers to the scal year. For towns, the scal year is January 1 to December 31 (RSA 31:94),
unless the town has adopted the optional July 1 to June 30 scal year in accordance with
RSA 31:94-a – :94-e.
For school districts, the scal year begins on July 1. RSA 194:15.
A. Source of the ‘Lapse’ Rule
e rule that appropriations lapse at year’s end follows logically from the principle that no town meeting
can be bound by the votes of prior town meetings. All substantive votes can be reconsidered at a later
meeting, unless action has already been taken giving someone a vested right. Preston v. Gillam, 104 N.H.
279 (1962). If it weren’t for the lapse rule, votes taken in one year could interfere in some binding way with
the following year’s budget.
B. Don’t Confuse Appropriation Accounting with Cash Accounting or Tax Accounting
e tax year runs from April 1 to March 31. Although each year’s tax rate is calculated based on budget
appropriations, there is no other relationship between appropriations and taxes. If the cash ow from
taxes is insucient to keep up with expenditure needs, a town may issue tax anticipation notes which will
be repaid as soon as the tax revenue is received. RSA 33:7. Citizens are oen confused by this, somehow
thinking each penny of tax money can be traced to a specic expenditure. Some think their taxes can be
pro-rated if they did not own the property for the entire budget year. at is not the way it works.
C. Lapsing to ‘Fund Balance’ – Not ‘Surplus’
Fund balance is not a ‘cash-account,’ instead, it is a measure of equity between revenues and expenditures
resulting in a surplus or a decit at year end. When an appropriation lapses, it is oen said that the
amount goes into “surplus.” However, the term “surplus” is a misnomer, since it gives the impression
that excess money is in a fund and is available for expenditure. Actually, when an appropriation lapses,
the unexpended balance of the appropriation becomes part of “fund balance,” which is an account
on the town’s balance sheet. In addition to unexpended appropriations, any excess revenues received
beyond those revenues budgeted also become part of the fund balance. Fund balance also accounts for
assets, such as uncollected taxes, as well as liabilities, such as invoices not yet paid by year-end. e net
CHAPTER FIVE
Fifth Key Concept
WHEN DO APPROPRIATIONS LAPSE?
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amount of these transactions results in a fund balance that is primarily used in municipalities for
two purposes: (1) to retain a portion for cash ow and emergency expenditures and (2) to fund future
years’ appropriations.
See NHMA’s publication, Basic Financial Policies: A Guide for New Hampshire Cities and Towns (currently
out of print, look for a new edition in 2022).
RSA 198:4-b, II permits a school district to retain year-end unassigned general funds in an amount not
to exceed 5% of the current year’s net assessment. A vote of the legislative body is required to authorize
the retainage. e authorization continues year-to-year until rescinded. Prior to expending such funds,
the school board must hold a public hearing, with newspaper notice of at least seven days. An annual
accounting of such funds must be published in the annual report.
1. FUND BALANCE—RETAIN OR REDUCE THE TAX RATE
General government nance guidelines recommend that municipalities retain 5 percent to 15
percent of regular general fund operating revenues or 8 percent to 17 percent of regular general
fund operating expenditures. e DRA concurs with these guidelines and amounts above these
ranges are recommended for reducing the tax rate or for funding future appropriations. e
town’s governing body makes the decision regarding the amount of fund balance to retain and/
or the amount used to reduce the tax rate at the time the tax rate is established in the fall. Any
amount retained cannot be spent without an appropriation unless one of the exceptions applies,
such as the payment of a legal judgment or DRA approval for overspending the budget under
RSA 32:11. See NHMA’s publication, Basic Financial Policies: A Guide for New Hampshire Cities
and Towns for a detailed discussion on the appropriate balance of fund balance to retain within
the recommended guidelines.
Appropriations using fund balance as all or part of the funding source should follow the rules
regarding gross budgeting and should state the amount to come from fund balance. For example:
“To see if the Town will vote to raise and appropriate $54,000 for the replacement of the piling
system and dock at the town pier, to be funded by $20,000 from the December 31, 2013, fund
balance with the remaining balance of $34,000 to come from general taxation.”
2. DISCLOSURE OF FUND BALANCE TO VOTERS
While the term “fund balance” is an accounting term and is not dened in any statute, the law
does require the “general fund balance sheet” from audited nancial statements or from the
nancial report led with DRA to be published in a town report or posted at the annual meeting.
See RSA 41:9, IV for towns; RSA 189:28-a, I for school districts; RSA 52:3, II and RSA 52:3-a, I-a
for village districts.
3. DEFICITS
e DRA sets the tax rate based on appropriations, so towns are not supposed to have decits.
But, sometimes, due to overestimating revenues or sloppy bookkeeping, they do. In the event of
a decit, RSA 41:9 requires the general fund balance sheet for towns to be published in the report
or posted at the place of the meeting so that if there is a decit, the voters will know about it. For
school districts, RSA 189:28-a, II imposes the same requirement upon school boards. In addition,
RSA 41:9 (towns) and 189:28-a (school districts), also requires the governing body of any town or
district that has a general fund decit to insert a warrant article recommending “such action as they
deem appropriate.” Notice that neither law mandates decit reduction. e “appropriate” action
could conceivably be simply an audit into the problems of the decit. Finally, RSA 31:4-a authorizes
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Chapter 5. When Do Appropriations Lapse?
towns and RSA 189:28-a authorizes school districts to raise, through taxation, an amount
earmarked for reducing a decit.
D. Unanticipated Revenue Is Not ‘Lost’
is question is oen asked by local ocials: Suppose shortly before the end of the scal year, the town
nally collects the $125,000 the state had agreed to pay for the town gravel pit it condemned for a state
highway. Local ocials want that money to go into a reserve fund for future gravel needs. Can the
money at this point be placed in a reserve fund? No. Putting money in a capital reserve fund requires an
appropriation by the voters.
Does this mean the money will have to be used to reduce the tax rate and will be lost for the purpose
the town wanted it for? No. If the town is on a January-to-December scal year with a March town
meeting, there will be another town meeting to appropriate that money, which at this point has become
fund balance. e fund balance is not applied against the amount to be raised by taxes until aer the
appropriations for the year have been made. e warrant can contain an article appropriating the sum
of $125,000 from surplus to a reserve or trust fund for future gravel needs. at article might include
a phrase such as “such funds representing the amount received by the town in December 2021 from
the State for the gravel pit condemned for a State highway.” is explanatory phrase can help voters
understand where the money really came from.
If the unanticipated money comes in aer the year’s appropriations have been made, a possibility for
those towns on the July-to-June scal year, the amount may still be kept as part of “retained fund balance”
at the time the tax rate is set. To avoid possible voter resistance to this solution (because they may think
it has to be paid for by taxation), an explanatory note may be included in the warrant article stating
that the appropriation “represents the amount received by the town from the state last December 21 for
condemnation of the town’s gravel pit,” or something similar. Just because the amount is part of fund
balance (or surplus) for accounting purposes does not mean the town is prohibited from identifying
where it actually came from.
E. Exceptions to the ‘Lapse’ Rule: RSA 32:7
1. CONTRACTUALLY ENCUMBERED FUNDS
“Encumbered funds” are those which the municipality has a legal obligation to pay. When this
obligation arises before the end of the scal year but is not paid by the end of the scal year,
it is referred to as an encumbered amount. Planning to spend the money is not enough; the
obligation to pay must be legally enforceable. For example, suppose the recreation director has
placed an order for recreation equipment. e goods and an invoice are received, but no payment
is made before the end of the scal year. ere is a legally enforceable obligation for the town
to pay and the amount remains “encumbered” until paid. RSA 32:7, I. Conceptually, under
accrual accounting principles, a liability exists at the time the obligation was created. e N.H.
Supreme Court has ruled that to prevent the lapse of the unspent portion of an appropriation
two conditions must be satised. First, the unspent funds must be encumbered by a legally
enforceable obligation for their expenditure. Second, the obligation must attach to the funds
before the end of the scal year for which they were appropriated. Monadnock Regional
School District v. Monadnock District Education Association, 173 N.H. 411 (2020)
2. SPECIAL WARRANT ARTICLES: ENCUMBERING TO PREVENT LAPSE
Under RSA 32:7, V and VI, money appropriated by a special warrant article is treated dierently
under the lapse rule. Special warrant articles, as dened by RSA 32:3, VI, include petitioned
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appropriations articles and any other article designated by the governing body as a “special” or
“nonlapsing” article. e appropriations for these two types of special articles can be treated
as “encumbered” (that is, nonlapsing) for one additional year. (Bond articles, capital project
appropriations and capital reserve fund appropriations are also special warrant articles, but those
appropriations do not lapse. See paragraph 3 below and Section F.) If the appropriation is part of a
special warrant article, the governing body can “encumber” that amount (that is, prevent it from
lapsing) for the extra year by voting at a properly noticed meeting held before the end of the scal
year for which the amount was budgeted. If the scal year ends on December 31, the amount
must be encumbered prior to that date. RSA 32:7, V.
In addition, if the warrant article itself so states, the amount in a special article can be
encumbered for up to ve years. If the governing body anticipates that it may wish to do this, it
should rst set the amount aside as an article separate from the general operating budget, and
then make sure the article states the amount of time it can be encumbered. For example, “is
appropriation shall be nonlapsing and may be encumbered by the select board for up to four
years.” Setting a specic date limit—less than ve years in the future—beyond which it cannot be
spent, is an alternative way to word it.
If a special warrant article can encumber an amount for up to ve years, why establish reserve
funds? Clearly, they are needed to encumber an appropriation for more than ve years.
However, using encumbered funds can be unwieldy, because the governing body must renew its
encumbrance vote every year before the scal year ends. Multi-year encumbered funds should
not be used as a substitute for establishing reserve funds. is will only cause bookkeeping
problems for municipal ocials as well as their auditors.
It is important to note the dierence between a special warrant article, which the governing
body may vote to encumber, and the “contractually encumbered funds” discussed in section E
(1) above, which can only be encumbered when there is a legally binding obligation to pay them
which is created before the end of the scal year.
3. BOND ISSUES
Under RSA 32:7, III, an amount raised through bonds or notes does not lapse until the purpose
it was intended for is completed or unless bond authorization is rescinded by a vote of the
legislative body (either at a time specied in the original vote to issue the bond or by later vote to
rescind under RSA 33:8-f). If there is an amount remaining aer the completion of the project,
or for some reason no expenditure has been made, RSA 33:3- a, II permits the legislative body
to authorize expenditure of the remaining funds for any purpose for which it is lawful to issue
bonds or notes.
e procedure for authorizing and rescinding bonds or notes is contained in RSA chapter 33. As
of September 27, 2020 the necessary majority for passage is three-hs (3/5) for both traditional
town meeting municipalities and those who have adopted the ocial ballot voting procedures
under RSA 40:13 (SB2). In traditional town meeting municipalities voting is by paper ballot
following discussion on the oor of town meeting, and only votes in the armative or negative
shall be included in the calculation of any majority. RSA 33:8. e issue of notes or bonds by
a municipality that has adopted an optional form of legislative body under RSA 49-D:3, I-a or
RSA 49-D:3, II-a shall be authorized by either a 2/3 or 3/5 vote as adopted and provided for in
the charter. If such charter does not specify which majority vote is required, then the required
majority vote shall be three hs (3/5).
Eective June 15, 2022, a municipality may authorize broadband infrastructure bonds at a
special town meeting without court approval. RSA 33: 3 -g authorizes a municipality or a
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communications district formed under RSA chapter 53-G to approve a bond for the purpose
of nancing the development, construction, reconstruction, renovation, improvement, and
acquisition of broadband infrastructure in any locations within a municipality unserved by
broadband as dened in RSA 38:38, I(c).
If the amount of the bond is more than $100,000, there are some additional requirements under
RSA 33:8-a:
• At least one public hearing must be held at least 15 days, but not more than 60 days, before
the meeting where the bond will be considered. Notice of the hearing must be posted and
published in a newspaper at least seven days before the hearing.
• e item must be acted on prior to any other business except zoning questions and other
required ocial ballot items.
• Secret ballot voting must be open for at least an hour aer discussion. e meeting may
not vote to shorten this time period.
• A bond article vote cannot be reconsidered until at least seven days later, at a meeting
noticed by publication in a newspaper at least two days prior to the meeting.
e one-hour balloting period may overlap with other business of the meeting so long as voters
remain free to vote for one hour. If there is more than one bond issue, the one-hour periods
can overlap. Most moderators wait until the majority of the voters have voted, then move on to
discuss other articles while the polls remain open for voting on the bond issues. In every case,
however, the polls must remain open for each article for at least one hour; do not, under any
circumstances, close the polls in less than one hour or the bond vote will be declared invalid.
a. Debt limits. All municipalities have a limit on the total amount of debt that may be
outstanding at any one time. is limit is calculated as a percentage of the total market
value (equalized assessed value) of all taxable property in town. e percentage is 3
percent for towns, 1 percent for village districts and 7 percent for school districts.
However, it is possible that the limit for any town, village district or school district may
actually be less at any particular time, because the total debt limit for any municipality
that contains an overlapping municipality (such as a school district and town that cover
the same geographic area) can be limited to 9.75 percent. RSA 33:4-a and 33:4-b. ere
are debt limit exceptions for specic purposes outlined in the statutes. Under these
exceptions, debt incurred is not included in the net indebtedness calculation for the
purposes of determining its borrowing capacity. ere are debt limit exceptions for sewer
treatment plants ordered by NHDES (RSA 33:5) or water treatment facilities ordered by
NHDES (RSA 33:5-a) or voluntary sewer projects (RSA 33:5-b) or solid waste site clean
ups (RSA 33:6-e ) and solid waste management districts (RSA 33:6-d). In addition, debt
incurred for broadband infrastructure is also an exception if it meets the denition in
RSA 38:38, I(e) (RSA 33:6-f).
b. Tax anticipation notes. Tax anticipation notes do not count as part of the municipality’s
debt limit total. In addition, the two-thirds ballot vote and prior public hearing required
for bonds are not necessary to authorize tax anticipation notes. e total amount of
tax anticipation notes cannot exceed the total tax levy of the preceding nancial year.
However, aer the tax levy of the current year is determined, cities and towns may borrow
an amount not exceeding the total tax levy for the current nancial year. During the
period from the beginning of the nancial year to the date of the annual town meeting,
towns may issue notes in an amount not exceeding 30 percent of the total tax receipts in
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the preceding nancial year. RSA 33:7. Note that under RSA 33:7, V, the authority to issue
tax anticipation notes need not be inserted on the warrant each year but can be authorized
“indenitely until rescission.” Tax anticipation notes are used when the cash ow from tax
revenues is insucient for current needs because of the timing of tax bills. e notes are
repaid with the tax revenue when it is received. Tax anticipation notes do not count as part
of the municipality’s total debt limit.
4. ANTICIPATED GRANTS
If the amount is appropriated from moneys anticipated to be received from a state, federal or
private source, the appropriation shall remain non-lapsing so long as the money remains available
under the rules or practice of the granting entity or agency. RSA 32:7, IV.
F. Statutorily Nonlapsing Funds
RSA 32:7, II, the “lapse rule,” does not apply to funds that have been properly created under a statute
designating the fund as nonlapsing. ere are four generic types of these funds:
1. CAPITAL RESERVE FUNDS
Appropriating money to a capital reserve fund is like putting it into a savings account. In fact,
the money is held and invested by someone other than the treasurer, namely the trustees of trust
funds. Towns, village districts and school districts are permitted to establish and fund capital
reserve funds for:
• the construction, reconstruction or acquisition of a specic capital improvement, or the
acquisition of specic equipment;
• the construction, reconstruction or acquisition of a type of capital improvement or the
acquisition of a type of equipment;
• a reappraisal of the real estate in the municipality for tax assessment purposes;
• the acquisition of land;
• the acquisition of a tax map of a town;
• extraordinary legal fees and expenses related to present or foreseeable litigation involving
the town or its ocers and employees; or
• municipal and regional transportation improvement projects including engineering, right-
of-way acquisition and construction costs of transportation facilities and for operation
and capital costs for public transportation
School districts may also establish a reserve fund to meet the expenses of educating children with
disabilities. RSA 35:1-b.
Reserve funds may be created for non-capital items but note that each still must be for a specic
purpose. RSA 35:1-c. is is not authority to create unspecied purpose reserves.
It takes two elements of action by the town meeting to create a capital reserve fund: action to
create the capital reserve fund, “distinctly stating the purposes” for which the fund is being
established, and an appropriation of a specic dollar amount into that fund. ese functions can
both occur in one warrant article and one vote, but both elements must be stated clearly in that
article. RSA 35:3; RSA 35:5.
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Chapter 5. When Do Appropriations Lapse?
Fund balance (see Section C above) may be transferred to a reserve fund by warrant article
vote. RSA 35:5.
RSA 35:5 and 35:12 permit towns and districts to fund capital reserve funds with monies “from
any source other than money given to the town [or] district … for charitable purposes.” us,
any source for the funds is usually valid. However, all such appropriations to capital reserve
must be by way of a special warrant article and appropriations by way of budget line item are now
prohibited. See RSA 35:5.
When can capital reserve funds be spent? RSA 35:15 provides that capital reserve funds remain
with the trustees of trust funds until town meeting votes to expend money from that fund for the
purpose for which the fund was established. Alternatively, town meeting can vote to name agents
for the expenditure of those funds. Although towns may wait to name agents in the year the fund
needs to be spent, many towns name agents at the same time the fund is created, in which case
no further town meeting action is necessary before spending from the fund. If a fund has been
created for the acquisition of land, the select board members are the only town ocials who may
be named as agents to expend. RSA 35:15, II(b) and then only if the town meeting had previously
adopted RSA 41:14-a.
In 2007, the legislature amended RSA chapter 35 to allow money in a capital reserve fund to
be used for periodic debt payments in addition to payments under a lease/purchase agreement.
“Capital reserve funds may be used for multiple payments under a nancing agreement for the
purpose for which the capital reserve was established.” RSA 35:15, III. An amendment to
RSA 35:15, eective August 30, 2021, allows a capital reserve fund to be used to make payments
under a lease/purchase agreement, regardless of whether the agreement contains an “escape”
or “non-appropriation” clause. If agents have been named to expend the fund according to
RSA 35:15, then no further vote of the legislative body is required to disburse funds for lease/
purchase payments aer the initial majority vote to approve the lease agreement under
RSA 33:7-e.
2. TOWN-FUNDED TRUST FUNDS & SCHOOL DISTRICT EXPENDABLE TRUST FUNDS
RSA 31:19-a authorizes towns to create trust funds for any valid public purpose. Similarly,
RSA 198:20-c authorizes school districts to create trust funds for “specic purposes for the
maintenance and operations of the schools.” An article to create a trust fund under either statute
should have at least the following elements:
• Reference to the statute (i.e., RSA 31:19-a or 198:20-c).
• Specic dollar amount.
• Statement of the source of the funds (to be raised from taxes or from some other
specic source).
• Statement of the purpose of the trust and any restrictions on spending, including a
statement that both principal and interest may be expended. Calling it an “expendable
trust fund” probably accomplishes this.
• Statement of who will have discretion over spending the money (agents) or a statement that
it shall not be spent until a subsequent vote of the meeting.
Prior to 1994, it was confusing for ocials to determine when to use a capital reserve fund
and when to use a town-funded trust fund; since the statutes were amended, it does not matter
whether the fund is labeled a “trust” or a “reserve” so long as it is created for a specic valid
public purpose. Also, RSA 31:19-a, I claries that the procedure for naming agents as set forth
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in the capital reserve fund law, RSA chapter 35, is the same procedure to use for town- funded
trust funds. Trust funds created under RSA 31:19-a are subject to the same provisions regarding
custody (that is, by trustees of the trust funds), investment, expenditure, change of purpose and
audits as are capital reserve funds. RSA 31:19-a, III.
3. SPECIAL REVENUE FUNDS
RSA 31:95-c authorizes towns to create nonlapsing funds into which they will place the revenue
from fee-generating facilities such as municipal airports and solid waste facilities. However, these
funds are not exempt from the budget appropriation process. Special revenue funds, while exempt
from lapse, cannot be spent without an appropriation. ey can only be spent aer a later town
meeting vote, for a purpose connected with the facility or program generating the fees. ere is
no authority in the law to appoint agents to expend special revenue funds.
Capital reserve funds and special revenue funds dier in that the town meeting must vote a
specic dollar amount into a capital reserve fund (or a town-funded trust fund established
under RSA 31:19-a), while the town meeting must vote a specic dollar amount out of a special
revenue fund.
a. Highway and capital improvements funds. ese are types of special revenue funds
authorized by RSA 31:95-c, II. A town can create a special nonlapsing fund for the purpose
of local highway improvements or general capital improvements as set forth in the town’s
capital improvements program (CIP). See RSA 674:5–:8 for how to develop a CIP. e
revenues that can be earmarked for local highway improvements include state highway
block grants, parking meter fees and nes, motor vehicle registration fees or any non-tax
revenue source.
b. Special revenue fund procedure. In order to create a special revenue fund, the governing
body must hold a public hearing 15 to 30 days before the town meeting (rst session in
ocial ballot referendum towns) with notice posted in at least two places and published at
least seven days in advance, and the following question placed on the warrant:
Shall we adopt the provisions of RSA 31:95-c to restrict [here insert portion as a fractional
or dollar amount] revenues from [here insert source] to expenditures for the purpose of
[here insert purpose]? Such revenue and expenditures shall be accounted for in a special
revenue fund to be known as the ______ fund, separate from the general fund. Any
surplus in said fund shall not be deemed part of the general fund. Any surplus in said
fund shall not be part of the general fund accumulated surplus and shall be expended only
aer a vote by the legislative body to appropriate a specic amount from said fund for a
specic purpose related to the purpose of the fund or source of the revenue.
e vote on a question to establish a Special Revenue Fund must be by ballot but cannot be on the
ocial election ballot (unless the town is under the SB 2 system). In other words, it must be voted
on at the business session of the town meeting. RSA 31:95-d.
Once the fund is established, future town meetings must vote specically to spend the money
accumulated in the fund and may only spend it on the purposes for which the fund was
established. RSA 31:95-c, II.
e fund may be dissolved in a similar manner by a majority vote of the legislative body. If that
occurs, any remaining amounts in the rescinded fund automatically become part of the general
fund accumulated surplus. RSA 31:95-d, IV(b).
A two-thirds vote of the legislative body is required to change the purpose of a special revenue
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Chapter 5. When Do Appropriations Lapse?
fund, the source of the revenues or the fractional portion of the revenues being deposited into the
fund. RSA 31:95-d, V.
4. REVOLVING FUNDS
Towns may establish recreation revolving funds under RSA 35-B:2, II, into which all fees and
charges for recreation services and facilities may be deposited. Money in the recreation revolving
fund does not lapse and can be spent on the order of the recreation commission for recreation
purposes under RSA chapter 35-B. However, if the recreation revolving fund is rescinded by vote
of the legislative body, remaining amounts in the fund automatically become part of the general
fund accumulated surplus. RSA 35-B:2, II.
Revolving funds may also be established under RSA 31:95-h for the following purposes:
• facilitating, maintaining or encouraging recycling as dened in RSA 149-M:4;
• providing ambulance services, or re services, or both;
• providing public safety services by municipal employees or volunteers outside of the
ordinary detail of such persons, including but not limited to public safety services in
connection with special events, highway construction and other construction projects or
for any other public safety purpose deemed appropriate by the municipality;
• Creating aordable housing and facilitating transactions relative thereto;
• providing cable access for public, educational or governmental use;
• nancing of energy conservation and eciency and clean energy improvements by
participating property owners in an energy eciency and clean energy district established
pursuant to RSA chapter 53-F; or
• facilitating transactions relative to municipal group net metering.
ese are the only stated purposes for which revolving funds may be established, although the
statute states that towns are not precluded from establishing revolving funds “for any other
purposes authorized by law.”
