The role of town, school budgets at Town Meeting

Editor's note: This is the second in a series of articles on the Town Meeting process.

As we head into the season of town and school district meetings, citizens who have not participated in the past may be confused about how to deal with the budget. Indeed, the budget process can be very confusing, especially in towns that have adopted RSA 40:13, the Official Ballot Act, commonly known as SB 2.

Under the traditional Town Meeting process, town or school leaders propose a budget that voters will consider.

Most municipalities and school districts also have adopted RSA 32, the Municipal Budget Law, which provides for voters electing a budget committee that serves as a second set of eyes to review the governing body’s budget proposals in light of their impact on taxpayers and to consider whether the proposed spending is justified. It is the budget committee’s recommendation that then goes before the voters.

Because SB 2 requires a ballot vote on each article after it has already been debated during the deliberative session, the town or school district must prepare a default budget to maintain operations if voters do not pass the budget as proposed. The default budget keeps spending at current levels for the coming fiscal year, with adjustments for one-time expenditures that are not necessary in the coming year and contractual increases such as collective bargaining agreements and multi-year contracts that have built-in spending increases.

Recent trends have led many communities to blur the line between what a town or school governing body proposes and what the budget committee recommends. Instead of separately considering the budget, budget committees often meet with officials as they develop their spending plan, resulting in identical versions of the budget proposal. The budget committee still has the ultimate authority in deciding what goes before the voters, so if officials disagree with that decision, they still have the option of publishing their own recommendation. That preserves voters’ ability to judge between the two budget proposals.

Default budgets have presented difficulties because of the way they can be manipulated. Instead of having clear criteria for deciding what constitutes an ongoing expense, the law is a bit vague, and the New Hampshire Legislature’s efforts to clarify that calculation have only partially helped. Additionally, factors such as inflation and government policies often mean the default budget is higher than the one proposed, leaving voters with little choice.

Acting on a budget

As with all other matters under consideration at a town or school district meeting, the proposed budget must appear as part of the warrant, a listing of articles to be decided. The warrant provides notice of what will be discussed, and prevents action on anything not listed.

The operating budget contains a list of all the spending categories for the general operation of the town or school district, including administration, departments such as fire, police and highway, and items such as utilities and building maintenance. Capital expenditures are items such as new vehicles, equipment and high-priced expenses such as a new building that requires borrowing money.

Capital expenditures appear in separate warrant articles, and their costs are not reflected in the operating budget. That means that approving those purchases will add to budget total indicated.

The governing body also may place articles on the warrant that allow a separate vote on expenditures they believe the public should decide — such as spending money for fireworks and other patriotic purposes.

Not all warrant articles are directly related to spending. They may include decisions on the disposal of property, the granting of property exemptions or pursuing long-term plans.

Before any money is spent, it must be “appropriated” by a positive vote on a warrant article. Appropriating means to earmark a certain sum for a particular purpose, allowing the governing board (selectboard or school board) to spend that money for that purpose during the course of the fiscal year.

When considering an appropriation, voters may amend the amount up or down or reject the article (except for the main budget) entirely. They may choose to change the amount of spending to apply more money to another article on the warrant, but they are prohibited from spending any money on something not listed on the warrant, because they cannot take binding action on a subject matter that was not warned in advance.

An important thing to understand is, although voters may amend a specific line of the budget, the governing body has the legal ability to transfer money between line items. If, for instance, voters lower the police budget by $1,000, the selectboard still has the ability to transfer $1,000 from another area of the budget into the police budget, as long as they can do so without exceeding the total amount appropriated in the entire budget.

There is an exception: If voters eliminate a budget item or set the amount to zero, no money can be spent for that purpose.

Also, even though the governing body has the ability to transfer money among budget categories, when voters have amended a line item, they have expressed a preference on how their tax money is to be used. Ignoring that message may cause the office holder to lose in a re-election bid later on.

Individual warrant articles do not offer the same leeway. Money appropriated for a specific purpose in an article cannot be used for something else. If citizens want to support a specific expenditure the governing body has not place on the warrant, they may submit a petitioned article — but they have to do so ahead of time, before the warrant is officially set.

Total budget expenditures are limited in communities that have adopted the Municipal Budget Law. Voters cannot appropriate an amount of money that exceeds the total recommended by budget committee by more than 10%.