The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.
Once the budget and other appropriations have been voted on, what is their legal effect? RSA 32:8 provides that no town, village district or school district official can spend any money for any purpose in excess of the amount appropriated by the legislative body for that purpose, or for any purpose for which no appropriation has been made.
Furthermore, annual appropriations are just that; they are appropriations that provide for identified expenditures for that fiscal year. All appropriations lapse at the end of the fiscal year and any unexpended portion cannot be expended without further appropriation, or unless of the exceptions to the lapse rule applies as stated in RSA 32:7.
This past year several municipalities faced demands for significant expenditures that were not anticipated and were decidedly unexpected. Some ambulance services were threatening to close their doors unless the town they served agreed to provide significant additional funding above and beyond what had been budgeted for that year. Here are some options for addressing unexpected expenditures that might bust the budget:
Contingency Fund:
To be prepared for an unexpected expenditure that arises during the year towns may establish a contingency fund by separate warrant article. The fund may be used by the governing body (select board, school board, village district commissioners) during the year to meet the cost of unanticipated expenses that may arise during that year. The amount of the 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. School Districts can also be authorized to establish a contingency fund under RSA 198:4-b.
Line-Item Transfers:
If changes arise during the year that make it necessary to spend more than the amount appropriated for a specific purpose, the governing body may transfer to that appropriation any unexpended balance remaining in some other appropriation, provided:
- The total amount spent shall not exceed the total amount appropriated at the town or district meeting.
- Records shall be kept by the governing body, such that the budget committee, if any, or any citizen may ascertain the purposes of appropriations to which, and from which, amounts have been transferred.
- A statement comparing all appropriations and expenditures shall be deemed adequate for this purpose so long as every expenditure has been properly authorized and properly classified and entered and any expenditures exceeding the original annual meeting legislative appropriations are offset by unexpended balances remaining in other appropriations.
- Any amount appropriated at the meeting under a special warrant article, or to a capital reserve fund pursuant to RSA 35:5, may be used only for the purpose specified in that article and shall not be transferred.
Emergency Expenditures:
Using RSA 32:11 either the Commissioner of the NH Department of Revenue or the Commissioner of Education can approve an expenditure that would exceed the total amount appropriated at the annual meeting, or for a purpose where no appropriation had been made, where “an unusual circumstance” arises during the year:
- The municipality shall apply to the DRA or Education Department prior to making the expenditure (although an expenditure caused by a sudden or unexpected emergency could justify an after the fact application).
- No such authority shall be granted until a majority of the budget committee, if any, has approved the application in writing. If there is no budget committee, the governing body shall hold a public hearing on the request, with notice as provided in RSA 91-A:2.
- Neither the DRA Commissioner nor Education Commissioner can approve such an expenditure unless the governing body designates the source of revenue to be used. This requires that there be sufficient municipal fund balance to support the expenditure. Neither commissioner shall have the authority to increase the town or district's tax rate in order to fund such an expenditure.
- When applying to the Education Commissioner the school board shall send a copy of such application to the DRA.
Special Town Meeting Permission: There are two options to consider under RSA 31:5 (towns & village districts) or RSA 197:3 (school districts) to get permission to raise and appropriate funds to address an unexpected expenditure:
Special Meeting with Minimum Voter Attendance: A special meeting of the legislative body (town or district meeting) can be held by the municipality to increase or reduce an appropriation previously approved at the annual meeting but only if 1/2 of the number of legal voters are in attendance. The checklist used at the meeting just preceding the special meeting is used to determine whether voter attendance satisfies this 50% requirement, and all voting at the special meeting shall be by ballot. This requirement would not apply to money to be raised for the public defense or any military purpose in time of war or to money to be raised for the purpose of financing broadband infrastructure bonds under RSA 33:3-g.
Special Meeting with Superior Court Approval: Since satisfying the 50% voter attendance requirement could be extremely difficult, in case an emergency arises during the year requiring an immediate expenditure of money, the select board, district commissioners or school board may petition the superior court for permission to hold a special meeting which, if granted, shall give the special meeting the same authority as an annual town or district meeting.
"Emergency" is defined 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. This definition, however, does not establish a requirement that an emergency involves a crisis in every set of circumstances.”
To demonstrate that an emergency exists the petition to the Superior Court must address the following factors:
(1) The severity of the harm to be avoided.
(2) The urgency of the petitioner's need.
(3) Whether the claimed emergency was foreseeable or avoidable.
(4) Whether the appropriation could have been made at the annual meeting.
(5) Whether there are alternative remedies not requiring an appropriation.
On or before the date of filing the petition with the Superior Court, the select board or district commissioners shall forward a copy of the petition and the warrant article or articles, by certified mail, to the commissioner of the department of revenue administration. The petition to the superior court shall include a certification that the commissioner of the department of revenue administration has been notified pursuant to this paragraph.
For School Districts, ten days prior to petitioning the Superior Court, the school board shall notify, by certified mail, the commissioner of the department of revenue administration that an emergency exists by providing the commissioner with a copy of the explanation of the emergency, the warrant article or articles and the petition to be submitted to the superior court. The petition to the superior court shall include a certification that the commissioner of the department of revenue administration has been notified pursuant to this paragraph.
For both towns and districts the governing bodies are required to post notice of their vote to petition the Superior Court within 24 hours after taking the vote and a minimum of 10 days prior to filing the petition with the court. Notice of the court date for any evidentiary hearing on the petition shall also be posted within 24 hours after receiving notice of the court date from the court. Such notices shall be posted at the office of the governing body and at 2 or more other conspicuous places in the town or district, and in the next available edition of a local newspaper with a wide circulation in the town or district.