A revolving fund for the purposes provided for in RSA 31:95-h must be established by a vote of
the legislative body, which at the time of establishment or at a later time may restrict expenditures
from the fund by limiting the types of items or services that may be purchased, limiting the
amount of any single expenditure, or limiting the total amount of expenditures to be made in
a year. No money may be spent from the revolving fund for any item or service for which an
appropriation has been specically rejected by the legislative body during the same year.
All or any part of the income derived from the services listed above may be deposited into the
revolving fund, as may other revenue approved by the legislative body for deposit into the fund.
e revolving fund is nonlapsing and is not considered part of the municipality’s fund balance.
e treasurer has custody of the monies in the revolving fund and shall pay out monies only
upon order of the governing body or other board designated by the legislative body at the time
the fund is created. Revolving fund money may be spent only for the purposes for which the
fund was created.
School districts are authorized under RSA 194:3-c to create revolving funds for school programs
which are self-supporting “in whole or in part.” e district may supplement revenue through
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The Basic Law of Budgeting – 2022 Edition
– and only through - a line item in the budget, and all such funds are subject to annual audits,
with records regarding the program open to the public. A revolving fund is non-lapsing only if
so designated by the article authorizing the fund. If the fund is terminated, then funds raised
through fees or tuitions are returned to the students, and if raised by goods or services, they go to
reduce the tax rate.
Additionally, RSA 198:4-c authorizes districts to create a revolving funds for building trades.
Such a fund must be used to pay necessary construction costs carried out as part of the
instructional program. When the project is completed, it is sold, and the money received is put in
the fund for use in another construction project.
5. OTHER LAPSE RULE EXCEPTIONS
ere are other funds that, by statute, do not lapse at the end of the year. Examples are the
conservation fund (RSA 36-A:5), forest maintenance fund (RSA 31:113), heritage commission
fund (RSA 674:44-d) and airport fund (RSA 423:6 and :7). Not all appropriations to these various
commissions are placed automatically into these nonlapsing funds. Make sure in each case that
the voters properly created the fund and the money was properly allocated into the respective
fund. For example, a budget may include two appropriations to the Conservation Commission:
one to the conservation fund (which would be nonlapsing) and one ordinary operations
appropriation for that scal year, which would lapse. However, under RSA 36-A:5, I, the whole or
any part of money so appropriated in any year and any gis of money received pursuant to
RSA 36-A:4 may be placed in a conservation fund and allowed to accumulate from year to year.
e deposit into the Conservation Fund must be made before the end of the scal year.
In addition, an appropriation for a “capital project” under RSA 32:7-a does not lapse
automatically. If the amount appropriated in any year is not spent in that year, it will not lapse.
e money will remain available for use for the project during the term stated in the warrant
article. However, a capital project appropriation does not create a capital reserve fund. It is simply
accounted for as a nonlapsing appropriation from year to year. At the end of the term stated in
the original warrant article, any unspent amounts will lapse into fund balance. Alternatively, at
any annual meeting before the end of the term of the project, the legislative body may rescind
the appropriation by a simple majority vote on a warrant article. If the project is rescinded, any
unexpended appropriations for the project will lapse immediately to fund balance.
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Chapter 6. Transfers of Appropriations During the Year
CHAPTER SIX
Sixth Key Concept
TRANSFERS OF APPROPRIATIONS
DURING THE YEAR
As a general rule, if the governing body needs more money in one account (“purpose of appropriation”),
it can transfer money from some other account (“purpose”), so long as the expenditure does not result in
overspending the bottom line of the total budget under RSA 32:10. Such a transfer must be approved in
some manner by the governing body. As armed in Sullivan v. Hampton Board of Selectmen, 153 N.H. 690
(2006), the governing body in a town or district that has adopted the ocial ballot referendum system (SB
2) may exercise this discretionary transfer authority with respect to an adopted default budget in the same
way as it may with respect to an adopted operating budget. See Chapter 8 for more on default budgets.
e voters cannot limit the governing body’s ability to make transfers by action on the oor of the
meeting. In McDonnell v. Derry, 116 N.H. 3 (1976), the voters attempted, by a general warrant article, to
prohibit overspending any line item without permission of the budget committee. e New Hampshire
Supreme Court held that this was illegal because it is inconsistent with RSA Chapter 32. Voters may
impose an advisory limit on transfers from some particular line item, which, though not enforceable in
court, might well be enforceable at the ballot box during the following election.
A. Special Warrant Articles Nontransferable
An amount appropriated by a special warrant article cannot be transferred and spent for other purposes.
RSA 32:10, I(d). A special warrant article is one of the following ve categories of individual warrant
articles: petitioned appropriations articles; bond or note issuance; articles that appropriate money into
or out of special funds such as capital reserve or trust funds; any article designated in the warrant by the
select board as special, nonlapsing or nontransferable; or a capital projects appropriation. RSA 32:3, VI.
A warrant article or budget line item cannot be designated “special” or nontransferable from the oor of
the meeting. e only way voters can create nontransferable appropriations, contrary to the wishes of the
governing body, is to submit a petitioned appropriation warrant article before the meeting and then vote
to adopt it at the meeting.
Amounts can be transferred out of the operating budget and into a special warrant article appropriation,
but amounts cannot be transferred out of special warrant articles to other purposes. RSA 32:10, I(e)
B. Maintaining Records of Transfers
Public records must be kept for all transfers of appropriations “such that the budget committee . . . or
any citizen . . . may ascertain the purposes of appropriations to which, and from which, amounts have
been transferred.” RSA 32:10, I(b). But paragraph I(c) of that same statute makes it clear that the select
board can over expend one account without specically designating the account from which the board
transferred the additional funds, as long as:
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The Basic Law of Budgeting – 2022 Edition
• the total of the line items overspent does not exceed the total underspent (that is, the bottom line is
still binding); and
• the expenditures are properly entered and recorded under the proper account codes, so that any
citizen can, at any time, nd out which lines are being overspent or underspent and what the
money was actually spent on. is requirement applies to whatever detailed chart of accounts is
being used. See alternative denition of “purpose” in RSA 32:10, II.
When the governing body makes a transfer, it does not have to vote formally on it. So long as the
governing body properly authorizes each expenditure through whatever manifest system the municipality
uses, it is not necessary to designate formally which expenditures constitute “transfers” of appropriations.
If the authorized expenditure results in overspending some account or line item, it is an implied transfer
from other accounts that remain underspent.
If only the bottom line is binding, why are records of transfers necessary? Budgeting is an ongoing
process. If, at the end of the year, one account is underspent and another overspent, the budget committee
and/or voters can take account of that information in formulating the following year’s budget. If the same
amount is being requested in the new budget, the voters and/or budget committee have the right to ask
why. Before 1993, this information may not have come to light because there was no legal requirement
to “properly classify and enter” every expenditure. Some ocials would, for example, record welfare
expenditures under highways, because that was the appropriation being spent—that is, money was being
transferred from the highway account to be used for welfare, but because of improper recording there was
no way to discover this.
In practice, the easiest way to avoid accidentally overspending the bottom line is for the select board to
formally vote on all transfers of funds from one purpose to another. While it is also acceptable for the
board to authorize each expenditure through whatever manifest system it ordinarily uses, monitoring
the budget at least on a monthly basis is recommended. Maintaining proper records is necessary to help
ensure there is no over expenditure of the approve budget bottom line, which would be a frank violation
of the budget law under RSA 32:8.
C. Line Item Voting?
Voters at the town, village or school district meeting may vote on specic line items in the budget, but
these votes are advisory only and do not aect the governing body’s power to make transfers, unless a line
item is actually deleted or reduced to zero. RSA 32:10, I(e). So long as even one dollar of an appropriation
is approved for a line item, the governing body may transfer unexpended funds from other areas of the
budget into that line under RSA 32:10. is provision applies only to line items on the posted budget, not
to line items in a more detailed chart of accounts (see alternate denition of “purpose” in RSA 32:10, II).
Obviously, if the bottom line is aected, that is binding, not merely advisory, because the governing body
may not overspend the bottom line.
If making adjustments to individual line items is only advisory, why do it? Again, budgeting is an ongoing
process. It is only by comparison with past appropriations, and expenditures made against them, that the
budget can be built and a reasonable bottom line ultimately set.
What if there is a petitioned warrant article not to make a particular expenditure (for example, not to
buy a new police cruiser this year)? Is it binding? is is a legal “gray” area, but it would likely be binding.
If the voters pass such an article they should also be sure to delete or subtract that amount from the
operating budget’s bottom line. Otherwise, there will be two inconsistent votes.
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Chapter 6. Transfers of Appropriations During the Year
D. Failed Separate Article: ‘No Means No’
RSA 32:10, I(e) was amended in 2004 to specify that if a separate appropriations article—an
appropriations article separate from the operating budget article—is rejected by the voters, the
purpose in the article is deemed “one for which no appropriation is made.” e eect of this law is
that no amount of money may be transferred to, or spent for, the purpose of a separate warrant article
(including special warrant articles) that has been defeated or reduced to zero. is is oen referred to as
the “no means no” provision.
Unfortunately, while the language of this statute may seem rather clear, in practice it has not been that
simple. ere are many gray areas in which the limits of the governing body’s authority have not yet
been made clear. It is not clear, for example, whether or not the purpose of an article proposing a “lease/
purchase” of a piece of equipment is considered the same purpose as the purchase of the same piece of
equipment. It is also unclear whether the defeat of a separate article to purchase a piece of equipment
prevents the already-designated agents of a capital reserve fund from spending money from that fund to
purchase the equipment instead. In these dicult situations, it is best to seek advice from the DRA, your
municipal attorney and/or the NHMA Legal Services attorneys.
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The Basic Law of Budgeting – 2022 Edition
CHAPTER SEVEN
Seventh Key Concept
THE BUDGET COMMITTEE
I. Composition and Creation of the Ocial Budget Committee
A. Ocial v. Advisory Budget Committee
An ocial budget committee must be adopted by a vote of the legislative body under RSA 32:14. e
law does not require a town or district to have any budget committee. Some towns and districts may
choose to have no budget committee; others may choose to have an unocial, advisory budget or nance
committee. RSA 32:24. However, unless an ocial body committee has been adopted, as described
in Section B below, an unocial committee is purely advisory and has none of the statutory duties or
authority of an ocial budget committee. In towns and districts without an ocial budget committee,
the governing body takes on ocial responsibilities related to the budget.
is chapter discusses the creation, authority, and responsibility of an ocial budget committee.
B. Adoption of an Ocial Budget Committee
Any town with a town meeting form of government, including those with a budgetary town meeting or
ocial ballot town meeting, and towns with an ocial ballot town council form of government under
which all or part of the annual operating budget is voted upon by ocial ballot, may establish an ocial
budget committee. RSA 32:14, I(a). An ocial budget committee is established by a majority vote of the
meeting and remains in existence unless and until a future meeting votes to abolish it. RSA 32:14. Voting
on the question to establish an ocial budget committee is done by ballot, but not the ocial ballot used
to elect ocers. Polls must remain open and ballots must be accepted by the moderator for a period of
not less than one hour following the completion of discussion on the question. e adoption of an ocial
budget committee can be rescinded in the same manner. Once adopted, the ocial budget committee has
all the statutory responsibilities and authority as described in RSA chapter 32.
Cooperative school districts and village districts located in more than one municipality may also establish
an ocial budget committee. RSA 32:14, I(b) and (c); RSA 195:12-a (Cooperative School Districts).
ere are some special considerations to keep in mind regarding budget committees and school districts.
If a town adopts RSA 32:14 – :24, budget preparation for any school district or village district wholly
within that town is governed by the same budget committee that governs the town budget. RSA 32:16,
I. erefore, there is no opportunity for a single-town school district to have its own budget committee
unless the town itself does not adopt its budget by means of an annual meeting. Questions may also arise
when a cooperative school district has a budget committee, but it was not adopted under RSA 195:12-a.
ese budget committees can be created by school board policy, in the “articles of agreement” created at
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Chapter 7. The Budget Committee
the inception of a cooperative school district, or even informally through “past practice,” (i.e., nothing in
writing, but it’s always been done this way). In these situations, confusion may arise regarding the extent
of authority and the roles of the budget committee. Ultimately, if the cooperative school district budget
committee was not adopted under RSA 195:12-a, then it is not an ocial budget committee with the
powers and duties set forth in Chapter 32, and its role is purely advisory.
C. Membership
1. MEMBERS-AT-LARGE
e composition of the budget committee is determined by town meeting within the limits set by
RSA 32:15. A budget committee must include three to twelve members-at-large who are residents
of the municipality and who may be elected or appointed by the moderator, as the town meeting
decides. e members at large must be domiciled in the town, and any member that ceases to
have domicile will immediately lose his or her seat. Members-at-large serve staggered three-year
terms. e town meeting may vote at a subsequent meeting to change the number or manner
of selection of its members-at-large. One of the members-at-large must be elected by the other
committee members as chair, and the committee can elect other ocers as it sees t.
2. EX OFFICIO MEMBERS
e committee must also include one member of the governing body of the municipality, one
member of the school board of each school district wholly within the municipality (if any),
and one commissioner of each village district wholly within the town (if any). ese ex-ocio
members are appointed by their respective boards to sit on the budget committee and serve terms
of one year, along with an alternate ex-ocio member to serve in their absence. e ex-ocio
members are voting members of the committee but may not serve as chair.
Under RSA 195:12-a, a cooperative school district budget committee has the “same number of
members as the cooperative school board plus one additional member from the school board as
provided in this paragraph.” Furthermore, other than this additional “ex ocio” school board
member, a cooperative school board member cannot serve as an appointed or elected budget
committee member.
3. INCOMPATIBILITY WITH OTHER OFFICES
RSA 32:15, V states that “[n]o selectman, town manager, member of the school board, village
district commissioner, full-time employee, or part-time department head of the town, school
district or village district or other associated agency shall serve as a member-at-large.”
erefore, department heads cannot serve as members-at-large on the budget committee, even if
they are part-time employees. RSA 32:15, V. “Department head” is not dened in the law and is,
therefore, this is a gray area of the law. To avoid problems related to incompatibility, any employee
responsible for submitting some portion of a budget should be treated as a department head.
A related issue is that of the ex-ocio members voting upon the budget presented by their
respective boards. In other words, should the selectperson on the budget committee vote on the
budget that the select board has recommended to the budget committee? Yes. e statute clearly
contemplates this by requiring an ex-ocio member and prohibiting any other member of that
board from serving as a member-at-large. e system is set up so that there is a representative
from each governing body of all aected political subdivisions, and those ex- ocio members are
expected to vote.
4. FAILURE TO ATTEND MEETINGS
A member-at-large ceases to hold oce immediately upon missing four consecutive scheduled or
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The Basic Law of Budgeting – 2022 Edition
announced meetings of which that member received reasonable notice, without being excused by
the chair. RSA 32:15, VI.
5. VACANCIES
If members of the budget committee members are elected, rather than appointed, the budget
committee itself lls vacancies in the membership-at-large seats. If budget committee members
are appointed, the chair must immediately notify the moderator, who is responsible for lling the
vacancy. If the moderator fails to appoint within ve days aer being notied of a vacancy, then
the remaining budget committee members can ll the vacancy. RSA 32:15, VII. When someone
is appointed to ll a vacancy by any of these methods, that person serves until the next annual
meeting, at which time a successor shall be elected or appointed to either ll the unexpired term
or start a new term, as the case may be.
Vacancies on cooperative school district budget committees are lled by the chairperson of the
cooperative school board. RSA 195:12-a, I; RSA 671:33; Sanborn Regional School District v. Budget
Committee of the Sanborn Regional School District, 150 N.H. 241 (2003).
II. Role and Authority of the Budget Committee
A. Basic Purpose
According to RSA 32:1, the purpose of the budget committee is “to assist voters in the prudent
appropriation of public funds.” e New Hampshire Supreme Court, in Hecker v. McKernan, 105 N.H.
195 (1963), described the purpose of the municipal budget committee:
[T]o provide a committee with special knowledge to oversee and analyze the expenditures of the
various town departments and districts. In this manner the electorate, which would ordinarily
be without the detailed knowledge necessary to vote intelligently on certain budgetary problems,
might be given sucient information to determine the annual amounts necessary to properly
manage town aairs.
Since all departments naturally tend to want more money in order to better perform the functions
they are charged with, the budget committee becomes “an arbiter . . . given power by the legislature to
reconcile these appropriation requests to maintain the tax load within manageable proportions.” Baker v.
Hudson School Dist., 110 N.H. 390 (1970).
B. Duties and Authority of the Budget Committee
RSA 32:16 enumerates the duties and authority of the municipal budget committee as follows:
I. To prepare the budget as provided in RSA 32:5, and if authorized under RSA 40:14-b, a default
budget under RSA 40:13, IX(b) for submission to each annual or special meeting of the voters
of the municipality, and, if the municipality is a town, the budgets of any school district or
village district wholly within the town, unless the warrant for such meeting does not propose
any appropriation.
II. To confer with the governing body or bodies and with other ocers, department heads and other
ocials, relative to estimated costs, revenues anticipated, and services performed to the extent
deemed necessary by the budget committee. It shall be the duty of all such ocers and other
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Chapter 7. The Budget Committee
persons to furnish such pertinent information to the budget committee.
III. To conduct the public hearings required under RSA 32:5, I.
IV. To forward copies of the nal budgets to the clerk or clerks, as required by RSA 32:5, VI, and, in
addition, to deliver 2 copies of such budgets and recommendations upon special warrant articles
to the respective governing body or bodies at least 20 days before the date set for the annual or
special meeting, to be posted with the warrant.
C. “The Budget”
Ultimately, the voters adopt the budget. But in towns and districts with an ocial budget committee, it is
the budget committee’s budget that is presented to the voters.
RSA 32:3, III denes “budget” as “a statement of recommended appropriations and anticipated revenues
submitted to the legislative body by the budget committee, or the governing body if there is no budget
committee, as an attachment to, and as part of the warrant for, an annual or special meeting.” e
italicized words were added to the law in 2003 to clarify that in budget committee towns and districts it is
the budget committee’s recommended budget, not the governing body’s, that is posted with the warrant.
RSA 32:5, VII was amended in 2004 to again clarify that it is the budget committee’s budget that is posted
with the warrant: “e governing body shall post certied copies of the budget, with the warrant for the
meeting. e operating budget warrant article shall contain the amount as recommended by the budget
committee if there is one.” However, if the municipality has voted to include the estimated tax impact
on the budget and other warrant articles, it is still the responsibility of the governing body (select board,
school board, or village district commissioners) to determine whether an article has a tax impact at all,
and to approve the calculation of that estimate. RSA 32:5, V-b.
D. Acquiring Information for Budget Preparation
Preparing a proposed budget can be a lengthy process. Ultimately, the deadlines can all be traced back
from the date of the annual meeting, and the milestones that must be reached along the way under the
law. It can be helpful for everyone involved in municipal government to understand the schedule so they
can appreciate how the information they will provide ts into the overall picture. It is advisable for the
budget committee to develop a schedule for budget proposals, discussion, and decision making that leaves
sucient time for the various formal budget hearings that will be required. In addition, it is the best
practice to share this schedule with the governing body, town manager/administrator, and department
heads very early in the process, and to work together so that the expectations about when information
will be provided to the budget committee are realistic for everyone involved.
RSA 32:16, II states that the budget committee must “confer with the governing body or bodies and with
other ocers, department heads and other ocials, relative to estimated costs, revenues anticipated, and
services performed to the extent deemed necessary by the budget committee.”
erefore, in budget committee towns and districts, all ocers and departments are required to submit
statements of estimated expenses and receipts to the governing body rst. e governing body then
submits its own recommendations to the budget committee, together with all information necessary for
the preparation of the annual budget, including each purpose for which an appropriation is sought and
each item of anticipated revenue. RSA 32:17. e scheduling of the committee’s functions is under the
budget committee’s control.
e budget committee also has the authority to request statements directly from department heads and
other ocers. RSA 32:17. Consistent with that, RSA 32:16, II states that it is “the duty of all such ocers
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and other persons to furnish such pertinent information to the budget committee.” However, while it
may be helpful to the budget committee to discuss proposed budgets with the governing body, town
administrators/managers and department heads, the budget committee does not have the authority to
require any of those ocials or employees to attend budget committee meetings. Eective September
21, 2021, RSA 32:17 has been amended to provide that when providing a comparative statement of all
proposed appropriations and expenditures, that information must include all sub-accounts used by the
governing body. Furthermore, those amendments require that the information provided to the budget
committee is to be in a form acceptable to the budget committee, provided, however, this requirement
may be satised by the municipality by providing a knowledgeable sta person who will attend the budget
committee meetings with access to and ability to provide the required information.
Where there is a town manager (in towns adopting RSA chapter 37), all ocer and department budgets
are submitted to the manager. e manager prepares a recommendation to the select board by January 31
of each year. RSA 37:6, V.
Obviously, when putting together the budget, the budget committee will need to obtain certain
information from the municipality. While requested information should be provided, the committee
must remember that it has no authority to direct municipal sta work duties. Requests should provide a
reasonable time frame and a reasonable format for producing the documentation. A careful balance must
be attempted between acquiring information necessary for budget preparation and not interfering with
the duties of other employees or ocials. Finally, keep in mind that one budget committee member has
no authority to act alone, and so one committee member cannot demand information if the committee
has not decided by committee vote to request that information.
Aer conferring with all ocers and department heads, the budget committee prepares the budget
and is responsible for holding the required public hearings, subject to the statutory notice and deadline
requirements. See RSA 32:5; RSA 195:12. See Chapter 1 for the budget hearing requirements.
Twenty days prior to the meeting, the budget committee must forward the nal budget to the governing
body (select board, school board, or village district commissioners). RSA 32:16.
E. The Default Budget
In SB 2 municipalities, the governing body determines the default budget, unless the voters have delegated
that responsibility to the budget committee. RSA 40:14-b. is delegation can be voted on at the time the
ocial ballot referendum system is adopted or, if the town or district already operates under the ocial
ballot referendum system, the delegation can occur at any time under an article in the warrant. For more
on the default budget, See Chapter 8.
F. Reviewing (Not Controlling) Expenditures
An ocial budget committee has the authority to review expenditures for the purpose of budgeting.
RSA 32:22 provides as follows:
Upon request by the budget committee, the governing body of the town or district, or the town
manager or other administrative ocial, shall forthwith submit to the budget committee a
comparative statement of all appropriations and all expenditures, including all subaccounts used
by the governing body, by them made in such additional detail as the budget committee may
require. e budget committee shall meet periodically to review such statements.
is statute requires governing bodies and managers to provide any information the budget committee
wants “in such additional detail as the budget committee may require.” e budget committee’s purpose
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Chapter 7. The Budget Committee
for reviewing expenditures is to determine whether the budget is meeting the needs of the town or school
district, and to assist the budget committee in putting together a budget. In other words, reviewing
current and past expenditures assists the budget committee in preparing future budgets. Use of the
word “periodically” in RSA 32:22 also indicates that the budget committee can (and should) review
expenditures throughout the year, not just during the so-called “budget season.”
However, RSA 32:22 is also very clear that the authority to review expenditures in no way creates the
authority to control expenditures:
e provisions of this section shall not be construed to mean that the budget committee, or any
member of the committee, shall have any authority to dispute or challenge the discretion of other
ocials over current town or district expenditures, except as provided in RSA 32:23.
Instead, under RSA 32:23, the only way a budget committee can dispute an expenditure is through a
formal petition to the superior court:
Upon receipt of the reports provided for by RSA 32:22, the budget committee shall examine the
same promptly, and if it shall be found that the governing body or town manager have failed to
comply with the provisions of this chapter concerning expenditures, a majority of the committee,
at the expense of the municipality, may petition the superior court for removal as provided in
RSA 32:12.
is would include overspending the bottom line or failure to properly enter and classify expenditures.
It would not include, as stated in RSA 32:22, an ability to dispute the governing body’s proper exercise of
discretion in making expenditures or transfers within the budget.
G. Special Article Recommendations
e budget committee’s recommendations should not only be shown on the budget form, but also
on the warrant itself in the case of special articles, along with those of the governing body. If town
meeting has voted previously under RSA 32:5, V-a or RSA 40:13, V-a to require recommendations by
numeric tally on all warrant articles containing appropriations (and, in the case of RSA 40:13, V-a,
ballot questions), the budget committee’s and governing body’s recommendations should appear on
the warrant/ballot for all such articles. RSA 32:5, however, provides that the failure to do this will not
invalidate an appropriation otherwise lawfully made. RSA 32:5, V-a and RSA 40:13, V-a also permit
the governing body in a town to vote to include the numerical tally on these articles when the town
meeting has not voted to do so. RSA 32:5, V-a and RSA 40:13, V-a also permit the governing body in a
town to vote to include the numerical tally on these articles when the town meeting has not voted to
do so, or an ocial budget committee may, on its own initiative, require that the tallies of its votes be
printed next to the aected article. Copies of each proposed budget must be submitted directly from
the budget committee to DRA. RSA 32:5, VI.
H. Failure of Budget Committee to Propose a Budget
In the rare instance in which a budget committee fails to prepare a budget to recommend to the town
or district meeting, RSA 32:5, VI provides that the governing body shall post its proposed budget, along
with a statement that it is being posted in lieu of the budget committee’s proposed budget. e governing
body’s proposed budget then becomes the basis for town meeting debate and action.
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I. Limit on Appropriations
1. 10 PERCENT LIMITATION
In budget committee towns and districts (meaning those with an ocial budget committee
adopted according to RSA 32:14), the total amount appropriated by the meeting, including
amounts appropriated in separate and special warrant articles, cannot exceed the total
recommended by the budget committee by more than 10 percent. RSA 32:18. e 10 percent
calculation is computed on the total amount recommended by the budget committee
(including separate warrant articles), less that part of any appropriation item which constitutes
“xed charges.” Fixed charges include appropriations for principal and interest payments on
bonds and notes, as well as mandatory assessments imposed on towns by the county, state or
federal governments.
In ocial ballot referendum (SB 2) towns and districts, the 10 percent limitation is calculated
based on the initial recommendations of the budget committee prior to the rst session. In
the event a special warrant article is amended by the rst session, and the budget committee
changes its recommendation on that article aer the rst session, the 10 percent limitation is still
calculated based on the budget committee’s original recommendation before the rst session.
RSA 32:5, V(b). is concept is discussed further in Chapter 8.
In a town with a tax or spending cap, the 10 percent rule still applies regardless of how the cap
aects the proposed budget. In other words, the legislative body may only appropriate up to 10
percent more than the total amount recommended by the budget committee. e concept of tax
and spending caps is discussed further in Chapter 1.
Can the budget committee, using the 10 percent rule, reduce its true recommended budget by 10
percent below the amount it really feels should be appropriated to prevent the voters from having
any leeway? No. at is what the budget committee in Hudson tried to do. e New Hampshire
Supreme Court, in Baker v. Hudson School District, 110 N.H. 389 (1970), held the practice illegal,
saying that “the voters [must] be le with some options which the budget committee may not
undermine through a subterfuge.”
However, in a 2015 superior court case, the judge determined that a budget committee’s cut
of approximately $650,000 from the school district’s recommended budget did not violate the
principle set forth in the Baker case above. Brentwood School District v. Budget Committee of
the Town of Brentwood, No. 218-2015-CV-150 (Rockingham Superior Court March 5, 2015).
e budget committee was somewhat vague about where in the budget the particular cuts were
coming from, and the ultimate result was that the voters could not amend the budget to reect
the school district’s originally proposed budget. e judge looked at the budget committee’s
intent and determined there was no evidence that the committee dishonestly proposed a budget
that it knew to be unworkable or that it intentionally “neutered” the voters’ amendment capability
in light of the 10 percent rule.
e 10 percent limitation aects the budget’s bottom line only, not individual line items. Because
of this rule, the budget committee can prevent larger projects simply by not recommending them.
e rule gives the budget committee a signicant role in the budget process. In a sense, the town
meeting, by opting to have a budget committee, has given up some of its legislative authority.
If the voters want that power back, they can repeal RSA 32:14 – :24.
2. OVERRIDE OF 10 PERCENT LIMITATION
RSA 32:18-a establishes a procedure for a budget committee town or district to vote to
override the 10 percent rule on specic bond issue questions. If a warrant article for a bond
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Chapter 7. The Budget Committee
is not recommended in its entirety by the budget committee, the governing body may vote
to place the article on the warrant with the phrase “passage of this article shall override the
10 percent limitation imposed on this appropriation due to the non-recommendation of the
budget committee.” e bond article still must pass by the statutorily required three-hs
(3/5) majority vote.
3.
EX
CEPTION FOR COLLECTIVE BARGAINING AGREEMENTS
Under RSA 32:19, amounts that are included in a budget for the purpose of funding the cost items
of collective bargaining agreements are exempt from the 10 percent rule. Budget committees
are free to not recommend these items, but that non-recommendation does not cause the
warrant article automatically to fail. If such appropriations are not recommended by the budget
committee, then such appropriations shall be exempt from the 10 percent limitation set forth in
RSA 32:18 , thus, the budget committee has no veto over these items. e statute provides that the
budget committee’s failure to recommend the negotiated cost items is not considered an unfair
labor practice.
4.
EX
CEEDING THE 10 PERCENT LIMIT
If the total appropriations at a given meeting do, in fact, exceed the recommended budget plus
10 percent, which items are invalid? e statute is silent on this question, but it is the practice
of DRA to treat the meeting chronologically, in the order the votes are declared passed by the
moderator. e rst appropriations that take the total over the 10 percent limit are invalid, as well
as any subsequent votes increasing total appropriations. is is a bit more complex in SB 2 towns
and districts, but DRA’s practice has been to follow the chronological order of the second session
ballot voting and invalidate those votes that exceed the 10 percent limitation.
Clearly, exceeding the limit should be avoided, because when it happens, the voters believe
they have made a valid appropriation that is later disallowed by DRA. e best practice is for
the moderator to have a clear awareness of the problem. Before the meeting, someone should
calculate the 10 percent limit using DRA’s form (available on the DRA website). e moderator
should make sure someone keeps a running total during the meeting, so that the voters can be
informed before a vote is taken that it will violate the limit. Since any vote can be reconsidered
under a proper motion, the voters may then want to reconsider previous appropriations.
In SB 2 towns and districts, it is particularly important for the moderator to encourage the rst
session to consider the 10 percent limitation. Suppose, for example, neither Articles 10 nor 11
were recommended by the budget committee. Neither one alone violates the limit but passing
both of them would violate the limit. e moderator should strongly encourage amendment of at
least one of those articles at the rst session by adding the words, “is vote to take eect only if
Article [x] is defeated.”
5.
THE
10 PERCENT RULE AND SPECIAL MEETINGS
e rule applies independently to each meeting, not to the yearly total appropriations. No
appropriation shall be made at any special meeting for any purpose not approved by the budget
committee unless it is within the 10 percent limitation, or, unless the special meeting involves
a proposed bond issue and the governing body votes to include the language in the warrant
article that allows the voters to override the 10 percent rule in accordance with RSA 32:18-a, or
where the special meeting involves a warrant article proposing the approval of the cost items of a
collective bargaining agreement.
6. PETITIONED ARTICLES
If the budget committee does not recommend a petitioned appropriation article, can the voters
pass it anyway? Yes, if the amount appropriated is within the 10 percent rule. Pittseld Board of
Selectmen v. School Board, 113 N.H. 598 (1973).
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The Basic Law of Budgeting – 2022 Edition
J. The Right-to-Know Law
Budget committees—whether ocial or advisory—are public bodies under e Right-to-Know Law.
erefore, all budget committee discussions, actions, and records are subject to the Right-to-Know Law,
RSA Chapter 91-A. See, Herron v. Northwood, 111 N.H. 324 (1971). Any subcommittees or advisory
committees they may create are also “public bodies” within the meaning of RSA 91-A:1-a, VI. is means
meetings of the budget committee, whether ocial committees under RSA chapter 32 or unocial
advisory/nance committees, must have noticed meetings open to the public, and all minutes and other
materials must be open to the public as governmental records.
is is an extremely brief explanation of a public body’s obligations under e Right-to-Know Law. For
more information, see NHMA’s publication, New Hampshire’s Right-to-Know Law.
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Chapter 8. Appropriations under the Ocial Ballot
A. ‘Standardized’ Referendum System Versus ‘Customized’ Charter
In 1995, the legislature enacted two bills to allow towns and districts that appropriate their budgets
through an annual meeting of voters to act on any or all warrant articles by means of the ocial ballot
system. Without adopting one of these options, the use of the ocial ballot for warrant article voting is
restricted as set forth in RSA 39:3-d. e “standardized” ocial ballot referendum option (referred to as
SB 2) is discussed below.
However, the other ocial ballot referendum bill (HB 141 of 1995) added two options to the types of town
government that can be adopted via the charter process as set forth in RSA Chapter 49-B, namely the
budgetary ocial ballot town meeting form of government (RSA 49- D:3, II-a) and the budgetary ocial
ballot town council form (RSA 49-D:3, I-a). Under these charter options, the details of such a charter—
that is, how the ocial ballot would be used—is le to the discretion of each town or district as exercised
through the charter adoption process in RSA 49-B. As discussed in Chapter 1, Section I, a town with a
town council form of government also may amend its charter to include a limit on annual increases in the
amount raised by taxes in the town budget. e limit must include a provision allowing for override of the
cap by a supermajority vote as established in the charter. RSA 49-D:3, I(e). Amendments eective August
20, 2021 provide that city and town charter exclusions, ordinances and accounting practices that have the
eect of an override of a tax cap require a supermajority vote of the legislative body. e charter cannot,
however, alter the basic ocial ballot procedures, such as voting booth specications, absentee voting, etc.
B. Description of the SB 2 System
Under the “standardized” ocial ballot referendum form of government (RSA 40:13), any town or district
can adopt a system in which all matters coming before the legislative body are given their nal vote by
means of the ocial ballot. e method of enactment is contained in RSA 40:14. A vote to adopt requires
a three-hs majority.
If SB 2 is adopted, the annual meeting consists of two sessions. e rst session is held “between the
rst and second Saturdays following the last Monday in January, inclusive of those Saturdays,” unless
the meeting adopts the April or May meeting option. e rst session, commonly referred to as the
deliberative session, is conducted just as the business portion of a traditional town meeting described in
Chapter 6, complete with the authority to discuss and amend any warrant article (except those required
to go on the ocial ballot). However, the major dierence is that the voters do not take nal action on the
warrant articles at this session. Instead, at the second session, voters vote on everything on the ocial
ballot: all articles in the nal form (as amended at the rst session, if applicable), plus the election of
ocers, and all other questions. e second session takes place the second Tuesday in March (or second
Tuesday in April or May, for those towns choosing those options) and is run just like any other election
CHAPTER EIGHT
APPROPRIATIONS UNDER THE OFFICIAL
BALLOT REFERENDUM (SB2) SYSTEM
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by ocial ballot, with no further opportunity for discussion or amendment. ere are other special
timing provisions for the submission of petitioned warrant articles, budget hearings, etc. RSA 40:13, II-a,
II-b and II-c. e ballot question for rescinding the ocial ballot referendum system and returning to
the traditional town meeting shall be: “Shall we rescind the provisions of RSA 40:13 (known as SB 2), as
adopted by [the local political subdivision] on [date of adoption] so that the ocial ballot will no longer be
used for voting on all questions, but only for the election of ocers and certain other questions for which
the ocial ballot is required by state law?” Rescission requires a three-hs vote.
In addition to the two separate sessions, there are several major dierences between SB 2 and traditional
towns and districts, as described further in this chapter.
C. Dierent Deadlines
In ocial ballot referendum jurisdictions, the following dates and other features dier from those that
apply under the traditional town meeting system. RSA 40:13.
e time for the rst budget hearing, rather than being “not later than 25 days before the meeting,” is
“on or before the third Tuesday in January” for a March SB 2 meeting. Towns or districts may adopt the
second Tuesday in April or in May as the second session voting date. e current March date remains
in eect if no action is taken to alter it. If one of the alternative dates is chosen, then all of the “January”
dates in the schedule below are changed to either February (if the April balloting is chosen) or March (if
the May balloting is chosen). See RSA 40:13, II-b and II-c for exact details. e law also allows towns that
have not adopted SB 2 to coordinate their elections with a school district that has adopted an April or
May ocial ballot voting date.
Notice of the budget hearing must be posted by the second Tuesday in January for a March meeting
(February for an April meeting and March for a May meeting).
e rst session meeting date is between the rst and second Saturdays following the last Monday in
January, February or March inclusive of those Saturdays, depending on which town meeting option has
been chosen—March, April or May. RSA 40:13, III.
e nal date for petitioned warrant articles is the second Tuesday in January (February or March,
depending on which meeting option has been chosen) provided however, that if a petitioned article
proposes a bond governed by RSA 33:8-a, the deadline is the previous Friday. At least one budget hearing
must be held aer that date. e “drop dead date” for collective bargaining agreements—the date by
which agreement must be reached on cost items—is also the second Tuesday in January (February or
March). e last day for the budget committee, if one exists, to deliver copies of the nal budget and
recommendations to the governing body is the ursday before the last Monday in January (February for
an April meeting and March for a May meeting).
e budget and warrant, including the default budget form, must be posted on or before the last Monday
in January (February or March). For special meetings, the warrant should be posted 14 days before the
rst session, and the second session must be held between 28 and 60 days aer the rst session. e public
hearing on bond issues must be held on or before the third Tuesday in January (February or March).
D. Default Budget
Probably the biggest budgeting dierence between SB 2 and traditional towns and districts is the default
budget. e default budget is necessary in the event that the voters reject the proposed operating budget at
the second (ballot) session.
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1. OPERATING BUDGET
To understand what the default budget is, you must rst know the denition of “operating
budget.” e operating budget is the total appropriations, excluding separate and special warrant
articles. RSA 40:13, IX(a). As described below, this means that separate and special warrant article
appropriations will not be included in the default budget unless they constitute “debt service,
contracts or other obligations previously incurred or mandated by law.” e governing body and
budget committee in an SB 2 municipality may want to consider this when deciding whether or
not to dra separate warrant articles for proposed appropriations, because the following year’s
default budget will be aected by the choice.
2. DEFAULT BUDGET
If the operating budget is rejected by ballot, a “default budget” based on the prior year’s operating
budget takes eect, unless the select board or school board, at their discretion, calls one special
meeting, without the need for court permission, to have one more try at adopting a revised
operating budget dierent from the prior year’s. RSA 40:13, X.
a. Determination of the Default Budget
Determination of the default budget, including one-time expenditures, capital projects
appropriations, and water/sewer default amounts, rests with the governing body and cannot
be altered by the meeting. However, town or district meeting voters may vote to delegate
determination of the default budget to the budget committee, if one exists, instead of the
governing body. RSA 40:14-b. is delegation of authority can be voted on at the time the
ocial ballot referendum system is adopted or, if the town or district already operates under
the ocial ballot referendum system, the delegation of default budget authority can occur
by an article in the warrant: “Shall we adopt the provisions of RSA 40:14-b to delegate the
determination of the default budget to the municipal budget committee which has been
adopted under RSA 32:14?”
b. Denition of “Default Budget”
e “default budget” is dened as “the amount of the same appropriations as contained in
the operating budget authorized for the previous year, reduced and increased, as the case
may be, by debt service, contracts, and other obligations previously incurred or mandated
by law, and by reduced one-time expenditures contained in the operating budget and by
salaries and benets of positions that have been eliminated in the proposed budget.”
RSA 40:13, IX(b). It goes on to dene “one-time expenditures” as “appropriations not
likely to recur in the succeeding budget, as determined by the governing body.”
c. Calculation of the Default Budget
Essentially, the default budget freezes the budget at the previous year’s level except for
amounts which the town is legally obligated to pay or which were one-time expenses.
Several amendments to RSA 40:13 were adopted in 2018 that expound upon the denition
of and requirements for calculating the “default budget.” 2018 NH Laws Chapter 313 and
2018 NH Laws Chapter 241.
Chapter 313 adds language to the existing denition in RSA 40:13, IX(b). Now, not only
must last year’s budget be reduced by one-time expenditures, it must also be reduced “by
salaries and benets of positions that have been eliminated in the proposed budget.” e
amendment further claries that “eliminated positions shall not include vacant positions
under recruitment or positions redened in the proposed operating budget.”
As a nal change to that subparagraph, Chapter 313 settles the question whether the default
budget may be higher than the proposed operating budget:
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In calculating the default budget amount, the governing body shall follow the
statutory formula which may result in a higher or lower amount than the proposed
operating budget.
Chapter 241 also added new subparagraph (c) to RSA 40:13, IX to dene the term “contracts”
found in the denition. e term “contracts” means “contracts previously approved, in the
amount so approved, by the legislative body in either the operating budget authorized for
the previous year or in a separate warrant article for a previous year.”
In fact, while these amendments were pending in the legislature, a judge in the Hillsborough
Superior Court, Northern District, found that annual salary increases included in an
employment contract, entered into between a town employee and the select board, could
not be included in future years’ default budgets. e judge determined that because the
appropriations in the contract were not previously approved by the voters, these amounts
did not constitute “contracts . . . previously incurred by law.” Neal Kurk v. omas Clow, et.
al, Docket No. 261-2018-CV-00086, [Armed in part, Neal Kurk v. omas Clow, 2019 N.H.
Lexis 90, NH Supreme Court (decided May 9, 2019)]. Chapter 241 conrms that ruling by
requiring that the amount of money in a contract must be previously approved by the voters
through the annual meeting budget process to be included in the default budget.
is means that employee raises should not be included unless they are required by a
legally binding and previously ratied contract obligating the municipality to ll particular
positions or employ particular people at certain wages. In addition, while the per-unit
cost for certain commodities may increase from one year to the next (such as the cost per
kilowatt-hour of electricity or the cost per ton of asphalt), the default budget includes the
“amount” of the money appropriated for that purpose the previous year, not the amount
that will be required for the same number of units in the coming year.
e default budget is limited not only to the same amount of the appropriations in the
previous year’s operating budget, but also to those purposes for which appropriations were
made in the previous year’s operating budget. New budget line items cannot be added
because they are not part of the appropriations contained in the previous year’s operating
budget. is means the only purposes that should be included in the default budget are the
purposes (line items) that appeared in the previous year’s operating budget. For example,
if the previous year’s operating budget had no appropriation for DRA’s Account #4152,
revaluation of property, that line cannot be added into the default budget because it does
not fall within the denition of default budget under RSA 40:13, IX(b).
If an SB 2 town maintains separate funds for revenues and expenditures related to the
operation, maintenance and improvement of a water and/or sewer system (a water fund
under RSA 38:29 and/or sewer fund under RSA 149-I:10), and if any appropriation to go
into that fund is proposed to be raised through user fees or charges which are included as
a separate warrant article from the operating budget, the warrant article may include its
own default amount. e default amount is determined by the governing body. e article
must state what the default amount is, and that if the article fails, the default amount will be
deemed to have been appropriated. RSA 40:13, XI-a.
In addition, if an SB 2 town approves a multi-year appropriation for a capital project under
RSA 32:7-a, for each year aer the rst year, the amount designated for that year as provided
in the original warrant article is included in the default budget and deemed appropriated
without further vote by the legislative body. In other words, once town meeting has
authorized a capital project multi-year appropriation, no warrant article is needed in any
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other year of the term. Each year’s amount will be treated as appropriated automatically in
future years of the term whether or not the proposed operating budget is passed.
d. Transfer Authority & Default Budget
is, however, does not mean the governing body cannot pay the increased expenses. As
claried by the New Hampshire Supreme Court, the governing body may exercise the same
discretionary transfer authority under RSA 32:10, I with respect to a default budget as it
may exercise with respect to an ordinary operating budget. Sullivan v. Hampton Board of
Selectmen, 153 N.H. 690 (2006). e Court noted that RSA 40:13, IX(b) denes the default
budget simply as an amount and prescribes how to calculate that amount. e Court also
noted that the default budget appears in a warrant article only as a dollar amount and,
as such, creates a bottom-line gure within which the governing body board must stay.
e failure to pass the operating budget is a sucient change in circumstances within the
requirements of RSA 32:10, I to justify the governing body’s use of the transfer authority. e
Court reasoned that “[h]olding otherwise would force the selectmen to sit idly by awaiting
the onset of a foreseeable budget crisis instead of acting to prevent it.” Id. at 694. Transferring
amounts among budget categories will not trigger the procedural requirements that apply
to the consideration of a revised operating budget, even if there are many transfers, so long
as the governing body does not overspend the bottom line of the default budget. Id. at 695.
e. Public Disclosure and Notice
e default budget must be disclosed at the rst public hearing on the budget held under
RSA 32:5 (towns) or RSA 197:6 (school districts). Unless determination of the default budget
has been delegated to the budget committee, the governing body must complete the default
budget form created by DRA. e purpose of the default budget form is to demonstrate how
the default budget amount was calculated. e calculations must include appropriations
contained in the previous year’s operating budget; reductions and increases to the previous
year’s operating budget due to changes in debt service contracts or other obligations; one-
time expenditures as dened in RSA 40:13, IX(b); and capital project default amounts. A
separate default amount following the denition described above is set by the governing
body and included in the warrant article for water and/or sewer funds.
e 2018 amendments also amplied the notice requirements for the default budget.
Adding onto the long-standing requirement that the default budget be disclosed at the
rst budget hearing, RSA 40:13, XI(a), as amended, further explains the default budget
must be “presented for questions and discussion” at that hearing, although many towns
and districts already do this. e form used for presenting the default budget must now
include the “specic items that constitute a change by account code, and the reasons for
each change,” as well as “reductions for eliminated positions and benets.” Towns and
districts will be required to make the “line item details” for these changes available for
inspection by the voters.
Finally, Chapter 241 has claried the default budget’s role at the deliberative session.
RSA 40:13, IV expressly permits voters to discuss and debate the default budget, along
with other articles on the warrant. at being said, RSA 40:13, XI(b) still prohibits the
voters from amending the default budget at the deliberative session.
e governing body must post certied copies of the default budget form or any amended
default budget form with the proposed operating budget and warrant. RSA 32:5, VII(b).
Please also refer to NHMA’s Default Budget FAQ, Appendix H.
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E. Recommendations/Altering Recommendations
e recommendations of the governing body and the budget committee on special warrant articles
containing appropriations must appear both on the warrant and on the ocial ballot. RSA 40:13, VI. If
town meeting has adopted the provisions of RSA 40:13, V-a, the recommendations of the governing body
and budget committee must be recorded and must be included on the warrant with the numeric tally of
the vote. Alternatively, if town meeting has not yet taken such a vote, the governing body or the budget
committee may take a vote to include the numeric tally of the vote.
In addition, the governing body and the budget committee (if any) in ocial ballot referendum towns
and districts can change these recommendations if the rst session has amended an amount contained
in a special warrant article. RSA 32:5, V provides that the governing body and budget committee
“may revise its recommendation on the amended version of the special warrant article and the revised
recommendations shall appear on the ballot for the second session of the meeting provided, however, that
the 10 percent limitation on expenditures [in budget committee towns and districts] shall be calculated
upon the initial recommendations of the budget committee.” RSA 32:5, V(b).
F. Voting Issues
1. VOTERS ABILITY TO AMEND WARRANT ARTICLES AT FIRST SESSION
e rst session has the same ability to amend warrant articles as that of a traditional meeting.
Nothing in the law prevents an article from being moved or amended on the oor of the rst
session, such as amending the amount of a bond issue down to $1. e role of the rst session, in
addition to information and debate, is to decide the nal form of ballot questions. e only types
of articles that cannot be amended are those whose wording is prescribed by law, such as zoning
amendments. RSA 40:13, IV. Of course, no amendments can be made at the second session
(ocial ballot voting).
e primary restriction on warrant article amendments is that the subject matter cannot be
eectively eliminated, which started with the case of Grant v. Barrington, 156 N.H. 807 (2008).
In that case, the New Hampshire Supreme Court said that amending an article to delete all
words aer “To see” was legal. As a result of that case, the legislature amended RSA 40:13 to
prohibit this practice, oen referred to as “to-seeing.” RSA 40:13, IV(c) reads, “No warrant article
shall be amended to eliminate the subject matter of the article. An amendment that changes
the dollar amount of an appropriation in a warrant article shall not be deemed to violate this
subparagraph.” In other words, an article may still be amended to change the dollar amount,
including reducing it all the way to zero, but it may not be amended by deleting everything aer
the words “To see.”
A recent 2017 case claried that SB 2 voters have great latitude in amending articles. e case
involved two petitioned warrant articles that proposed making the positions of welfare director
and police chief elected oces with stipulated annual salaries. By amendment at the deliberative
session, both articles were revised to state that the town meeting would express the advisory view
that both the police chief and welfare director should remain appointed positions with nothing
stated about annual salaries.
e Court held that the statute was intended to prohibit warrant articles from being amended
in a manner that eliminates their subject matterentirely, thereby making it impossible for
voters at the second session to determine what the article is about. Although these amendments
substantially changed the original articles, the subject matter—the welfare director and police
chief positions—remained the same. e Court also rejected the petitioner’s argument that voters
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Chapter 8. Appropriations under the Ocial Ballot
are prohibited from changing the intent of an article, noting that this would require the Court to
read the word “intent” into the statute.
If the deliberative session amends anything, the amended version of the warrant must be included
in the annual report. RSA 40:13, II; see Spaulding v. Newport School District, No. 220-2013-CV-
33 (Sullivan County Superior Court April 8, 2013). Additionally, if the operating budget warrant
article is amended by the deliberative session, the governing body and the budget committee, if
one exits, may each vote on whether to recommend the amended article, in which case the revised
recommendation(s) will appear on the ocial ballot.
However, there is some new exibility in what must go on the ballot. If an article proposes the
adoption or amendment of an ordinance, a neutrally-worded topical description of the substance
of the ordinance or amended may be placed on the ballot instead of the full text. RSA 40:13, VI.
(Zoning articles must still follow the requirements of RSA 675:3.) If the topical description is
used, an ocial copy of the proposed ordinance or amendment, including any amendment to the
proposal adopted by the rst (deliberative) session, shall be placed on le and made available to
the public at the clerk’s oce at least one week before the second (voting) session of the meeting.
In addition, an ocial copy must be displayed for the voters to read at the polling place the day of
the second session. RSA 40:13, VII-a. Language to be used on the ballot if this option is chosen is
set forth in RSA 40:13, VIII-a.
2. RESTRICTING RECONSIDERATION
Votes to reconsider a previous vote of the meeting or to restrict reconsideration may only occur
at the rst (deliberative) session when articles are discussed, debated, and possibly amended.
RSA 40:13, IV provides that a vote to restrict reconsideration prohibits any further action upon
that article until the second session, when voters either approve or reject the article in whatever
form it was at the time of the vote to restrict reconsideration. In an SB2 deliberative session, an
armative vote to restrict reconsideration prohibits any further action on the restricted article
until the second session, when the article is voted on by ballot in its nal form. erefore, SB 2
municipalities do not follow the procedure for taking up the reconsideration at a meeting seven
days later as provided in RSA 40:10, II, like in traditional towns and districts. In other words,
a vote to restrict reconsideration in an SB 2 municipality means discussion, deliberation, and
amendments to that article has ended.
3. SECRET BALLOT
Voters who are present at the rst session can ask for a secret “yes/no” ballot on a proposed
amendment or motion diering from the printed article being voted on at the rst session.
RSA 40:4-a and RSA 40:4-b. However, the secret “yes/no” ballot under RSA 40:4-a and :4-b
does not include any opportunities for absentee voting.
4. CONDITIONAL MOTIONS
Since ballot voting on all questions happens simultaneously, there is no way to know the result
of an earlier question before voting on a later one when the outcome of one article hinges on the
outcome of another article. However, there is no legal reason why a motion could not be made
conditional. Suppose that Article 3 is a bond issue for a school addition and Article 7 calls for
a lease of extra classroom space, a question everyone knows is moot if Article 3 is approved. It
makes sense to word the ballot question under Article 7 as follows: “In the event that Article 3 is
defeated, shall the district raise and appropriate the sum of $__ for the lease of extra classroom
space?” is can also help to prevent the meeting from exceeding the 10 percent limitation in
budget committee towns.
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5. RECOUNT
A recount can be requested on any question on the ocial ballot. RSA 40:4-c allows a recount to
be requested within seven days on any ocial ballot question, if a $10 fee is paid. at statute is
specically referenced in RSA 40:13, XIV.
6. MAJORITY NEEDED FOR BONDS
ere is no longer a distinction between towns operating under the SB 2 form of town meeting
versus the traditional form of town meeting when determining the majority necessary to
approve a bond or note. RSA 33:8 now provides that the issue of bonds or notes by any municipal
corporation, except a city or a town which has adopted a charter pursuant to RSA 49-B,
without a budgetary town meeting, shall be authorized by a vote by ballot of 3/5. e issue
of notes or bonds by a municipality that has adopted an optional form of legislative body under
RSA 49-D:3, I-a or RSA 49-D:3, II-a shall be authorized by either a 2/3 or 3/5 vote as provided for
in the charter. If such charter does not specify which majority vote is required, then the required
majority vote shall be 3/5.
RSA 32:8 claries that only the votes in the armative or negative are to be counted when
calculating whether a three-hs majority has been achieved. In other words, only votes actually
cast are counted, not ballots where that question is le blank.
G. Special Meetings
Special town and district meetings also require two sessions under the ocial ballot referendum system,
one for discussion and amendment, and a second one for ocial balloting. RSA 40:13, XVI. e only
exception applies to special meetings at which the only questions to be acted upon are the adoption,
amendment or repeal of a zoning ordinance, historic district ordinance or building code. In those cases
(where no appropriations would be involved), there is no deliberative session. RSA 40:13, XVII.
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Chapter 9. Basic Town, Village District and School District
CHAPTER NINE
BASIC TOWN, VILLAGE DISTRICT, &
SCHOOL DISTRICT MEETING PROCEDURES
e following points are excerpts from NHMA’s Town Meeting and School Meeting Handbook, to which
you are referred for more information. All of these points also apply to the rst session of an ocial ballot
referendum meeting, except, of course, for the nal vote on each article.
A. Rules of Procedure
New Hampshire law vests the moderator with authority to set rules of procedure for the town or district
meeting, so long as those rules do not violate state law, and also enables the meeting to overrule the
moderator’s rulings. RSA 40:4. e New Hampshire Supreme Court has ruled that a town meeting is not
a continuing body, and one meeting may not adopt standing rules or bylaws to govern the proceedings of
subsequent meetings. Each meeting is independent and entitled to the privilege of adopting its own rules.
Exeter v. Kenick, 104 N.H. 168 (1962).
From a practical viewpoint, a set of rules adopted by the voters is only advisory, even at that same
meeting, because rulings made by the moderator—even if clearly contrary to the adopted rules—will
stand, unless successfully challenged by the voters at that meeting. When viewed in this perspective,
there is no strong legal impetus for adopting a set of rules at the beginning of a meeting. Instead, the
justication for doing so is to preserve the feeling and appearance of fairness by giving fair warning of
how the moderator intends to govern the meeting in the absence of any challenges.
1. OVERRULING THE MODERATOR
Occasionally, a moderator will make a ruling that is clearly erroneous or otherwise meets with
general disfavor by the town meeting. If this happens, any qualied voter may appeal to the
meeting to overrule the moderator’s ruling. e voter is not required to give any reason for the
request to overrule but should be given an opportunity to do so. e moderator is then legally
obliged to poll the house to see whether or not the moderator is sustained. RSA 40:4. As with
most other votes, a simple majority controls.
2. MODERATOR MUST FOLLOW RULINGS OF THE MEETING
Any moderator who willfully neglects or refuses to follow any rule or proceeding established by
the vote of the town, including any vote to overrule the moderator, is guilty of a misdemeanor.
RSA 40:6. We are not aware of any moderator actually becoming subject to this penalty, but in
light of Exeter v. Kenick, discussed above, such a penalty would be applicable only if the voters
had actually made a particular procedural vote or demanded a secret ballot or recount, and the
moderator had blatantly ignored it. A court probably would not listen to a complaint from a voter
who had not bothered to challenge the procedure at the meeting, or from one whose motion to
overrule the moderator did not pass.
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B. Wording of Articles, Motions and Amendments
Select boards and voters oen ask about the “correct” way to word a warrant article, motion or
amendment. Usually there are no magic legal words, with some notable exceptions, such as a motion
to discontinue a highway “subject to gates and bars.” Votes on appropriations must comply with the
Municipal Budget Law. As a general rule, the “right” way to word a proposed warrant article, motion, or
amendment is any way that clearly expresses the intent of the voters, is understood by those present, and
will be understood by those not present. Simplicity is usually best. Courts usually interpret town meeting
votes so that technical errors do not defeat the obvious wishes of the voters.
Even where the wording of a question is prescribed by statute, this wording is not mandatory. RSA 31:130
says that the prescribed wording of enabling statutes is “advisory only” and that the vote will not be
declared invalid if slightly dierent wording is used, “so long as the action taken is within the scope of,
and consistent with the intent of, the enabling statute or statutes.”
Moderators have no inherent power to reword motions or amendments, but most moderators, in the
interest of fairness, make some eort before a vote is taken to ascertain whether the intent and eect of a
proposed vote is well understood. If there are doubts, a moderator may even make friendly suggestions for
wording if this can be done in an impartial way. e moderator may also consult with the town’s attorney,
if present, to resolve doubts about the legal eect of the proposed action.
In Lamb v. Danville School Board, 102 N.H. 569 (1960), a warrant article had called for the appropriation
of $98,000 for a new school, to be raised through bonds or notes. A motion was made to raise and
appropriate $60,000 for the school. It lost. A second motion was to raise and appropriate $98,000 for
the school. at lost also. A third motion sought to raise and appropriate $95,000 for the school and to
raise it through bonds or notes. at vote passed. e plainti argued in court that this vote was invalid
because it was inconsistent with the earlier votes, and there was never a motion to reconsider. e
Court disagreed, quoting from U.S. Supreme Court Justice Oliver Wendell Holmes: “e machinery of
government would not work if it were not allowed a little play in the joints … e failure to observe the
niceties of parliamentary procedure involving no violation of statutes does not void the district action.”
1. MANDATORY VERSUS ADVISORY
A persistent source of confusion is whether a vote is intended by the voters to be mandatory or
merely advisory. It is best to clarify that intention in the wording of the vote itself. Otherwise, a
court may later have to delve into the voters’ intent. In McMahon v. Salem, 104 N.H. 219 (1962),
a vote to “authorize” the town manager to appoint a recreation commission was construed as a
mandate. e Court held that the manager must appoint, observing: “To hold otherwise would
attribute to the voters greater indecision than is commonly encountered at town meetings.” On
the other hand, in Stamper v. Selectmen of Hanover, 118 N.H. 241 (1978), a vote stating the “sense
of the meeting” that hawkers and peddlers are a benet to the town was held not to deprive the
select board of the authority to prohibit hawkers and peddlers on some of the town’s streets in
accordance with RSA 41:11.
2. WHAT TYPES OF MOTIONS OR AMENDMENTS ARE LEGALLY VALID?
e legality of motions and amendments is controlled by the requirement in RSA 39:2 that “the
subject matter of all business to be acted upon at the town meeting shall be distinctly stated in the
warrant.” is means that any motion or amendment that raises subject matter not contained in
the warrant does not have any legal validity. Of course, a motion to name someone Volunteer of
the Year or to thank the Scouts for providing cookies is not intended to have any legal validity. It
is not illegal to make these kinds of motions at the meeting and to vote on them but votes that the
voters intend to have a legal and binding eect must comply with the subject matter requirement
in RSA 39:2.
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3. NO NEED FOR MOTION TO TRACK ARTICLE
ere is no legal requirement for the main motion made under a warrant article to reect the
exact wording of the article as printed in the warrant. e only legal requirement is that the
subject matter of the motion has been stated in the warrant, such as where new information has
made the original wording outdated. However, if the article is moved with signicant changes
to the article as printed in the warrant, the better practice is to rst move the article as printed
in the warrant; thereaer, a proposed amendment can be made. e Department of Revenue
Administration has indicated that where an article as printed in the warrant diers signicantly
from the article as adopted by the meeting, with no indication in the town meeting minutes the
article was amended by way of a motion to amend approved by the meeting, DRA might disallow
that article. Although this would apply to only those articles containing appropriations, it is
better to have a consistent practice for all warrant articles.
4. ADDING OR ALTERING DETAILS BY AMENDMENT
It has long been held that so long as a motion or amendment deals with the same subject matter
as appears in the warrant, the action to be taken with respect to that subject matter may vary
considerably from what is in the warrant. Pittsburg v. Danforth, 56 N.H. 272 (1875). For example,
in Sawyer v. Railroad, 62 N.H. 135 (1882), the warrant article had called for the town to make a
payment if a particular railroad were built by January 1878. e vote taken omitted the condition
of the completion date. e Court said the vote was nevertheless valid and that alternative and
additional conditions could have been added as well. In other words, an amendment may legally
change the intent and impact of a warrant article but may not change the subject matter. ere
are, however, two exceptions to this general rule. When the language of an article is prescribed by
statute, amendments that alter the original intent may not be legal if they stray too far from the
original intent. In addition, as explained more fully in Chapter 8, the law limits the ways in which
the rst session of an ocial ballot referendum (SB 2) meeting may amend warrant articles.
Under RSA 40:13, IV(c), the rst session may not amend an article to eliminate the subject matter
of the article, although it may continue to amend dollar amounts freely.
C. Dividing a Question
If no new subject matter is added, there is no reason a meeting cannot take multiple independent votes
on dierent aspects of that subject matter. If both aspects are covered by a pending motion, a motion to
divide the question may be in order. Alternatively, a separate and independent motion could be made
aer the vote is taken on the rst motion. is is true in SB 2 towns and districts as well—the ballot can
legally contain multiple questions under the same warrant article.
D. Reconsideration and Limits on Reconsideration
Generally, any vote taken by a town meeting may be reconsidered and/or rescinded later at that same
meeting or at any subsequent meeting unless some third-party contractual obligation or other vested
right has already been created in reliance on that vote. Jewett v. Alton, 7 N.H. 253 (1834). Also, a
vote taken by ocial ballot, such as a zoning question, cannot be reconsidered on the oor at a later
deliberative session. McDonnell v. Derry, 116 N.H. 3 (1976). (Bear in mind that when we refer to “ocial
ballot votes” in this context, we are not referring to the ocial ballot referendum form of government. In
SB 2 towns and districts, ballot votes at the second session cannot be reconsidered. RSA 40:13, XV.)
For example, in Preston v. Gillam, 104 N.H. 279 (1962), the original town meeting vote instructed the
select board to sell certain town property by auction. e select board had already scheduled an auction at
the time the board received a valid petition for a special town meeting to reconsider that vote, a meeting
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that could only have occurred aer the already-scheduled auction. e select board held the auction, sold
the property and then refused to schedule a meeting to reconsider because it was too late. e Court held
that these actions were proper.
In Byron v. Timberlane School District, 113 N.H. 449 (1973), a particular bond issue failed to pass by the
required two-thirds vote at the March 31 annual meeting, but there was a motion to reconsider at an
adjourned session on April 6. At that April 6 session, a new vote was taken, and the bond issue was again
defeated. However, later during that same session, around 2 a.m., when most voters had le, a motion to
reconsider again was made. is time the bond issue passed. e Court upheld this vote. e lesson seems
to be that voters who leave before the nal adjournment do so at their peril.
Perhaps because of voter dissatisfaction with such tactics, there are now two statutes that limit the ability
to reconsider, even if the meeting later changes its mind. ese laws supersede any local rules. ey also
supersede any late-night attempts to change local rules.
1. BONDS EXCEEDING $100,000
RSA 33:8-a provides that a vote on the issuance of bonds or notes over $100,000 cannot be
reconsidered at that same session. If there is a motion to reconsider, and it passes, actual
reconsideration must take place at an adjourned or recessed session of the meeting held at least
seven days later. Notice must be given in a newspaper in circulation in the town at least two days
before the reconsideration vote.
2. RESTRICTING RECONSIDERATION
e more general statute restricting reconsideration is RSA 40:10, which can be made to apply to
any vote. is statute allows a meeting, on a vote-by-vote basis, to limit reconsideration of a vote
or warrant article in the same manner as bond issue votes are protected under RSA 33:8-a above.
Aer any vote passes at the meeting, the meeting may then vote to restrict reconsideration of that
prior vote or article. If the vote to restrict reconsideration passes, the vote or warrant article that
is subject to the restriction is, until nal adjournment of that meeting, protected as provided by
RSA 40:10. If later in that meeting, there is a motion to reconsider the restricted vote or warrant
article and the motion passes, actual reconsideration cannot take place until an adjourned
session held at least seven days later. e time, date and place at which the reconsideration
will occur must be announced before the close of the prior session and must be published in a
newspaper at least two days prior to the reconsideration. e motion to restrict reconsideration
can be made by any voter at the meeting. It does not have to be made by someone who voted in
favor of the motion.
e actual vote to restrict reconsideration cannot itself be reconsidered. at would have been an
obvious loophole in the scheme. e motion to restrict reconsideration does not have to be made
immediately aer the original vote. e law says that “any vote previously taken at that meeting”
can be restricted. For example, it is possible to vote “to restrict reconsideration of all votes taken
up to now.” However, the voters cannot adopt a rule at the beginning of the meeting to restrict
reconsideration of all votes at that meeting. A vote to restrict reconsideration under RSA 40:10
can be taken only aer the vote on the article being restricted.
For example, at 8 p.m. a motion is made under a proper warrant article to appropriate $50,000
for a particular purpose, and it passes. en a motion is made to restrict reconsideration of this
article, and that motion passes. Hours later, a motion is made and passed to reconsider the 8 p.m.
vote. e result is that at least seven days later, an adjourned session must be held with proper
notice to vote again on the $50,000 appropriation.
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Chapter 9. Basic Town, Village District and School District
3. IMPLIED RECONSIDERATION
RSA 40:10 says that a restriction on reconsideration, once voted for, applies to any subsequent
action by the meeting that changes the eect of the original vote, regardless of whether the word
“reconsideration” is actually used.
E. Preventing Disorder
e moderator may command any constable, police ocer or legal voter to remove from the meeting and
detain any person whose conduct is disorderly. RSA 40:8. Police and constables are guilty of a violation
for not obeying the commands and orders of the moderator for the preservation of order. RSA 40:9. No
person may speak during the meeting without permission of the moderator, nor may anyone speak when
any person already speaking is in order. Everyone must be silent at the desire of the moderator or he or
she will be guilty of a violation. RSA 40:7.
In State v. Dominic, 117 N.H. 573 (1977), the New Hampshire Supreme Court upheld the disorderly
conduct conviction of a select board member who, at a meeting of the select board, refused to follow the
orders of the chair. e Court said the First Amendment right to free speech was not violated by an order
to leave the room for failing to follow the procedural orders of the chair. e same legal principle applies
to support the authority of the moderator to have disorderly persons removed from the meeting.
F. Separating Voters from Nonvoters
RSA 669:5 requires an updated checklist to be used for all town meetings, including the deliberative
session. e moderator must, therefore, make sure that only registered voters vote, so that the town
meeting process is orderly. e details are up to the moderator, so long as whatever arrangement is made
assures that only registered voters are voting.
G. How Votes Are Counted and Declared
With the exception of certain votes required by statute to have a two-thirds or three-hs vote in order
to pass, a vote at town meeting will be considered approved if it passes by a majority of those present and
voting. ere is no quorum requirement and those present but silent (abstaining) are not counted either
as positive or negative. Sugar Hill v. Lisbon, 104 N.H. 40 (1962); Laconia Water Co. v. Laconia, 99 N.H. 409
(1955). A moderator cannot alter the majority vote rule, and if an attempt to do this is made, a court can
later overturn it, even if no objection or request for recount was made at the time.
H. Requests for Secret Yes/No Ballot
e moderator must conduct a secret ballot whenever ve voters (three voters in a town of 500 or fewer)
make a written request prior to a voice vote or division vote on the article. RSA 40:4-a. Voters must
be present at the meeting to request the secret ballot vote. e written requests must come during the
meeting “prior to a voice vote or division vote…” Most moderators have not permitted petitions signed
by ve voters to be submitted before the meeting asking for secret yes/no ballots on some or all questions.
Secret ballot voting under RSA 40:4-a applies to votes taken at an SB 2 rst session (a motion to amend).
e procedure for a secret ballot is not prescribed in detail by the statute. Some towns use blank white
paper and voters are requested to print “yes” or “no.” Other towns print the words “yes” and “no” with
boxes beside them in which the voters place an “x.” Many towns use dierent colored paper for each
question to avoid confusion. To save time, some towns have found it useful to pass a “ballot box” up and
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down the aisles for the collection of secret ballots. Fraud is prevented by the manner in which dierently
marked ballots are distributed as voters enter the hall.
I. Questioning a Vote
If the moderator is in doubt as to the result of any voice vote, he or she may call for the taking of the vote
by other means. In addition, RSA 40:4-b requires the moderator to take a secret “yes/no” ballot when
seven or more voters question any non-ballot vote immediately aer the moderator declares the vote and
before any other business is begun. e voters must be present. e request may be oral or in writing.
Recounts are also permitted aer secret “yes/no” ballots as described in paragraph H above. Any ve
voters who are present may, orally or in writing, request a recount of a secret ballot. Such a request must
be made immediately aer the result is announced. e recount shall take place immediately following
public announcement of the vote taken providing that the vote margin is not more than 10 percent of the
total vote cast. RSA 40:4-a, I(b).
It should go without saying that if the moderator or other election ocial actually discovers a mistake in
the counting of ballots, the moderator may correct himself/herself, even aer an incorrect result has been
announced, and even if there was no request for a recount. Felkner v. Chesley, 66 N.H. 381 (1891).
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Chapter 10. Capital Improvements Plans: An Important Financial
CHAPTER TEN
CAPITAL IMPROVEMENTS PLANS:
AN IMPORTANT FINANCIAL PLANNING TOOL
A capital improvement plan (CIP) is a living document used as a community planning and scal
management tool for the purpose of coordinating the location, timing, and funding for capital
improvements over a multi-year period. Although it is a tool many larger communities have been using
for years, a CIP can be useful and valuable for even very small communities. Essentially, it is a prioritized
list of anticipated large expenses, including, but not limited to capital expenses related physical plant
and facilities, equipment, feasibility, architectural and engineering studies and infastructure needs.e
threshold of what a “large expense” is and the details of what is needed may vary from municipality to
municipality, but the process, the governing law and its usefulness are the same across the state. e goal
is to develop a CIP plan that provides a working blueprint for sustaining and improving a municipality’s
infrastructure needed to maintain desired levels of government services.
A. Why do we need a capital improvements program?
CIPs are not required by law, but there are a host of reasons a municipality should prepare one and keep it
up to date. Here are a few:
• A plan helps bridge the gap between the long-term planning process and the development of the
annual operating budget.
• A plan systematically anticipates needs rather than just reacting to unanticipated problems (thus
preventing surprises among government ocials and the voting public).
• Planning ahead allows time to get the necessary resources in place bit-by-bit rather than all at once,
avoiding spikes in the tax rate.
• is advance planning leaves time to identify alternate sources of funding (federal and state grants,
long and short term debt, or pay-as-you-go).
• A well developed CIP can help evaluate competing demands for resources and identify the most
economical means of nancing a project.
• e plan informs and educates both decision makers and the public about the anticipated
investments in the municipality.A plan prepared cooperatively among ocials, employees and the
public increases the “buy-in” so voters understand why items in the plan are important.
• “Shovel-ready” or prepared plans can help a community be ready to participate in federal or state
grant programs when they arise.
• Good plans create a blueprint linking scal capacity with the need to promote economic
development through investments in infrastructure.
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• Regular attention to capital assets increases the likelihood of proper maintenance to extend the life
of existing assets.
• A CIP is a legal prerequisite for some other land use tools, such as growth management under
RSA 674:22 or impact fees under RSA 674:21, V.
B. Where does the CIP t into local government?
A CIP is a planning tool. Under the law, “[t]he sole purpose and eect of the capital improvements
program shall be to aid the mayor or selectmen and the budget committee in their consideration of
the annual budget.” RSA 674:5. e nal CIP must be submitted to the governing body and the budget
committee “for consideration as part of the annual budget.” RSA 674:8. e projects identied in the
CIP are not mandatory; the CIP is simply a set of recommendations and an outline for achieving them.
However, the list of reasons above shows that a CIP goes a long way toward helping that budget meet the
real needs of the community at a time, in a way, and for a price that makes sense.
It is also important to note that a CIP has no eect on applications before the planning board or zoning
board of adjustment other than as a guide for o-site exactions, and to the extent it is used to guide
the development of grown management ordinances or impact fee ordinances. Zukis v. Fitzwilliam, 135
N.H. 384 (1992).
e overall purpose is to help communities make good planning choices for the future based on goals and
resources. In doing so, the CIP integrates many other facets of local government. e CIP is tied to the
goals of the master plan. It puts the operating budget and the capital budget in perspective. A good CIP is
based on the existing xed asset inventory and presents a replacement and renewal schedule that makes
sense. It also requires cooperation among department heads, the governing body, town/city manager, and
planning ocials. A capital improvements program acts as a bridge between the planning process and the
budget process. With all the information gathered during the CIP process, municipal ocials can help
voters make informed decisions about appropriations and policies.
It is also important to note that, without a CIP in place, a municipality is not permitted to enact a growth
management ordinance under RSA 674:22, I. is makes sense because a growth management ordinance
is only valid to the extent it accurately balances the municipality’s need for restrictions on growth and a
projection of what is deemed to be “normal growth.” Rancourt v. Barnstead, 129 N.H. 45 (1986). In other
words, how can a town know what a growth management ordinance needs to accomplish if it hasn’t
considered what reasonable projected growth is and what infrastructure is required to support it? e CIP
also provides information about the municipality’s need for additional services to accommodate growth
and a reasonable timetable for developing those services.
e other major ordinance that may be adopted only aer a CIP is adopted is an impact fee ordinance
under RSA 674:21, V. Impact fees may be assessed for a lot of things, including and limited to water
treatment and distribution facilities; wastewater treatment and disposal facilities; sanitary sewers;
storm water, drainage and ood control facilities; municipal road systems and rights-of-way; municipal
oce facilities; public school facilities; the municipality’s proportional share of capital facilities of a
cooperative or regional school district of which the municipality is a member; public safety facilities;
solid waste collection, transfer, recycling, processing, and disposal facilities; public library facilities; and
public recreational facilities not including public open space. A town may still levy exactions for o-site
improvements under RSA 674:21, V(j) without an impact fee ordinance, but they are limited to the cost
of improvements located outside the subject property and include only any necessary highway, drainage,
and sewer and water upgrades pertinent to that development.
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Chapter 10. Capital Improvements Plans: An Important Financial
Although school districts are, for the most part, separate political entities which adopt their own budgets,
a town or city CIP can also look at school-related projects. is information is useful in a variety of ways.
It provides perspective on the overall nancing burden of capital improvements that taxpayers will be
bearing because, of course, the same taxpayers are paying both municipal and school taxes. It may make
sense to stagger some school and municipal projects to avoid spikes in the tax rate. It may also make
sense to schedule school and municipal projects in a certain order to create eciency. For example, if a
town needs to repair a road and the school district needs to rebuild a school, add sewer connections, and
change the location of its curb cuts on the same road, it may make sense for the road improvement to
wait until the school project is completed. In addition, school capital projects are part of the underlying
rationale for both growth management and impact fee ordinances.
C. Where do we begin?
Before a capital improvements program can be prepared, (a) the municipality must have established a
planning board under RSA 673:1, and (b) the planning board must have created and adopted a master
plan under RSA 674:1. When considering how this ts with a CIP, it is helpful to remember that a master
plan is intended to delineate the best and most appropriate future development of the area to guide the
planning board in its work, so the community can achieve smart growth, sound planning, and wise
resource protection. RSA 674:2, I. Aer those two prerequisites are met, the legislative body (town
meeting, town council or city council/aldermen) may authorize the creation, adoption and amendment
of a capital improvements program. RSA 674:5. In a town meeting town, this is done by approval of an
article on the warrant.
Municipalities may authorize either the planning board or a special CIP committee to work on the CIP.
If the warrant article is silent on this issue, it is assumed that the planning board will do it. Alternatively,
the article may provide for a CIP committee appointed by the governing body (select board, town/city
council). e committee must include at least one member of the planning board and may (but isn’t
required to) include other members of the planning board and other local ocials. It is important to note
that the planning board cannot grant itself the authority to prepare a CIP; the authorization must come
from the legislative body.
Once authority has been given to prepare a CIP, the planning board or committee—and any
subcommittees—must realize that they are “public bodies” subject to all of the requirements of RSA
chapter 91-A, New Hampshire’s Right to Know law. is means that all meetings require at least 24 hours’
notice posted in at least two public places, the public must be permitted to attend the meetings, and
minutes must be kept of all meetings. RSA 91-A:2. In addition, virtually all documents given to or created
by the planning board or committee in the process of preparing the CIP will be “governmental records”
which must be disclosed to the public upon reasonable request. RSA 91-A:4.
D. What is a “capital improvement”?
In the most general sense, a capital improvement is something that has a high cost and a useful life
of several years, in contrast with regular operations and maintenance, which generally have a lower
cost and occur on a more frequent basis. Typically, capital improvements will include infrastructure
projects, land acquisition, buildings, or engineering studies for any of those projects, and may include
vehicles or highway maintenance equipment in some municipalities. One useful starting point is the
list of improvements for which impact fees may be assessed; the list in RSA 674:21, V is a good place to
look for ideas.
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Each community must dene for itself what qualies as “high cost” and a “useful life of several years.”
e specic denition in each community will be slightly dierent based on the population, capital needs,
and available budget. ere is no single “right” way to dene this. Smaller towns may have a dierent
denition than larger towns or cities. For example, the City of Franklin sets its capital improvement
threshold at $25,000 with a useful life of seven or more years. Expenditures that do not meet both the cost
and useful life threshold are not included in the capital improvements plan; instead, they are included
as a part of the city’s operating budget. In a smaller community like Plymouth, (population 6,500), the
threshold is $10,000 with a useful life of ve years. An even smaller community may dene it as any
project having a useful life of at least 3 years and requiring a gross expenditure of more than $5,000.
An expenditure that seems very large to one community and that occurs only rarely (and thus should
be part of a capital improvements program) may be considered part of the ordinary operating budget
in a much larger community. If a city has a large eet of vehicles and expects to replace three or four of
them every year, vehicle replacement may simply be a line in the operating budget. For a small town,
however, the replacement of a vehicle may occur only once every few years, and the expenditure may be
signicant. is is something that may belong in a capital improvements program so it can be planned
and saved for appropriately.
E. What goes into a capital improvements program?
According to RSA 674:5 and :6, there are required elements and optional elements. A CIP “shall” do the
following:
• Address capital improvement projects over a period of at least six years. It can be a longer period, of
course, and 6 – 10 years is typical in many municipalities.
• Classify projects according to the urgency and need for implementation.
• Include a timetable for implementation of projects.
• Take into account public facility needs that are indicated by the development shown in the master
plan or which are permitted under the municipality’s zoning ordinances and regulations.
A CIP “may” include the following:
• e estimated cost of each project or capital purchase.
• e estimated operation and maintenance costs.
• e anticipated project timeline.
• e estimated revenues (if any) from each project.
• Suggested funding sources.
• Project or capital purchase prioritization.
Some larger communities prefer to have the CIP concentrate solely on what is needed and when, and to
have the budget committee, administrator/manager, and governing body concentrate on the cost and
funding mechanisms. Again, there is no single “right” answer here.
Each community should make choices for their future needs based on their specic goals and
available resources..
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Chapter 10. Capital Improvements Plans: An Important Financial
1. HOW DOES THE PROCESS WORK?
First of all, it is critical to recognize that the planning board or CIP committee does not operate
in a vacuum. e law grants quite a bit of authority to the planning board or CIP committee. It
is true that under RSA 674:6, the CIP is based on information submitted by the departments and
agencies of the municipality. All town or city departments, agencies, ocials, and any aected
school board are required to provide to the planning board or CIP committee, upon its request, a
statement of all capital projects proposed to be undertaken during the CIP period. RSA 674:7, II.
However, although the law gives the planning board or CIP committee authority to gather
information, this authority means little if the planning board or CIP committee does not act in
a way that fosters cooperation and coordination with everyone else in municipal government. To
be eective, the process should involve the governing body and the chief administrative ocer
(town/city manager). e process is actually somewhat similar to the way an ocial budget
committee prepares a budget: information is gathered from all corners of municipal government
and put together in a proposal for the town or city to consider. And just as with budgeting, the
development of a CIP works well only when all of the parties cooperate with one another.
e planning board may have the responsibility to prepare the plan, but it cannot do so without
the assistance of almost every other municipal ocial. “Who is in charge?” is not the most
important issue here.
2. ORGANIZATION
e rst issue is organization. e planning board or committee should have an initial meeting
to consult with the town administrator, town or city manager, the governing body and the
budget committee to discuss the process and the timetable. RSA 674:7. e goal here is to have
fewer surprises and more cooperation among all ocials and employees. Working together, this
group should establish a timeline for preparation of the CIP. e timeline should be two things:
reasonable and well-publicized. It is important for the planning board or committee to recognize
that the ocials and employees from whom they are trying to get information each have a lot
of other things on their plate. e further in advance they know the information is needed, the
easier it should be for them to prepare the information in a timely way.
e other general preparation task is to establish policies. is should be done as part of the initial
meeting(s) suggested above, and should address:
• A denition of what a “capital improvement” is for your community (threshold expense and
useful life).
• How will items be prioritized?
• Points of contact—how will the planning board or committee communicate with other ocials
and employees about this project?
• What general categories of information will be requested from the town administrator or
manager, city manager, department heads, and governing body? Is there any specic format
to be followed or any particular information that will be requested? e board or committee
should be able to communicate what it is they are looking for.
3. TIMELINES
Aer the initial meetings, the planning board or committee should establish a timeline for its
activities based on the feedback from the initial meetings.
is internal timeline should include:
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• A period to assess the current scal and capital asset situation and to review the master
plan. If there are many departments or too much information, the planning board or
committee might consider creating subcommittees to each review a certain portion of the
information (perhaps a specic department) and report back to the larger group.
• A discussion period during which the planning board or committee can discuss issues
with the town/city manager or administrator, ask and answer questions, and gather
additional information.
• A plan for exactly who will dra the CIP and when.
• A timetable for draing, revising, and adopting the CIP.
4. ASSESSING THE CURRENT SITUATION
It is dicult to plan where you are going if you don’t know where you are. us, the planning
board or committee should look at three important areas relating to the current situation. e
rst is a capital asset inventory. It may already exist in larger communities, but smaller towns may
need to put one together for the rst time. e list should include everything the municipality
has that falls within the established threshold of what is a “capital asset.” (One place you might
consider checking is the list of insured properties and equipment.) Once a list is established, it
is important to note the decits. Department heads are particularly helpful in pointing out the
“holes” in the existing inventory.
e second issue is a scal analysis to assess scal capacity. e planning board or committee
should obtain or create a comprehensive list of all the trust funds, capital reserve funds, special
revenue funds, and other funds (and the balances in each fund). Other important information
includes the most recent tax rate, xed costs going forward (such as bond payments or other debt
service), and the past, present and future expected revenues, expenditures and debt (i.e., what can
the municipality aord?).
e third area of importance is the current status of previously approved projects. What are the
cost estimates and funding sources for projects which are currently underway and when are they
expected to be completed? What impact do those projects have on the scal analysis and asset
inventory once they are nished?
e CIP may include the following information:
• A list of the capital projects, equipment, and major studies.
• A ranking of projects based on a prioritization matrix reecting the entity’s long-term
goals and objectives.
• A nancing plan for each expenditure.
• A timetable for the construction or completion of the project
• A project justication and explanation for the project expenditures
5. REVIEWING THE MASTER PLAN
A review of the recommendations of the master plan in relation to the capital improvements
program being considered is a required step in the preparation of a CIP. RSA 674:7. is review
may reveal indicators of long-term capital needs to improve existing services so that they match
community standards and to accommodate reasonable growth. Local zoning ordinances and
land use regulations should also be reviewed as part of this step to see how proposed capital
projects may t.
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Chapter 10. Capital Improvements Plans: An Important Financial
6. EVALUATING PROJECT REQUESTS
Under RSA 674:7, the planning board or CIP committee is required to confer with the governing
body, the chief scal ocer or budget committee, the school board, and other municipal ocials
and agencies. ese ocials are required to provide a statement of all capital projects they
propose during the term of the CIP. Information provided should, ideally, include justications,
estimates of project costs, estimates of future operation and maintenance costs for each project,
the relationship of this project to other (existing and proposed) projects, implementation
schedules and the degree of urgency for each one. It is also important to obtain information
regarding the replacement, repair or renovation of existing capital assets. e planning board or
committee should also consider the estimated tax impact of proposed projects.
How well will the total annualized tax impacts of capital spending t within the municipality’s
overall scal goals and the urgency of the needs?
As information is gathered, the planning board or committee should review it and respond to
the ocial, board or employee who provided it as appropriate with recommendations, questions
or comments. RSA 674:7. While some municipalities prefer to have the town administrator or
manager help with the nancial and tax impact end of things, in others, the planning board or
committee handles all of it. If the administrator or manager is part of the committee, this can all
be made much more seamless. In any case, the planning board or committee should engage in
a thorough discussion with all of the ocials and employees it needs to in order for the CIP to
address the municipality’s needs.
7. FUNDING
e most straightforward way to pay for municipal projects is through a one-year appropriation,
but that is certainly not the only way. Regular appropriations into capital reserve funds targeted
for specic projects are, essentially, savings accounts for future projects. ey prevent spikes
and dips in the property tax rate and can be much easier for taxpayers to handle than a sudden,
very large expense in one year. Municipalities may also borrow to pay for capital projects, either
by borrowing directly from a bank or, more commonly, by issuing bonds. Borrowing spreads
the expense out aer the project rather than before. Another funding source is impact fees.
ey may be assessed and collected from those receiving approval from the planning board
for development projects and used to fund capital projects, although they must be refunded if
they are not spent or encumbered for the purpose for which they were collected within six years
aer collection. RSA 674:21, V. is means that they should be targeted toward projects that are
projected to occur within that timeframe.
It is oen possible for a municipality to pay for much of a project with grant money from the
state or federal government, and occasionally from private sources. Most grants require some
matching portion of the funds to be provided by the municipality, but they can still signicantly
reduce the tax impact. Taxes may also be targeted toward capital improvements through a tax
increment nancing district under RSA Chapter 162-K.
Most importantly, all of these methods may be used in combination with one another. A mix of
funding sources is oen the best way to move projects forward without undue pressure on taxpayers.
F. Drafting, Revising, and Adopting the CIP
ere is no statutory procedure for the planning board or committee to follow to adopt the nal product.
e New Hampshire Oce of Planning & Development (OPD) recommends using the same process that
a planning board would use to adopt a master plan under RSA 675:6. Under that procedure, the board/
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committee holds at least one public hearing with ten days posted and published public notice (exclusive of
posting and hearing days). If substantive changes are made aer the rst hearing, a second hearing may
be held with the same notice. In any case, the planning board or committee should take a formal vote at a
public meeting to adopt the nal version. A copy should be sent to NH OPD for ling. RSA 675:9.
e planning board or committee must present the CIP to the mayor or select board and the budget
committee, if one exists, for consideration as part of the annual budget. RSA 674:8. Although only the
plan for the current year must be presented each year, it does not make sense to present proposals in a
vacuum. Providing the entire CIP will allow those preparing the budget to put the recommendations in
context and make them more useful.
G. Next Steps: Begin Again!
To be eective, a CIP cannot simply be prepared, put on the shelf, and forgotten. It must be an ongoing
project. e best CIPs are reviewed and amended on a regular basis (every 1 – 3 years) and kept up to
date. Priorities, needs, and opportunities will change over time, and the CIP needs to change as well. e
original authority by the legislative body is sucient for the planning board or committee to continue
work past the rst year, although additional appropriations may be required in subsequent years to fund
the review and amendment process. Each time the CIP is amended, it should be led with NH OPD and
shared once again with the mayor or select board and budget committee.
A great CIP is worth the time and eort that goes into it. It is a versatile management tool that can help
municipalities make better choices and plan for future needs in a way the community can aord. By
coordinating strategic planning, nancial capacity, and physical development the plan can serve as a
compass pointing toward future goals realized.
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Chapter 11. Understanding the Property Tax System
A. Property Taxes Based on Appropriations
Every property owner is responsible for paying a portion of the taxes necessary to operate various units
of government: the municipality, school district, county, and village district, if any. Each of these units
of government must dra a budget, hold public hearings on the budget proposal, and submit the budget
to its legislative body for adoption. It is these appropriations, reecting the spending priorities voted
by the legislative bodies, that determine the amount of revenue needed to be raised by property taxes
in order to fund municipal government operations, and each municipality’s share of the school, state
education, and county budgets. For many taxpayers, the lag time between adopting the budget in the
spring and the arrival of the property tax bill at the end of the year results in a disconnect between those
approved budget appropriations and the need to eventually pay for them. Additionally, many citizens
are unfamiliar with the process used to determine their share of the property taxes raised to support the
adopted budgets. e following sections describe the steps involved in the property tax process and the
formula used to calculate each municipality’s annual property tax rate.
B. Valuing Property: The Appraisal Process
In accordance with RSA 76:2, property taxes are assessed based upon the appraised value of property as
of April 1 of each year. is means that the property tax bill, generally due in December, reects the value
of property on the previous April 1. By law under RSA 76:5, it is the responsibility of the select board to
annually determine the assessed value of each property within the municipality as of April 1. Most, if not
all, municipalities rely on professionally-trained assessors to fulll this statutory responsibility.
Valuing property for property tax purposes is an ongoing process. In accordance with Pt. 2, Art. 6 of
the New Hampshire Constitution, each municipality conducts a full revaluation of all property within
the municipality at least once every ve years. During a full revaluation, property is physically reviewed
and then valued based upon the sale prices of other comparable properties or other approved appraisal
methods. e goal of a revaluation is to appraise property at its “full and true” value, oen referred to as
“market” value.
A complete revaluation establishes base-year property values but is costly and time-consuming and
consequently is not conducted every year. In the years following a revaluation, assessors perform updates
in order to maintain proportionality between the properties in the municipality. ey make adjustments
to the tax rolls for what are known as pick-ups: for example, new construction, demolitions, errors or
omissions, and other changes to properties. Depending on the amount of change reected in recent sales
prices and other market conditions, assessors may perform statistical updates, where values are adjusted
either up or down based on market data, using a detailed process beyond the scope of this chapter.
CHAPTER ELEVEN
UNDERSTANDING THE
PROPERTY TAX SYSTEM
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rough revaluations and updates, assessors strive to ensure that property within the municipality is
appraised proportionally as required by Pt. 2, Art. 5 of the N.H. Constitution, so that each property
owner bears a proportionate share of the property tax based upon the value and use of their property.
C. Increased Assessed Value Does Not Necessarily Mean Increased Tax Amount
One of the most common misconceptions occur when a revaluation occurs and assessed values increase
due to current real estate market increases. Many property owners believe their increased property
assessment will automatically result in increased property taxes. is is not true. Some properties may
actually realize a reduced tax amount if the value for their class of property (residential, multi-family,
condominium, commercial, etc.) has dropped ‘proportionally’ compared to other property types.
It helps to understand the equation used to calculate the tax dollars needed to fund the municipal budget.
If the (3)municipal budget remains the same, and the total (1)assessed value increases through a
revaluation, then the (2)tax rate will decrease. Conversely, if the (3)municipal budget remains the same,
and the total (1)assessed value decreases, then the (2)tax rate will increase. In either case, the key factor
is ‘(3)’ the amount of taxes needed to fund the municipal budget. If this remains the same, then generally
speaking the dollar amount of taxes needing to be raised by individual property owners will not change
signicantly. To determine why some taxpayers may pay an increased amount while others may pay a
decreased tax amount aer a revaluation, it is important to understand ‘proportionality’.
D. Proportionality:
A frequent area of misunderstanding is the importance of assessing property values proportionally. It is
not as important whether property is assessed at, above, or below market value, as it is whether taxes are
proportionally assessed amongst properties based on values and use.
e following examples along with the graphic illustration in Appendix D will help explain the concept of
proportionality. For these examples, there are only two taxable properties in the town, the properties are
very similar in all respects, and the legislative body has approved a $10,000 budget to fund town services,
all of which will come from property taxation.
Scenario 1: Both properties have a market value of $250,000 as well as an assessed value of
$250,000, for a total town-wide assessed value of $500,000. With taxes to be raised of $10,000, the
tax rate would be $20 per $1,000 of valuation (10,000 ÷ 500,000 x 1,000). Since there are only two
properties with the same assessed value, the tax burden would be shared equally: each property
would owe $5,000 in property taxes.
Scenario 2: e town budget remains the same at $10,000, but the market has declined since
last year so that the market value of each property is now $225,000. However, the assessed value
on each property remains unchanged at $250,000. What is the impact of over-assessing these
properties compared to market value? None—there is no tax impact because the proportionality
between the properties did not change; both properties declined in market value by the same
amount. e town still needs to raise $10,000, and with a town-wide assessed value of $500,000,
the tax rate would remain $20 per $1,000 of valuation and each property would again owe $5,000
in property taxes.
x
(2)
Tax Rate =
(3)
Property Tax Amount Needed to Fund Municipal Budget
1,000
(1)
Assessed Value
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Scenario 3: e outcome is the same when the market value of the properties increases above
the assessed value, in this case to $275,000. While the market value of all properties in town
increased to a total of $550,000, the assessed values remained at $500,000, and the town still
needs to raise $10,000, so the tax rate would still be $20 per $1,000 of valuation with each
property paying $5,000.
ese three scenarios demonstrate that in order to create equity in the tax amount each property owner
pays to fund the budget, it is more important that assessed values remain proportional, than it is whether
the assessed value of each property is at, above or below market value. In this simple example, because the
assessed value of the properties remained proportional, each property’s share of the tax burden was 50%,
or $5,000, regardless of how the assessed values compared to market value.
What happens when one of these properties changes in value, but the other does not? Assume the market
value of one of the properties dropped while the other property maintained its value (such as a drop in
the market for condominiums). e condominium, which once had a market value of $250,000, now has
a market value of $200,000. If the assessed value of the condominium remains at $250,000, both of these
properties would still owe $5,000 in property taxes, even though the market value of the condominium is
$50,000 lower than the other property in town. is would leave the condominium owner paying more
than a fair share of the tax burden because the market value of the condominium is less than the market
value of the other property. Assessors can correct this lack of proportionality by using a statistical update.
e assessor reduces the assessed value of the condominium to reect its drop in market value and to
make it proportional to the other property. Now both will be assessed at market value and both will pay
only their proportionate share of the tax burden.
See Appendix D for a graphic illustration and explanation of the change that occurs when additional
property value is to added to the tax rolls.
E. The Assessing Process
e assessing process requires applying statutory exemptions and credits to the appraised values of
properties. is includes identifying properties which are exempt from taxation, such as those owned and
used for governmental, religious, charitable, educational, and other special purposes. Other exemptions
result in a reduction of the assessed value of a particular property and include exemptions for the elderly,
disabled, deaf, blind; certain solar, wind powered and wood burning systems. A credit does not aect the
property’s assessed value but is a reduction from the bottom line of the tax bill on a particular property.
e most common property tax credit is for veterans and their surviving spouses. All property tax
exemptions and credits are authorized in RSA 72, some of which include local option in determining the
amount of exemption or credit.
A common misconception about property tax exemptions and credits is the eect they have on the
amount of taxes to be raised. Granting exemptions and credits for any purpose does not change the
amount of property taxes that need to be raised; it merely shis the responsibility for payment to
other property owners. While the exemption may benet a particular property or one segment of the
population, it will lower the municipality’s total tax base (total assessed value), resulting in a higher
tax rate and increased taxes for those properties not eligible for the exemption. e same is true with
property tax credits: if one property qualies for a credit and therefore pays less in property taxes, then
the amount of tax credit must be made up by the property taxes assessed on all other properties by
increasing the tax rate.
Similarly, if a property tax exemption or credit is eliminated, it does not result in additional revenue to
the municipality. Rather, as illustrated in Appendix D, it increases the municipality’s total tax base, which
then lowers the tax rate and reduces the tax burden on other properties.
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F. The Equalization Process
Some municipalities may be assessing property close to market value, while others may be assessing
above or below market value, all of which is permissible as explained in the proportionality section above.
However, to ensure that public taxes shared by municipalities, such as the state education tax, cooperative
school district taxes, and county taxes, are reasonably apportioned among municipalities, the assessing
playing eld must be leveled. is is accomplished by the annual equalization process conducted by
the Department of Revenue Administration (DRA) through which each municipality’s assessed values
are adjusted to reect proportionality to other municipalities. is process involves a detailed study of
property sales throughout the state, a comparison of those sales with the local property assessments, and
an adjustment of the local assessed value up or down to achieve proportionality. e result is called the
“equalized” assessed value.
Once the equalized value of property in each municipality has been determined, then the total tax
amounts to be raised for the state education tax, cooperative school district tax, and county tax can be
proportionally allocated to each municipality. For example, if the equalized value of the property in a
particular municipality represents 15% of the total equalized property value in the entire county, then
that municipality would be apportioned 15% of the total county taxes to be raised. Once the dollar
amount of a municipality’s share of the county tax is known, then that local municipality’s total tax base
(total assessed value) is used to determine its county tax rate and how much each individual property
owner in that municipality must pay towards support of county operations.
A by-product of the equalization process is the determination of an equalization ratio. Generally, the ratio
shows the average level at which each municipality assessed property the previous year in comparison
to full value. A ratio of 90 percent would indicate that the municipality generally assessed property at
approximately 90 percent of full value, that is, below market value. A ratio of 110 percent would indicate
that the municipality generally assessed property at 110 percent of full value, or above market value.
Neither a high nor a low ratio, in itself, is cause for alarm. Whether a municipality is assessing at 110
percent or 90 percent of full value is really not signicant. As previously explained, what is important
is that ‘assessments’ are proportional, so that each property owner bears their share of the property tax
based upon the proportional assessed value of their property.
G. Setting the Tax Rate
Every fall, the DRA compiles all the information necessary to certify property tax rates for each
municipality, reviewing all appropriations voted by the legislative bodies in the spring and all revenues
expected, other than property taxes. at information is then used in the formula below to calculate the
local property tax rate:
Multiplying that rate by 1,000 provides the property tax rate per $1,000 of property value, which is
how the rate is typically stated. e amount of money which must be raised through taxes—voted
appropriations minus all other revenue expected to be received—is the primary factor that drives the
property tax rate. e local assessed value of property is the basis on which the tax money to be raised is
apportioned to each property owner within a municipality. is same formula is used to determine the
local school portion of the tax rate.
= Property Tax Rate
VOTED APPROPRIATIONS minus ALL OTHER REVENUE
LOCAL ASSESSED PROPERTY VALUE
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Chapter 11. Understanding the Property Tax System
As previously explained, taxes shared among municipalities, such as cooperative school districts and
counties, rst use the equalized assessed valuation in the equation to determine each municipality’s share.
(Note that some cooperative school districts also use pupil counts in addition to equalized values when
allocating costs to multiple municipalities.) Similarly, each municipality’s equalized assessed valuation
(calculated without including utility property values) is used to calculate the municipality’s share of the
annual statewide education property tax of $363 million in accordance with the provisions of RSA 76:3.
Once the municipality’s share of those taxes has been determined, that amount is then divided by the
municipality’s total assessed value to arrive at the tax rate per $1,000 of property value that is needed to
support those units of government.
H. Property Tax Bill
RSA 76:11-a requires that the property tax bill show the assessed value of all lands and buildings
being taxed, along with the tax rates for each component of the tax: the municipal, local education,
state education, county, and village district or precinct rates (if any). e bill must also inform the
taxpayer of the right to apply for an abatement, and contain a statement regarding the types of tax
relief for which the taxpayer has the right to apply, including elderly exemptions and deferrals, disabled
and blind exemptions, and veterans’ credits. Most municipalities receive the certied tax rates from
DRA by mid-November, issuing bills that are then due by December 1 or thirty days aer the bills are
mailed, whichever is later. RSA 76:13 requires that interest of eight percent per annum be charged on
delinquent payments.
I. How Much Will That Add to the Tax Rate?
Before property tax bills are even mailed, the process begins again in many municipalities, as governing
bodies and budget committees deliberate on the budget recommendations that will be presented at the
next annual meeting. A question oen asked at this time is “How much will a particular item add to
the tax rate?” To provide a ballpark estimate of how much a certain item will cost on the tax rate, DRA
came up with the “three-nger rule.” Taking the municipality’s prior year total assessed property value,
and covering the right three digits with three ngers, provides an estimate of the amount of money that
represents $1.00 on the tax rate. Covering the next digit would represent 10 cents on the tax rate and
covering one more digit would be a penny on the tax rate. is works for estimating both a change in
appropriations as well as a change in revenues.
For example, in a municipality with $1,400,000,000 of total assessed property value:
• $1,400,000 would be approximately $1.00 on the tax rate
• $140,000 would be approximately $.10 on the tax rate
• $14,000 would be approximately $.01, on the tax rate
Using the ‘three nger rule’, you can easily determine the impact on the tax rate if this municipality
should choose to appropriate an additional $28,000 for a new police cruiser. It would add approximately
$.02 to their tax rate.
Determining the impact of losing a portion of the municipality’s tax base (i.e., a reduction in the total
assessed value) due to decisions such as increasing exemption amounts, requires a few more steps. First,
you would need to determine the total additional amount that would be considered ‘exempt’. For example,
if this town has 112 residents over the age of 65 receiving an elderly exemption, and the decision was
made to increase the exemption amounts by $10,000 for each age category, it will result in $1,120,000 total
increased exemptions (112 x $10,000), which is also an equivalent reduction in the ‘total assessed property
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value’. You would then need to use the most recent tax rate ($24.26 in this town) and calculate the tax
revenue generated from this assessed value amount, as follows: $1,120,000/1,000 assessed value x $24.26
tax rate = $27,171 total tax revenue. Finally, you are then able to use the “three-nger rule” and determine
the specic impact on the tax rate. In this case, $27,171 lost in tax revenue would mean approximately
$.02 (2 cents) would need to be added to their tax rate to make up for this loss.
Note that the amount would be dierent for each municipality depending on the net local assessed
valuation. Also recognize that this is a rough estimate since it is based upon the prior year’s assessed
valuation, a value that will change as of April 1. But the three-nger rule certainly provides a reasonable
estimate of whether a particular appropriation, an action to change the tax base, or an anticipated change
in revenue, will result in pennies, nickels, dimes or dollars on the tax rate!
See Appendix E for a worksheet to help determine the tax rate impact for your particular municipality.
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New Hampshire Municipal Association
Appendix A
Custody and Expenditure of Common Town Funds
TYPES OF
FUNDS
WHO AUTHORIZES
EXPENDITURES
HELD IN THE
CUSTODY OF
RSA 31:19
Trust Funds
Governing body or body designated by donor
Trustees of
Trust Funds
RSA 31:19-a
Town-created trust funds
Agents named to expend or legislative body vote
Trustees of
Trust Funds
RSA 31:95-c
Special Revenue Funds
Legislative body vote Treasurer
RSA 31:95-h
Revolving Funds
Governing body or other board as designated
by legislative body
Treasurer
RSA 31:113
Forest Fund
Legislative body vote Treasurer
RSA 35:1
Capital Reserve Funds
Agents named to expend or legislative body vote
Trustees of
Trust Funds
RSA 35-B :2, II
Recreation Revolving Fund
Recreation Committee or other body or board
designated by Town Meeting at the time fund
was created
Treasurer
RSA 36-A:5
Conservation Fund
Conservation Commission Treasurer
RSA 38:29
Water Fund
Board of Water Commissioners if established,
otherwise governing body
Treasurer
RSA 149-I:10
Sewer Fund
Board of Sewer Commissioners if
established, otherwise governing body
Treasurer
RSA 202-A:11; RSA 202-
A:22; RSA202-A:23 Library
appropriations, fees and
income from trusts
Library Trustees
Library Trustees or
Trustees of Trust
Funds
RSA 318-B:17-b
Drug Forfeiture Account
Police Chief with approval of governing body Treasurer
RSA 423:6 and :7
Airport Fund
Governing body Treasurer
RSA 673:16, II
Fees collected
Land use board or designated agent Treasurer
RSA 674:21, V
Impact fees
Governing body Treasurer
RSA 674:44-d
Heritage Fund
Heritage Commission Treasurer
RSA 674:44-g
Agricultural Fund
Agricultural Commission Treasurer
RSA 674:44-j
Housing Fund
Housing Commission Treasurer
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Appendix B
FEES, LICENSES, PERMITS & PENALTIES
Selected References
PURPOSE STATUTORY REFERENCE
Permits/Licenses/Fees
Select Board Authority to Establish Fees 41:9-a (must be adopted by town meeting)
Aordable Housing 31:95-h
Ambulance 31:95-h
Bicycles 265:149
Building 155-A:9; 674:51, III (d)
Cable 31:95-h; 53-C:4
Cemetery Lot Sales 289:2-a
Dogs 466:4
Driveway 236:13
Documents (RTK Requests) 91-A:4, IV (d)
Energy Conservation & Eciency 31:95-h
Excavation/Street Opening 236:9
Fire 31:39, I(e); 154:18; 227-L:17
Fireworks 160-B:5; 160-B:6; 160-B:7; 160-B:10
Food serving establishments 147:1, II; 31:39, I(k)
Hawkers & Peddlers 31:102-a
Junk & Scrap Metal 322:1; 322:11; 322:13
Junk/Motor Vehicle Recycling Yards 236:122
Marriage License 457:29
Kennels (“Group Licenses” for dogs) 466:6
Parades/”Theatricals” 286:2; 286:4; 286:4-a
Billiard Tables 286:6; 286:8
Pistols & Revolvers: License to Carry 159:6
Pistols & Revolvers: License to Sell 159:8
Place of Assembly 155:18
Police Details 105:9
Public Safety Services 31:95-h
Raes 287-A:7
Recreation 35-B:3
Recycling 31:95-h; 149-M:17
Registration Permits, Additional Fees 261:154
Occupy Street: Construction Materials 31:99
Occupy Street: Events 31:100
Solid Waste 149-M:17
Soliciting Funds 31:91
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Tattoo Parlors 31:39, I(m)
Taxicabs 31:40
Town Property 41:11-a
Utility Poles & Wires 231:165
Pinball Machines 31:41-d
Open Air Motion Pictures 31:41
Motor Vehicle Racetracks 31:41-a
Geographic Information Systems- GIS 31:95-f (town); 47:11-c (city)
Background Checks for Vendors 31:102-b
Woodstoves
31:117 (town);
47:28 (city)
Fines & Penalties
Local Ordinances
31:39, III, 31:39-c & -d (town);
47:17 & 47:17-b (city)
Parking Meters 231:130; 231:131
Building 155-A:8; 674:51, III (d)
Hazardous Materials Accidents 154:8-a
Health Regulations 147:1
Planning & Zoning 676:17
Land Use
Impact Fees 674:21, V
Plan Reviews, Experts & Administrative Costs 673:16; 676:4, I(g); 676:5, IV
Town Clerk
Vital Record Copies 5-C:10
Recording Fee 41:25
Motor Vehicles
Municipal Permit Fees 261:153, I-IV
Municipal Clerk Fee 261:152
Title Application Fee 261:4
Municipal Agent Fee 261:74-d
Reclamation Trust Fund Fee 261:153, V
Transportation Improvement Fee 261:153, VI
Public Parking Facilities Fee 261:154
Boats
Boat Fees 72-A:3,4
Agent Fee 270-E:5,II(c)
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Taxation
Abatement Application 76:16
Duplicate Copy of Tax Bill 76:11, I
Interest on overdue taxes 76:13; 76:13-b
Tax Lien Costs and Penalties 80:90
Uncollectible Checks 80:56
Utilities
Broadband 38:39
Electricity 38:22
Gas 38:22
Sewer 149-I:8
Water 38:28
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New Hampshire Municipal Association
Appendix C
FINANCING OPTIONS
Selected References
RESTRICTED TRUST FUNDS
Cemetery Trust
Funds
RSA 31:20 - 21 Trusts funds received by gi, legacy, devise or
donation for care of cemeteries and burial plots.
Trust Funds
by Town
RSA 31:19 Town Meeting votes to authorize the governing
body to take and hold gis, legacies.
SPECIAL PURPOSE TRUST FUNDS
Deferred
Compensation
Plans
RSA 31:19-b Deferred compensation trust created under
Internal Revenue Code provisions for municipal
employees.
OPEB Trusts RSA 31:19-c Other Post Employment Benet (OPEB) Trusts
to pay for medical, disability or other health
benets of municipal employees.
FUNDS THAT ARE EXPENDED WITHOUT LEGISLATIVE BODY APPROPRIATION
Unanticipated
Funds
RSA 31:95-b Town Meeting may authorize receipt and
expenditure of state, federal or private grants not
requiring expenditure of other municipal funds
except those lawfully appropriated for same
purpose.
Acceptance of
Personal Property
RSA 31:95-e Town Meeting authorizes acceptance of donation of
personal property.
School
Unanticipated
Funds
RSA 198:20-b School district meeting may authorize receipt
and expenditure of state, federal or private grants
not requiring expenditure of other school district
funds except those lawfully appropriated for same
purpose.
Library
Unanticipated
Funds
RSA 202-A:4-c Library Trustees authorized to receive and expend
state, federal or private source grants not requiring
expenditure of other library funds except those
lawfully appropriated for same purpose.
Library Acceptance
of Personal
Property
RSA 202-A:4-d Library Trustees authorized to accept donations of
personal property.
SAVINGS ACCOUNTS
Expendable Trust
Funds
31:19-a Town Meeting votes to appropriate funds for
permissible public purpose. Agents to expend
may be appointed. Non-lapsing account. Annual
report of activities published in Town Report.
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Capital Reserve
Accounts
RSA chapter 35 Town, school, and village district may vote to
establish non-lapsing savings accounts for capital
improvements and may name agents to expend.
SPENDING ACCOUNTS
Special Revenue
Funds
RSA 31:95-c Town meetings votes to restrict revenues from
a specic source (e.g., highway block grant) for
expenditures for specic purposes. e revenues and
expenditures are accounted for in a special revenue
fund separate from the general fund.
Revolving Fund RSA 31:95-h Revenues from fees, charges, or other income
derived from such activities as recycling, ambulance
or highway details placed into non-lapsing account
to be support those services. Expended by select
board or other designated agent or department.
Contingency Fund RSA 31:98-a Contingency fund authorized by town meeting for
unanticipated costs incurred during year. All
expenditures reported in annual report.
School
Contingency Fund
RSA 198:4-b Contingency fund authorized by school district
meeting for unanticipated costs incurred during
year. All expenditures reported in annual report
Recreation
Revolving Fund
RSA 35-B:2 (II) Town Meeting may authorize that all recreation
fees and charges be deposited into a non-lapsing
revolving fund to support recreation activities.
Recreation and Park Commission/Committee is
agent to expend
Conservation Fund RSA 36-A:5 Money appropriated by town meeting for
conservation purposes, or land use change tax
income allocated under RSA 79-A:25 (II); a
non-lapsing fund expended by the Conservation
Commission, purchases of interests in land
requiring select board approval.
Forest Maintenance
Account
RSA 31:113 Non-lapsing account for establishing and
maintaining town or city forest.
ENTERPRISE FUNDS
Water Fund RSA 38:29 Funds received by municipal water utility from
collection of water rates, expended only for
acquisition, construction, payment of the interest,
management, maintenance, operation, and repair
of water systems, or construction, enlargement, or
improvement of such systems.
Energy
Commission Fund
RSA 38-D:5 Non-lapsing account established to fund the study,
planning, and utilization of energy resources for
municipal buildings by local Energy Commission.
Sewer Fund RSA 149-I:10 Sewer rents and rates received that are expended
only for the acquisition, construction, payment of
debt, management, maintenance, operation, and
repair of sewer systems, including sewage or waste
treatment and disposal works.
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New Hampshire Municipal Association
Stormwater Utility
Fund
RSA 149-I:10-a Stormwater utility fees kept as a separate fund
to manage surface runoff and drainage that is
generated from precipitation and snowmelt,
including any debris, chemicals, sediment, or other
substances carried along with the water.
Energy Financing
Reserve Accounts
RSA 53-F:7 (II) A loss reserve account for property-assessed
clean energy nance programs. Funds in a loss
reserve account shall not be provided from general
municipal revenues.
Airport Fund RSA 423:6 - 7 Airport tolls, charges, rents or other fees collected
by towns or cities for aeronautical purposes that
are kept in a separate, non-lapsing account and not
intermingled with other funds of the municipality.
SPECIAL ASSESSMENTS
Cable Franchise
Fees
RSA 53-C:4 Fees charged by municipality for cable franchise
granted to cable television system.
Impact Fees RSA 674:21 (V) Fee imposed upon land use development in order to
help meet the needs occasioned by that development
for the construction or improvement of capital
facilities owned or operated by the municipality.
Non-lapsing fund expended by governing body
within six years from date of collection.
BORROWING
Bond for
Preliminary
Expenses
RSA 33:3-c Bonds or notes for the cost of preliminary or nal
plans or other preliminary expenses connected
a proposed public work or improvement of a
permanent nature.
Refunding Bond RSA 33:3-d Bonds issued in order to pay all or part of any
prior issue of bonds called or to be called for
redemption, including any redemption premium.
Superfund
Cleanup Bonds
RSA 33:3-e 20-year bond issued in order to pay all response
costs associated with a CERCLA superfund site
in which a municipality is a named potentially
responsible party.
Broadband
Infrastructure
Bonds
RSA 33:3-g Bonds for the purpose of nancing the
development of broadband infrastructure in areas
not served by an existing broadband carrier.
Water Works Bond RSA 33:5-a Debt incurred for supplying water or for the
construction, enlargement, or improvement of
water works.
Tax Anticipation
Notes
RSA 33:7 Debt incurred in anticipation of the taxes to be
received in the nancial year in which the debt is
incurred, in order to pay current maintenance and
operation expenses.
Temporary Notes RSA 33:7-a A temporary loan in anticipation of the money to be
derived from the sale of bonds or notes which are
payable not later than 5 years from the date of issue.
92
The Basic Law of Budgeting – 2022 Edition
Bond in
Anticipation of Aid
RSA 33:7-b Debt that is issued in anticipation of receiving
federal aid with respect to a sewer project, with
notes payable within 5 years from date of issue.
Tax Lien
Redemption Note
RSA 33:7-d Where a municipality uses the tax lien provisions
of RSA 80:56-86, debt may be incurred in
anticipation of redemption of real estate tax liens
in order to pay current maintenance and operation
expenses or to fund cash decits.
Bonds & Notes RSA 33:8 The issue of general obligation bonds or notes
authorized by a ballot of 3/5 at town meeting.
Municipal Revenue
Bonds
RSA chapter
33-B
A municipality or regional water district may
issue bonds or notes for construction of revenue-
producing facilities (e.g., water works, sewer
plant, parking facility, energy producing facility).
School
Reimbursement
Anticipation Notes
RSA 198:20-d Borrowing by a school district in anticipation of
receiving an Adequate Education Grant a Special
Education Grant.
FINANCING OTHER THAN BY BONDS OR NOTES
Lease Agreements RSA 33:7-e Equipment lease purchase agreements that contain
a scal funding clause that may be approved by a
simple majority at town meeting.
Appropriations for
Capital Projects
RSA 32:7-a A multi-year appropriation not exceeding 5 years
approved by 2/3 by vote to town meeting, 3/5 in
SB2 town, for a capital project.
93
New Hampshire Municipal Association
Appendix D
ASSESSED VALUE ILLUSTRATIONS
114
APPENDIX D
ASSESSED VALUE ILLUSTRATIONS
SCENARIO 1
SCENARIO 2SCENARIO 3
MARKET VALUE $250,000 $250,000 $500,000
ASSESSED VALUE $250,000 $250,000 $500,000
TAX RATE $20/$1,000 of value $20/$1,000 of value
TAX BILL $5,000 $5,000 $10,000
TOTAL
TOTAL
MARKET VALUE $225,000 $225,000 $450,000
ASSESSED VALUE $250,000 $250,000 $500,000
TAX RATE $20/$1,000 of value $20/$1,000 of value
TAX BILL $5,000 $5,000 $10,000
TOTAL
MARKET VALUE $275,000 $275,000 $550,000
ASSESSED VALUE $250,000 $250,000 $500,000
TAX RATE $20/$1,000 of value $20/$1,000 of value
TAX BILL $5,000 $5,000 $10,000
Does adding value to the property tax base bring in more tax revenue?
Example 1: What is the eect of adding property value in the municipality? Starting with the two proper-
ties each valued at $250,000, assume now that improvements are made to one of the properties, for example,
the addition of a two-car garage with a family room above, which adds $50,000 to the value of the property.
e assessors would add this “pick-up” to the tax base, resulting in a new total town-wide assessed value of
$550,000. With the town budget the same at $10,000, the tax rate would decrease to $18.18 per $1,000 of value
(10,000 ÷ 550,000 x 1,000). e unchanged property would see a decrease in its tax bill to $4,545, while the
property with the addition would now owe $5,455, for a total of $10,000 in property taxes.
94
The Basic Law of Budgeting – 2022 Edition
115
Does adding value to the property tax base bring in more tax revenue?
Example 1: What is the effect of adding property value in the municipality? Starting with the two properties each valued
at $250,000, assume now that improvements are made to one of the properties, for example, the addition of a two-car
garage with a family room above, which adds $50,000 to the value of the property. The assessors would add this “pick-up”
to the tax base, resulting in a new total town-wide assessed value of $550,000. With the town budget the same at $10,000,
the tax rate would decrease to $18.18 per $1,000 of value (10,000 ÷ 550,000 x 1,000). The unchanged property would see
a decrease in its tax bill to $4,545, while the property with the addition would now owe $5,455, for a total of $10,000 in
property taxes.
Example 2: Assume that the two properties remain the same, and that a third, similar property is constructed. All three
properties are assessed at $250,000, which increases the total town-wide assessed value to $750,000. The town budget re-
mains at $10,000 and the tax rate drops to $13.33 per $1,000 of valuation (10,000 ÷ 750,000 x 1,000). Each property owes
one-third as its proportionate share, or $3,333 in property taxes—but the total tax revenue received is still only $10,000.
As demonstrated by these two examples, new construction (a strip mall, commercial building, residential improvements,
etc.) does not result in additional property tax revenue to the municipality. The amount of property tax revenue to be
raised is always based upon the appropriations approved during the budget process—in these cases, $10,000. Expanding
the tax base by adding the value of new construction does not generate additional tax revenue. If appropriations remain
level, increasing values will only cause a decrease in the tax rate.
MARKET VALUE $250,000 $300,000 $550,000
ASSESSED VALUE $250,000 $300,000 $550,000
TAX RATE $18.18/$1,000 of value $18.18/$1,000 of value
TAX BILL $4,545 $5,455 $10,000
TOTAL
TOTAL
MARKET VALUE $250,000 $250,000 $250,000 $750,000
ASSESSED VALUE $250,000 $250,000 $250,000 $750,000
TAX RATE $13.33/$1,000 $13.33/$1,000 $13.33/$1,000
of value of value of value
TAX BILL $3,333 $3,333 $3,333 $10,000
Example 2: Assume that the two properties remain the same, and that a third, similar property is
constructed. All three properties are assessed at $250,000, which increases the total town-wide assessed
value to $750,000. e town budget re mains at $10,000 and the tax rate drops to $13.33 per $1,000 of
valuation (10,000 ÷ 750,000 x 1,000). Each property owes one-third as its proportionate share, or $3,333 in
property taxes—but the total tax revenue received is still only $10,000.
115
Does adding value to the property tax base bring in more tax revenue?
Example 1: What is the effect of adding property value in the municipality? Starting with the two properties each valued
at $250,000, assume now that improvements are made to one of the properties, for example, the addition of a two-car
garage with a family room above, which adds $50,000 to the value of the property. The assessors would add this “pick-up”
to the tax base, resulting in a new total town-wide assessed value of $550,000. With the town budget the same at $10,000,
the tax rate would decrease to $18.18 per $1,000 of value (10,000 ÷ 550,000 x 1,000). The unchanged property would see
a decrease in its tax bill to $4,545, while the property with the addition would now owe $5,455, for a total of $10,000 in
property taxes.
Example 2: Assume that the two properties remain the same, and that a third, similar property is constructed. All three
properties are assessed at $250,000, which increases the total town-wide assessed value to $750,000. The town budget re-
mains at $10,000 and the tax rate drops to $13.33 per $1,000 of valuation (10,000 ÷ 750,000 x 1,000). Each property owes
one-third as its proportionate share, or $3,333 in property taxes—but the total tax revenue received is still only $10,000.
As demonstrated by these two examples, new construction (a strip mall, commercial building, residential improvements,
etc.) does not result in additional property tax revenue to the municipality. The amount of property tax revenue to be
raised is always based upon the appropriations approved during the budget process—in these cases, $10,000. Expanding
the tax base by adding the value of new construction does not generate additional tax revenue. If appropriations remain
level, increasing values will only cause a decrease in the tax rate.
MARKET VALUE $250,000 $300,000 $550,000
ASSESSED VALUE $250,000 $300,000 $550,000
TAX RATE $18.18/$1,000 of value $18.18/$1,000 of value
TAX BILL $4,545 $5,455 $10,000
TOTAL
TOTAL
MARKET VALUE $250,000 $250,000 $250,000 $750,000
ASSESSED VALUE $250,000 $250,000 $250,000 $750,000
TAX RATE $13.33/$1,000 $13.33/$1,000 $13.33/$1,000
of value of value of value
TAX BILL $3,333 $3,333 $3,333 $10,000
As demonstrated by these two examples, new construction (a strip mall, commercial building, residential
improvements, etc.) does not result in additional property tax revenue to the municipality. e amount
of property tax revenue to be raised is always based upon the appropriations approved during the budget
process—in these cases, $10,000. Expanding the tax base by adding the value of new construction does not
generate additional tax revenue. If appropriations remain level, increasing values will only cause a decrease
in the tax rate.
95
New Hampshire Municipal Association
Appendix E
TAX RATE IMPACT WORKSHEET
EXAMPLE FOR ANYTOWN, NH
1 2022 NET LOCAL ASSESSED VALUE: $1,411,324,700.00
2 $1.00 ON THE TAX RATE =
$1,411,324.00
3 $0.10 ON THE TAX RATE =
$141,132.00
4 $0.01 ON THE TAX RATE =
$14,113.00
5
ESTIMATES IMPACT OF $400,000 FIRE TRUCK:
$400,000/ LINE 2)
$0.28
6
IMPACT OF $25,000 COST ITEM:
($25,000 / LINE 2) $0.02
MUNICIPALITY:
1.) 2022 NET ASSESSED VALUATION: $
2.) $1.00 ON THE TAX RATE = $
3.) $0.10 ON THE TAX RATE = $
4.) $0.01 ON THE TAX RATE = $
5.) ESTIMATED IMPACT OF $ ON THE TAX RATE:
($ / LINE 2)
96
The Basic Law of Budgeting – 2022 Edition
Appendix F
TIMETABLE FOR SPECIAL TOWN MEETING
10 DAYS BEFORE COURT PETITION
If the special meeting is to appropriate money and requires superior court permission, the governing
body must vote to petition the superior court and it must post notice of the vote within 24 hours.
COURT PETITION
Governing body petitions superior court for meeting not sooner than 10 days aer voting to petition the
court. RSA 31:5 or 197:3. DRA must be notied on or before the date the petition is led with the court,
and certication of that notication must be included with the petition led with the court.
Governing body must post notice of the court date for the evidentiary hearing on the petition within
24 hours aer receiving notice of the court date from the superior court. Notices must be posted at the
governing body’s oce and at two or more conspicuous places in the municipality, as well as in the next
available edition of a local newspaper with a wide circulation of the municipality.
32 DAYS BEFORE MEETING
Last day for governing body or budget committee to post notice of public hearing Public hearing may
be held prior to this date. Public hearing notice must be posted seven days prior to the hearing. It is also
recommended that it be published in a local newspaper. RSA 32:5.
31 DAYS BEFORE MEETING
In budget committee towns and districts, last day for governing body to submit proposed warrant
and budget information to budget committee if the hearing will be on the nal day. Otherwise the
information must be submitted ve days prior to whenever the budget committee will hold that hearing.
RSA 32:17.
FOURTH TUESDAY BEFORE MEETING
Last day for the supervisors of the checklist to post the checklist. RSA 39:1-c; RSA 669:5; RSA 654:26;
RSA 654:27.
NOTE: Ocial ballot referendum towns and districts must consult RSA 40:13 for
appropriate schedule. e second session must be held not fewer than 28 days nor more
than 60 days following the rst session.
97
New Hampshire Municipal Association
25 DAYS BEFORE MEETING
Last day for budget committee or governing body to hold public hearing. RSA 32:5. Other hearings may
be held aer this if changes need to be made.
7 DAYS BEFORE THE SATURDAY CHECKLIST SESSION
Last day to post and publish notice for checklist correction session. RSA 654:27.
16 DAYS BEFORE MEETING
e last day for the select board to post warrant and budget. RSA 39:5. (Although listed as 14 days in
RSA 39:5, the day calculation does not include the date of posting or the date of the meeting). Warrant
must also be published within one week of posting.
SATURDAY BETWEEN 6 AND 13 DAYS BEFORE MEETING
Supervisors of the checklist hold session for correction of checklist. Must be posted and published at least
seven days prior. RSA 669:5; RSA 654:27.
9 DAYS BEFORE MEETING
Last day for publishing warrant, except that this must be done within one week aer posting. RSA 39:4.
MEETING
Hold meeting.
98
The Basic Law of Budgeting – 2022 Edition
New Hampshire
Department of
Revenue Administration
Town and City Forms
& Documents
Required Required
Required
Page 1 of 2
8/9/2022
The following list includes the forms and documents required by towns and cities to be filed with the department. Many of the forms are
now created and processed through the Municipal Tax Rate Setting Portal (MTRSP). The forms and instructions on our web site can be
accessed at: https://www.revenue.nh.gov/forms/town-city.htm. Please contact the Municipal Bureau at (603) 230-5090 with
questions.
FORM NAME
FORM NUMBER
REQUIRED SIGNATURES
DUE TO DRA
Warrant
N/A
Majority of Governing Body
20 days after meeting
Budget of the Town
MS-636
Majority of Governing Body
20 days after meeting
Proposed Budget of the City
MS-6c
Majority of Governing Body
20 days after meeting
Budget of a Town with a Municipal
Budget Committee
MS-737
Majority of Budget Committee
20 days after meeting
Default Budget (SB2 Only)
MS-DT
Majority of Governing Body or Majority
of Budget Committee (following
adoption of RSA 40:14-b)
20 days after meeting
Deliberative Minutes (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Sample Ballot (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Annual Meeting Minutes
N/A
Town/City Clerk, Certified
20 days after meeting
Voting Results (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Report of Appropriations Actually Voted
MS-232
Majority of Governing Body
or their Designee
20 days after meeting
Annual Town Report
N/A
N/A
To public 7-days prior to annual
meeting* 20 Days after meeting
Financial Report of the Budget
MS-535
Majority of Governing Body
and Preparer
April 1 (Sept. 1 FY)
Revised Estimated Revenues
MS-434
Majority of Governing Body
or their Designee
September 1
MS-1 Extension Request Form
MS-1 EXT
Majority of Governing Body or
Assessors
Prior to September 1
Summary Inventory of Valuation
MS-1
Majority of Governing Body
September 1
Tax Collector Report
MS-61
Tax Collector
March 1 (Sept. 1 FY)
Audit Waiver Request
MS-60W
Majority of Governing Body
45 Days prior to end of FY
Auditor Option and Schedule
MS-60A
Municipal Official
10 Days after close of FY
Appendix G
New Hampshire
Department of
Revenue Administration
Town and City Forms
& Documents
Required Required
Required
Page 1 of 2 8/9/2022
The following list includes the forms and documents required by towns and cities to be filed with the department. Many of the forms are
now created and processed through the Municipal Tax Rate Setting Portal (MTRSP). The forms and instructions on our web site can be
accessed at: https://www.revenue.nh.gov/forms/town-city.htm. Please contact the Municipal Bureau at (603) 230-5090 with
questions.
FORM NAME FORM NUMBER REQUIRED SIGNATURES DUE TO DRA
Warrant N/A Majority of Governing Body 20 days after meeting
Budget of the Town MS-636 Majority of Governing Body 20 days after meeting
Proposed Budget of the City MS-6c Majority of Governing Body 20 days after meeting
Budget of a Town with a Municipal
Budget Committee
MS-737 Majority of Budget Committee 20 days after meeting
Default Budget (SB2 Only) MS-DT
Majority of Governing Body or Majority
of Budget Committee (following
adoption of RSA 40:14-b)
20 days after meeting
Deliberative Minutes (SB2 Only) N/A Town/City Clerk, Certified 20 days after meeting
Sample Ballot (SB2 Only) N/A Town/City Clerk, Certified 20 days after meeting
Annual Meeting Minutes N/A Town/City Clerk, Certified 20 days after meeting
Voting Results (SB2 Only) N/A Town/City Clerk, Certified 20 days after meeting
Report of Appropriations Actually Voted MS-232
Majority of Governing Body
or their Designee
20 days after meeting
Annual Town Report N/A
N/A
To public 7-days prior to annual
meeting* 20 Days after meeting
Financial Report of the Budget
MS-535
Majority of Governing Body
and Preparer
April 1 (Sept. 1 FY)
Revised Estimated Revenues
MS-434
Majority of Governing Body
or their Designee
September 1
MS-1 Extension Request Form MS-1 EXT Majority of Governing Body or
Assessors
Prior to September 1
Summary Inventory of Valuation MS-1
Majority of Governing Body
September 1
Tax Collector Report MS-61 Tax Collector March 1 (Sept. 1 FY)
Audit Waiver Request MS-60W Majority of Governing Body 45 Days prior to end of FY
Auditor Option and Schedule MS-60A Municipal Official 10 Days after close of FY
Appendix G
99
New Hampshire Municipal Association
New Hampshire
Department of
Revenue Administration
Town and City Forms
& Documents
Required Required
Required
Page 2 of 2 8/9/2022
FORM NAME FORM NUMBER REQUIRED SIGNATURES DUE TO DRA
Report of Locally Elected
Auditor(s)
MS-60 Town Auditor
Within one year after close of the
municipality's fiscal year
CPA Audit
N/A Audit Firm Preparer
Within one year after close of the
municipality's fiscal year
Report of Trust and Capital Reserve
Funds
MS-9 Majority of Trustees March 1 (Sept. 1 FY)
Report of Common Trust Fund
Investments
MS-10 Majority of Trustees March 1 (Sept. 1 FY)
Report of Town, City and Village Officials MS-123 Town/City Clerk After annual election
Treasurer's Report of Borrowing MS-50 Town/City Treasurer
10 Days after issue of bonds or
notes
Treasurer's Annual Report N/A Town/City Treasurer Close of fiscal year
Appendix G
New Hampshire
Department of
Revenue Administration
Town and City Forms
& Documents
Required Required
Required
Page 1 of 2
8/9/2022
The following list includes the forms and documents required by towns and cities to be filed with the department. Many of the forms are
now created and processed through the Municipal Tax Rate Setting Portal (MTRSP). The forms and instructions on our web site can be
accessed at: https://www.revenue.nh.gov/forms/town-city.htm. Please contact the Municipal Bureau at (603) 230-5090 with
questions.
FORM NAME
FORM NUMBER
REQUIRED SIGNATURES
DUE TO DRA
Warrant
N/A
Majority of Governing Body
20 days after meeting
Budget of the Town
MS-636
Majority of Governing Body
20 days after meeting
Proposed Budget of the City
MS-6c
Majority of Governing Body
20 days after meeting
Budget of a Town with a Municipal
Budget Committee
MS-737
Majority of Budget Committee
20 days after meeting
Default Budget (SB2 Only)
MS-DT
Majority of Governing Body or Majority
of Budget Committee (following
adoption of RSA 40:14-b)
20 days after meeting
Deliberative Minutes (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Sample Ballot (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Annual Meeting Minutes
N/A
Town/City Clerk, Certified
20 days after meeting
Voting Results (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Report of Appropriations Actually Voted
MS-232
Majority of Governing Body
or their Designee
20 days after meeting
Annual Town Report
N/A
N/A
To public 7-days prior to annual
meeting* 20 Days after meeting
Financial Report of the Budget
MS-535
Majority of Governing Body
and Preparer
April 1 (Sept. 1 FY)
Revised Estimated Revenues
MS-434
Majority of Governing Body
or their Designee
September 1
MS-1 Extension Request Form
MS-1 EXT
Majority of Governing Body or
Assessors
Prior to September 1
Summary Inventory of Valuation
MS-1
Majority of Governing Body
September 1
Tax Collector Report
MS-61
Tax Collector
March 1 (Sept. 1 FY)
Audit Waiver Request
MS-60W
Majority of Governing Body
45 Days prior to end of FY
Auditor Option and Schedule
MS-60A
Municipal Official
10 Days after close of FY
Appendix G
100
The Basic Law of Budgeting – 2022 Edition
8/9/2022
New Hampshire
Department of
Revenue Administration
The following list includes the forms and documents required by school districts to be filed with the department. Many of the forms are
now created and processed through the Municipal Tax Rate Setting Portal (MTRSP). The forms and instructions on our web site can
be accessed at: https://www.revenue.nh.gov/forms/school.htm Please contact the Municipal Bureau at (603) 230-5090 with
questions.
FORM NAME FORM NUMBER REQUIRED SIGNATURES DUE TO DRA
Warrant N/A Majority of School Board 20 days after meeting
Proposed Budget MS-26 Majority of School Board 20 days after meeting
Proposed Budget (Dependent School
District)
MS-26c Majority of School Board 20 days after meeting
Proposed Budget (Budget Committee) MS-27 Majority of School Board 20 days after meeting
Default Budget of the School District (SB2
Only)
MS-DSB
Majority of School Board or Majority of
Budget Committee
(following adoption
of RSA 40:14-b)
20 days after meeting
20 days after meeting
Deliberative Session Minutes N/A School District Clerk, Certified 20 days after meeting
Sample Ballot (SB2 Only) N/A School District Clerk, Certified 20 days after meeting
Annual Meeting Minutes N/A School District Clerk, Certified 20 days after meeting
Voting Results (SB2 Only)
N/A School District Clerk, Certified
20 days after meeting
Report of Appropriations Actually Voted MS-22
Superintendent, School District Clerk,
Majority of School Board
20 days after meeting
Annual Report N/A N/A
To Department of Education
20 days after meeting
Revised Estimated Revenues
MS-24
Preparer
September 1
School Financial Report MS-25
School Board Chairperson,
Superintendent, Maj. of School Board
Board
September 1
Report of Locally Elected Auditor(s) MS-60 School District Auditor
Within one year after close of
school district’s fiscal year
CPA Audit N/A Audit Firm Preparer
Within one year after close of
school district’s fiscal year
Auditor Option and Schedule MS-60A School District Official
10 Days after close of FY
School Forms &
Documents
Appendix G
New Hampshire
Department of
Revenue Administration
Town and City Forms
& Documents
Required Required
Required
Page 1 of 2
8/9/2022
The following list includes the forms and documents required by towns and cities to be filed with the department. Many of the forms are
now created and processed through the Municipal Tax Rate Setting Portal (MTRSP). The forms and instructions on our web site can be
accessed at: https://www.revenue.nh.gov/forms/town-city.htm. Please contact the Municipal Bureau at (603) 230-5090 with
questions.
FORM NAME
FORM NUMBER
REQUIRED SIGNATURES
DUE TO DRA
Warrant
N/A
Majority of Governing Body
20 days after meeting
Budget of the Town
MS-636
Majority of Governing Body
20 days after meeting
Proposed Budget of the City
MS-6c
Majority of Governing Body
20 days after meeting
Budget of a Town with a Municipal
Budget Committee
MS-737
Majority of Budget Committee
20 days after meeting
Default Budget (SB2 Only)
MS-DT
Majority of Governing Body or Majority
of Budget Committee (following
adoption of RSA 40:14-b)
20 days after meeting
Deliberative Minutes (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Sample Ballot (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Annual Meeting Minutes
N/A
Town/City Clerk, Certified
20 days after meeting
Voting Results (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Report of Appropriations Actually Voted
MS-232
Majority of Governing Body
or their Designee
20 days after meeting
Annual Town Report
N/A
N/A
To public 7-days prior to annual
meeting* 20 Days after meeting
Financial Report of the Budget
MS-535
Majority of Governing Body
and Preparer
April 1 (Sept. 1 FY)
Revised Estimated Revenues
MS-434
Majority of Governing Body
or their Designee
September 1
MS-1 Extension Request Form
MS-1 EXT
Majority of Governing Body or
Assessors
Prior to September 1
Summary Inventory of Valuation
MS-1
Majority of Governing Body
September 1
Tax Collector Report
MS-61
Tax Collector
March 1 (Sept. 1 FY)
Audit Waiver Request
MS-60W
Majority of Governing Body
45 Days prior to end of FY
Auditor Option and Schedule
MS-60A
Municipal Official
10 Days after close of FY
Appendix G
101
New Hampshire Municipal Association
8/9/2022
New Hampshire
Department of
Revenue Administration
The following list includes the forms and documents required by village districts to be filed with the department. Many of the forms are
now created and processed through the Municipal Tax Rate Setting Portal (MTRSP). The forms and instructions on our web site can
be accessed at: https://www.revenue.nh.gov/forms/village.htm Please contact the Municipal Bureau at (603) 230-5090 with
questions.
FORM NAME FORM NUMBER REQUIRED SIGNATURES DUE TO DRA
Warrant N/A Majority of Commissioners 20 days after meeting
Budget of the Town/Village District MS-636 Majority of Commissioners 20 days after meeting
Budget of the Town/Village District with a
Budget Committee
MS-737 Majority of Budget Committee 20 days after meeting
Annual Meeting Minutes N/A District Clerk, Certified 20 days after meeting
Report of Town, City and Village
Officials
MS-123 District Clerk, Certified
20 Days after election or
appointment
Report of Appropriations Actually Voted MS-232 Majority of Commissioners 20 days after meeting
Annual Report N/A N/A
To public 7-days prior to annual
meeting* 20 Days after meeting
Financial Report of the Budget
MS-535
Majority of Commissioners and
Preparer
April 1 (Sept. 1 FY)
Revised Estimated Revenues MS-434 Preparer
September 1
Audit Waiver Request MS-60W Majority of Commissioners 45 Days prior to end of FY
Auditor Option and Schedule MS-60A District Official 10 Days after close of FY
Report of Locally Elected Auditor(s) MS-60 District Auditor
Within one year after close of
municipality's fiscal year
CPA Audit N/A Audit Firm Preparer
Within one year after close of
the municipality's fiscal year
Village Forms &
Documents
Appendix G
New Hampshire
Department of
Revenue Administration
Town and City Forms
& Documents
Required Required
Required
Page 1 of 2
8/9/2022
The following list includes the forms and documents required by towns and cities to be filed with the department. Many of the forms are
now created and processed through the Municipal Tax Rate Setting Portal (MTRSP). The forms and instructions on our web site can be
accessed at: https://www.revenue.nh.gov/forms/town-city.htm. Please contact the Municipal Bureau at (603) 230-5090 with
questions.
FORM NAME
FORM NUMBER
REQUIRED SIGNATURES
DUE TO DRA
Warrant
N/A
Majority of Governing Body
20 days after meeting
Budget of the Town
MS-636
Majority of Governing Body
20 days after meeting
Proposed Budget of the City
MS-6c
Majority of Governing Body
20 days after meeting
Budget of a Town with a Municipal
Budget Committee
MS-737
Majority of Budget Committee
20 days after meeting
Default Budget (SB2 Only)
MS-DT
Majority of Governing Body or Majority
of Budget Committee (following
adoption of RSA 40:14-b)
20 days after meeting
Deliberative Minutes (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Sample Ballot (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Annual Meeting Minutes
N/A
Town/City Clerk, Certified
20 days after meeting
Voting Results (SB2 Only)
N/A
Town/City Clerk, Certified
20 days after meeting
Report of Appropriations Actually Voted
MS-232
Majority of Governing Body
or their Designee
20 days after meeting
Annual Town Report
N/A
N/A
To public 7-days prior to annual
meeting* 20 Days after meeting
Financial Report of the Budget
MS-535
Majority of Governing Body
and Preparer
April 1 (Sept. 1 FY)
Revised Estimated Revenues
MS-434
Majority of Governing Body
or their Designee
September 1
MS-1 Extension Request Form
MS-1 EXT
Majority of Governing Body or
Assessors
Prior to September 1
Summary Inventory of Valuation
MS-1
Majority of Governing Body
September 1
Tax Collector Report
MS-61
Tax Collector
March 1 (Sept. 1 FY)
Audit Waiver Request
MS-60W
Majority of Governing Body
45 Days prior to end of FY
Auditor Option and Schedule
MS-60A
Municipal Official
10 Days after close of FY
Appendix G
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The Basic Law of Budgeting – 2022 Edition
Appendix H
Default Budget FAQ
Default Budget FAQ
Up until recently, the law provided that in Ocial Ballot Referendum (“SB 2”) towns, the default budget is
“the amount of the same appropriations as contained in the operating budget authorized for the previous
year, reduced and increased, as the case may be, by debt service, contracts, and other obligations previously
incurred or mandated by law, and reduced by one-time expenditures contained in the operating budget.”
RSA 40:13, IX (b). e statute went on to dene “one-time expenditures” as “appropriations not likely to
recur in the succeeding budget, as determined by the governing body.”
is sounds simple enough: the default budget is supposed to be the same budget as last year, with certain
amounts added or increased as required by the statute. However, terms such as “contracts previously
incurred by law” or what really constitutes an expense “not likely to recur” created ambiguity when
calculating the default budget. Indeed, in some towns and districts, tensions rose when the default budget
frequently exceeded the proposed operating budget for a given year.
As a result, several amendments were made to RSA 40:13 in 2018. is Q&A looks at the law in its new form
and provides suggestions for handling your default budget going forward.
WHAT CHANGED IN 2018?
In a nutshell, between House Bill 1307 and Senate Bill 342, the Legislature revised the denition of “default
budget,” created more specic requirements for what may and may not be included in the default budget,
and mandated new notice and transparency requirements.
HOW WILL OUR CALCULATION OF THE DEFAULT BUDGET CHANGE WITH THESE NEW
AMENDMENTS?
Calculation of the default budget still starts with last year’s budget; the question is which amounts must be
taken out, and which amounts that were not included in last year’s budget can be added. As stated above,
last year’s budget must be reduced or increased “by debt service, contracts, and other obligations previously
incurred or mandated by law, and reduced by one-time expenditures contained in the operating budget.”
RSA 40:13, IX (b). Some of this is easy. For example, an obligation “mandated by law” would be something
like the county tax, which municipalities are obligated to pay.
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New Hampshire Municipal Association
WHAT AMOUNTS MUST BE TAKEN OUT OF LAST YEAR’S BUDGET?
Even prior to the 2018 amendments, RSA 40:13, IX(b) required last year’s budget to be reduced by one-time
expenditures. e amendments now also require the budget to be reduced by “by salaries and benets of
positions that have been eliminated in the proposed budget.”
WHAT IS A ONE-TIME EXPENDITURE?
“One-time expenditures” are “appropriations not likely to recur in the succeeding budget, as determined by
the governing body.” For example, let us say the town included money in the maintenance line of last year’s
operating budget to install new windows in the town hall. Since the window installation was a discrete
project that occurred last year, and not something to recur annually (i.e., the town hall doesn’t get new
windows every year!), that amount constitutes a one- time expenditure that must be taken out to calculate
the default budget.
WHAT EMPLOYMENT POSITIONS ARE “ELIMINATED” AND MUST COME OUT OF THE DEFAULT
BUDGET?
As stated above, the statute now requires last year’s budget to be reduced “by salaries and benets of positions
that have been eliminated in the proposed budget.” It goes on to say that “eliminated positions shall not
include vacant positions under recruitment or positions redened in the proposed operating budget.” So,
let us say your town had an Assistant Public Works Director who retired, and a decision has been made that
the position would not be lled—essentially, the position was discontinued when that employee retired. e
amount of money in last year’s operating budget that represents the salary, benets, and costs associated
with that position would not be included in the upcoming year’s default budget.
However, if the town intended to ll the Assistant Public Works Director position, but it was just vacant
while a search was conducted, the amount of money associated with that position would be included in the
default budget.
WHAT ABOUT MULTI-YEAR CONTRACTS? MORE SPECIFICALLY, IF THE GOVERNING BODY
SIGNS A MULTI-YEAR CONTRACT, DOES THE AMOUNT FOR EACH YEAR AUTOMATICALLY GET
INCLUDED IN THE DEFAULT BUDGET?
HB 1307 also added new subparagraph (c) to RSA 40:13, IX to dene the term “contracts” in the default
budget denition. is amendment addressed one of the most hotly-debated questions related to the default
budget—when the governing body enters into a multi-year contract, can the costs associated with the
contract automatically be included in next year’s proposed operating budget and next year’s default budget?
is new amendment specically states that the term “contracts” means “contracts previously approved, in
the amount so approved, by the legislative body in either the operating budget authorized for the previous
year or in a separate warrant article for a previous year.”
e easiest way to conceptualize this is to put the denition into context.
Take, for example, a waste-hauling contract renewal for a term of three years that the select board signed.
Assume the annual amount increases by 10% in year two and 15% in year three. A warrant article could
be presented to the voters asking for approval of the entire three-year term, which would include: (1) the
purpose of the contract; (2) the term of the contract; (3) the amount to be spent for each year of the contract;
and (4) the total amount to be spent over the term of the contract. If that warrant article for the hauling
contract is approved, then the three-year hauling contract is a contract “previously approved, in the amount
so approved by the legislative body . . . in a separate warrant article.” In the subsequent years’ default
budgets, the full amounts (with the increases) may be included in the default budget.
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The Basic Law of Budgeting – 2022 Edition
On the other hand, the denition also says that a contract may be approved in the operating budget for
the previous year. Look at the hauling agreement again and assume the select board did not present the
agreement to the voters in a separate warrant article, but as an appropriation for the purpose of paying the
hauling contract included in a line item in the operating budget. In that case, when calculating next year’s
default budget, the same amount that was included last year for the hauling contract will be included in the
default budget—not the increased amount in the contract.
WHAT ARE THE RISKS ASSOCIATED WITH PUTTING THE FULL TERM OF THE CONTRACT TO THE
VOTERS IN A SEPARATE WARRANT ARTICLE?
e most obvious risk is triggering “no means no.” e voters could vote down the separate warrant
article to approve the multi-year agreement and appropriations. When a separate article containing an
appropriation is rejected by the voters, it generally means that no money can be spent on the purpose stated
in that warrant article. In this context, the voters’ rejection of this article may bring up dicult questions:
Have the voters rejected spending any money at all on a hauling contract? Or have they simply rejected the
increased amounts in future years? A well-craed warrant article may help reduce these risks, should the
voters reject the article, so that the purpose of spending (e.g., spending any money on waste hauling) is not
prohibited by a “no” vote on the article.
WHAT ARE THE RISKS ASSOCIATED WITH PUTTING THE AMOUNT IN THE OPERATING BUDGET?
ere is nothing wrong with this approach—and since there are many types of multi-year agreements
signed by the select board, this is oen the most eective approach—but it does mean that the default
budget cannot include the increases that the select board may be on the hook to pay; the budget includes
only the same “base” amount as included last year. Let us go back to the hauling contract: Assume the 2017
budget contained $100,000 for waste hauling. At the end of 2017, the select board signed a renewal for a
contract period of three years: $105,000 for 2018; $108,000 for 2019, and $110,000 for 2020.
What amount goes into the 2018 default budget? e answer, based on the new denition of “contracts,” is
$100,000. e reason? e 2018 default budget is based on the 2017 operating budget, and the 2017 budget
contained $100,000. erefore, the voters approved the amount of
$100,000 for waste hauling. e default budget should contain $100,000 and not $105,000, but your proposed
operating budget should contain $105,000. Don’t panic—keep reading!
BUT WAIT! ARE YOU SAYING WE’RE PROHIBITED FROM PAYING THE ANNUAL INCREASES IN
MULTI-YEAR AGREEMENTS SIGNED BY THE SELECT BOARD? WHAT ABOUT SALARY INCREASES
INCLUDED IN AN EMPLOYMENT CONTRACT?
Absolutely not! Remember that the select board has the authority to spend money and the authority to
transfer funds from one purpose to another. is authority applies to a default budget as well as an approved
proposed operating budget—both are bottom line budgets.
Let us go back to the hauling contract in the question above, where the select board did not submit the
contract to the voters in a separate warrant article, and where the 2017 budget contained $100,000 for
waste hauling. We said that the 2018 default budget can contain only the $100,000— as approved in last
year’s operating budget—not the $105,000 contained in the new contract signed by the select board. But
the select board can still pay $105,000 for waste hauling in 2018, even if the town ends up with the default
budget. is is because the budget—whether an adopted operating budget or a default budget—is a bottom
line budget, and the select board has the authority to transfer from line to line. e board must nd the
additional $5,000 elsewhere in the budget. is, of course, means that another area of the budget may suer,
but this is part of the reality of being in a default budget year.
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New Hampshire Municipal Association
e same rules apply to employment contracts that contain annual salary increases, which is another
commonly debated issue with default budgets. Take, for example, an employee whose salary plus benets
in the 2017 budget was $100,000 (with a $50,000 salary). But let’s say the select board had also entered into
an agreement to pay this employee a 10% increase in the subsequent year. For the 2018 default budget,
the board cannot include $105,000 ($55,000 increased salary plus benets); it can put in just the $100,000
approved by the legislative body in the 2017 budget. at doesn’t mean the $55,000 salary can’t be paid to
the employee—but it does mean that the board will need to move money around to “nd” that extra $5,000.
Of course, just like any other multi-year agreement, the select board could ask the voters to approve the
full term of the employee’s contract, including the pay increases, in which case the pay increases would be
included in the default budget.
In fact, while these amendments to RSA 40:13 were pending in the legislature, a judge in the Hillsborough
Superior Court, Northern District, found that annual salary increases included in an employment
contract, entered into between a town employee and the select board, could not be included in future
years’ default budgets. Neal Kurk v. omas Clow, et. al, Docket No. 261-2018- CV-00086 (armed in
part, Neal Kurk v. omas Clow, 2019 N.H. Lexis 90, NH Supreme Court (decided May 9, 2019). e
select board had put into the default budget about $60,000 worth of salary increases. ese increases
were the result of various agreements between the board and certain employees. Neither the contracts
nor the amounts in the contracts (i.e., the annual increases above and beyond the salary amounts in
last year’s budget) had been approved by vote of the legislative body. e judge determined that because
the appropriations in the contract were not previously approved by the voters, these amounts did not
constitute “contracts . . . previously incurred by law.” HB 1307 conrms that ruling by requiring that the
amount of money in a contract must be previously approved by the voters through the annual meeting
budget process to be included in the default budget.
Although this order came out before the current amendments went into eect, we believe the case represents
the intent behind the amendment—that it was targeted at preventing the “unapproved increases” from
being put into the default budget by clarifying that contracts must be approved by the legislative body for
those amounts may automatically be included in the default budget.
Of course, approved collective bargaining agreements, and the cost increases included therein, are always
included in the default budget because those contracts are approved by the voters separately.
IS OUR DEFAULT BUDGET PER SE INCORRECT IF IT IS MORE THAN THE PROPOSED OPERATING
BUDGET?
No. SB 342 nally settles the question whether the default budget may be higher than the proposed
operating budget by amending RSA 40:13, IX(b):
In calculating the default budget amount, the governing body shall follow the statutory formula
which may result in a higher or lower amount than the proposed operating budget.
erefore, if the default budget is calculated correctly, it is not “wrong” because it is higher than the
proposed operating budget for the year.
WHAT ADDITIONAL DISCLOSURE TO THE PUBLIC IS REQUIRED?
HB 342 amplies the notice requirements for the default budget. Adding onto the long-standing requirement
that the default budget be disclosed at the rst budget hearing, RSA 40:13, XI(a), as amended, further
explains the default budget must be “presented for questions and discussion at that hearing,” although
many towns and districts already do this. e form used for presenting the default budget must now include
the “specic items that constitute a change by account code, and the reasons for each change,” as well as
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The Basic Law of Budgeting – 2022 Edition
“reductions for eliminated positions and benets.” Towns and districts will be required to make the “line
item details” for these changes available for inspection by the voters.
SINCE THE DEFAULT BUDGET CANNOT BE AMENDED BY THE VOTERS, IS IT “OFF LIMITS” FOR
DISCUSSION AT THE DELIBERATIVE SESSION?
HB 1307 has claried the default budget’s role at the deliberative session. RSA 40:13, IV will now expressly
permit voters to discuss and debate the default budget, along with other articles on the warrant. However,
RSA 40:13, XI(b) still prohibits the voters from amending the default budget at the deliberative session.
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Index of Statutes
New Hampshire Statutes: Full chapter Citations
RSA chapter 32 ................................ 7, 10, 22, 45, 48, 56
RSA chapter 33 ................................................. 32, 38, 92
RSA chapter 33-B ..........................................................92
RSA chapter 35 .................................... 31, 41, 42, 43, 90
RSA chapter 37 ..............................................................52
RSA chapter 49-B ..........................................................57
RSA chapter 53-A ..........................................................19
RSA chapter 53-F .....................................................32, 43
RSA chapter 53-G ..........................................................39
RSA chapter 79-E ..........................................................15
RSA chapter 91-A .................................................... 56, 73
RSA chapter 162-K ........................................................77
RSA chapter 273-A ..................................................32, 33
New Hampshire Statutes: Section Citations
RSA 31:3 .........................................................................34
RSA 31:4 ........................................................2, 13, 14, 36
RSA 31:4-a ......................................................................36
RSA 31:5 ........................................... 9, 19, 27, 28, 30, 96
RSA 31:5, III .............................................................19, 28
RSA 31:19 .................................................................85, 89
RSA 31:19-a .......................................... 11, 31, 41, 42, 85
RSA 31:19-a; (d) ............................................................11
RSA 31:19-b....................................................................89
RSA 31:19-c ....................................................................89
RSA 31:20 - 21................................................................89
RSA 31:39 .......................................................................14
RSA 31:94 .................................................................10, 35
RSA 31:94-a – :94-e .................................................10, 35
RSA 31:95-b..............................................................31, 89
RSA 31:95-c ................................................. 11, 42, 85, 90
RSA 31:95-d .............................................................42, 43
RSA 31:95-e ....................................................................89
RSA 31:95-h ......................................... 10, 32, 43, 85, 90
RSA 31:98-a ..............................................................16, 90
RSA 31:103-a ..................................................................19
RSA 31:113 ........................................................ 44, 85, 90
RSA 31:130 .....................................................................66
RSA 32:1 .....................................................................7, 50
RSA 32:1 – :13 .................................................................. 7
RSA 32:2 ........................................................................... 7
RSA 32:3 ............................ 10, 12, 13, 23, 27, 37, 45, 51
RSA 32:3, VI ................................................ 10, 23, 37, 45
RSA 32:5 .......................7, 17, 18, 19, 21, 22, 23, 24, 25,
50, 51, 52, 53, 54, 61, 62, 96, 97
RSA 32:5-a ......................................................................19
RSA 32:5-b ..................................................................7, 17
RSA 32:5-c ..................................................................7, 17
RSA 32:5, I ................................................................18, 51
RSA 32:5, II ....................................................................18
RSA 32:5, III .............................................................21, 22
RSA 32:5, IV ...................................................................18
RSA 32:5, V ..............................23, 24, 25, 51, 53, 54, 62
RSA 32:6 ...................................................................12, 26
RSA 32:7 ........... 3, 11, 23, 24, 35, 37, 38, 40, 44, 60, 92
RSA 32:7-a ......................................11, 23, 24, 44, 60, 92
RSA 32:8 ............................................... 10, 21, 29, 46, 64
RSA 32:9 .........................................................................29
RSA 32:10 .......................... 10, 26, 29, 30, 45, 46, 47, 61
RSA 32:10, I(e) ............................................ 10, 45, 46, 47
RSA 32:11 .......................................................... 16, 30, 36
RSA 32:11, V ..................................................................16
RSA 32:12 ............................................................ 7, 29, 53
RSA 32:13 .......................................................................30
RSA 32:14 ................................................7, 10, 48, 54, 59
RSA 32:14 – :24 ................................................... 7, 48, 54
RSA 32:15 .................................................................49, 50
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The Basic Law of Budgeting – 2022 Edition
RSA 32:16 ....................................................48, 50, 51, 52
RSA 32:16, I ....................................................................48
RSA 32:17 .......................................................... 51, 52, 96
RSA 32:18 .................................................................54, 55
RSA 32:19 ....................................................19, 23, 28, 55
RSA 32:19-a ..............................................................19, 28
RSA 32:22 .................................................................52, 53
RSA 32:23 ...................................................................7, 53
RSA 32:24 ...................................................................7, 48
RSA 32:25 ......................................................................... 7
RSA 33.........................11, 19, 24, 33, 35, 38, 39, 40, 41,
58, 64, 68, 91, 92
RSA 33:3-c ...................................................................... 91
RSA 33:3-d......................................................................91
RSA 33:3-e ...................................................................... 91
RSA 33:3-g ......................................................................91
RSA 33:5-a ......................................................................91
RSA 33:7 ...................................................................91, 92
RSA 33:7-a ......................................................................91
RSA 33:7-b ......................................................................92
RSA 33:7-d......................................................................92
RSA 33:7-e ...................................................................... 92
RSA 33:8 .........................................................................92
RSA 33; (c) ......................................................................11
RSA 35..........................11, 31, 32, 33, 40, 41, 43, 85, 90
RSA 35:1 .........................................................................85
RSA 35-B :2, II ...............................................................85
RSA 35-B:2 (II) ..............................................................90
RSA 36-A:4 ...............................................................14, 44
RSA 36-A:4-a .................................................................14
RSA 36-A:5 ........................................... 14, 31, 44, 85, 90
RSA 36-A:5, II ................................................................14
RSA 37:6, V ....................................................................52
RSA 38:29 ....................................................32, 60, 85, 90
RSA 38:29, III .................................................................32
RSA 38:38, I(c) ...............................................................39
RSA 38:38, I(e) ...............................................................39
RSA 38-D:5 .....................................................................90
RSA 39:1 ...................................................................27, 96
RSA 39:2 ...................................................................26, 66
RSA 39:3 ......................................................17, 18, 27, 57
RSA 39:4 ...................................................................26, 97
RSA 39:5 .........................................................................97
RSA 40:4 ............................................... 63, 64, 65, 69, 70
RSA 40:4-a ......................................................... 63, 69, 70
RSA 40:4-b ................................................................ 63, 70
RSA 40:4-c ...................................................................... 64
RSA 40:6 .........................................................................65
RSA 40:7 .........................................................................69
RSA 40:8 .........................................................................69
RSA 40:9 .........................................................................69
RSA 40:10 .......................................................... 63, 68, 69
RSA 40:10, II ..................................................................63
RSA 40:13 .......... 7, 9, 18, 24, 26, 38, 50, 53, 57, 58, 59,
60, 61, 62, 63, 64, 67, 96, 102, 103, 105, 106
RSA 40:13, II-b.........................................................18, 58
RSA 40:14 ....................................................50, 52, 57, 59
RSA 40:14-b....................................................... 50, 52, 59
RSA 41:9 .........................................................................36
RSA 41:9, IV ...................................................................36
RSA 41:11 .......................................................................66
RSA 41:14-a ....................................................................41
RSA 41:29 .......................................................................31
RSA 44:1-b ......................................................................19
RSA 49-B ........................................................... 17, 57, 64
RSA 49-B:13, II-a ...........................................................17
RSA 49-C:12, III ............................................................17
RSA 49-C:33, I(d) .......................................................... 17
RSA 49-D:3, I-a ................................................. 38, 57, 64
RSA 49-D:3, I(e) ......................................................17, 57
RSA 49- D:3, II-a ........................................................... 57
RSA 49-D:3, II-a ......................................................38, 64
RSA 52:1 .........................................................................13
RSA 52:3-a, I-a ...............................................................36
RSA 52:3, II ..............................................................13, 36
RSA 53-A ........................................................................19
RSA 53-A:2, ....................................................................19
RSA 53-C:4 .....................................................................91
RSA 53-F:7 (II)...............................................................91
RSA 72.............................................................................81
RSA 76:2 .........................................................................79
RSA 76:3 .........................................................................83
RSA 76:5 .........................................................................79
RSA 76:11-a ....................................................................83
RSA 76:13 .......................................................................83
RSA 79-E ........................................................................15
RSA 79- E:1, II-a ............................................................15
RSA 79-E:2, II ................................................................15
RSA 79-E:13, I (b) .........................................................15
RSA 91-A:1-a, VI ...........................................................56
RSA 91-A:2 .....................................................................73
RSA 91-A:4 .....................................................................73
RSA 149-I:10 .................................. 31, 32, 60, 85, 90, 91
RSA 149-I:10, II ............................................................. 32
RSA 149-I:10, III ...................................................... 31, 32
RSA 149-M:4 ..................................................................43
RSA 149-M:17, IV ......................................................... 33
RSA 149-M:17, V ...........................................................33
RSA 162-K ......................................................................19
RSA 189:28-a ............................................................ 36, 37
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New Hampshire Municipal Association
RSA 189:28-a, I ..............................................................36
RSA 194:3-c ....................................................................43
RSA 194:15 ...............................................................10, 35
RSA 195:12 ..................................................48, 49, 50, 52
RSA 195:12-a ..................................................... 48, 49, 50
RSA 197:3 .......................................................... 19, 27, 28
RSA 197:3, III .................................................................19
RSA 197:6 .................................................................18, 61
RSA 197:7 .......................................................................26
RSA 198:4 ............................................. 13, 17, 36, 44, 90
RSA 198:4-b....................................................................90
RSA 198:20-b ...........................................................31, 89
RSA 198:20-c ..................................................................41
RSA 198:20-d .................................................................92
RSA 198:48 .....................................................................31
RSA 202-A:4-a ...............................................................31
RSA 202-A:4-c .........................................................31, 89
RSA 202-A:4-d ...............................................................89
RSA 202-A:11 .................................................................85
RSA 202-A:22 .................................................................85
RSA 202-A:23 .................................................................85
RSA 204-C:57, IV .......................................................... 15
RSA 273-A:1, IV ......................................................19, 28
RSA 289:2 .......................................................................19
RSA 318-B:17-b .............................................................85
RSA 423:6 ....................................................31, 44, 85, 91
RSA 654:26 .....................................................................96
RSA 654:27 ...............................................................96, 97
RSA 669:5 .......................................................... 69, 96, 97
RSA 671:33 .....................................................................50
RSA 673:1 .......................................................................73
RSA 673:16, II ................................................................85
RSA 674:1 .......................................................................73
RSA 674:2, I ....................................................................73
RSA 674:5 ....................................................42, 72, 73, 74
RSA 674:6 .......................................................................75
RSA 674:7 .......................................................... 75, 76, 77
RSA 674:7, II ..................................................................75
RSA 674:8 .................................................................72, 78
RSA 674:21 (V) .............................................................. 91
RSA 674:21, V .............................................72, 73, 77, 85
RSA 674:22 .....................................................................72
RSA 674:44-d .................................................... 31, 44, 85
RSA 674:44-g ..................................................................85
RSA 674:44-j...................................................................85
RSA 675:3 .......................................................................63
RSA 675:6 .......................................................................77
RSA 675:9 .......................................................................78
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The Basic Law of Budgeting – 2022 Edition
NEW HAMPSHIRE MUNICIPAL ASSOCIATION
e New Hampshire Municipal Association (NHMA) provides legislative advocacy,
a legal advice hotline, and training programs for member municipalities. Originally
formed by local ocials in 1941 to represent municipal policy concerns before the
state legislature, NHMA has more than 75 years of continuous service to the state’s
municipalities. As the service and action arm of local governments throughout New
Hampshire, NHMA sta respond to thousands of legal inquires from members every
year, and track hundreds of bills every legislative session, actively working to advance
member-adopted policies.
NHMA also provides signicant training and educational opportunities for local
ocials and employees from member municipalities. We know local government!
Learn more at www.nhmunicipal.org.
OUR MISSION
rough the collective power of cities and towns, NHMA promotes eective
municipal government by providing education, training, advocacy and legal services.
25 Triangle Park Drive, Concord, NH 03301 • Phone: 603.224.7447
www.nhmunicipal.org
