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.
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. The 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 effective August 20, 2021 provide that city and town charter exclusions, ordinances and accounting practices that have the effect of an override of a tax cap require a supermajority vote of the legislative body.
In other towns with traditional town meetings or official ballot referendum town meetings (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.
According to the New Hampshire Department of Revenue Administration, of the 13 cities in New Hampshire, there are 5 which do not mention any “cap” or budget limitation in their charters: Berlin, Claremont, Concord, Keene and Lebanon. The remaining 8 cities use a variety of ways to control spending either through charter provisions that limit budget increases, or through limits on the amount of any increase in the property tax levy or a limit on appropriations: Dover, Franklin, Laconia, Manchester, Nashua, Portsmouth, Rochester and Somersworth. There are 6 towns that have adopted tax caps under RSA 32:5-b: Alstead, Brentwood (adopted in 2025), Litchfield, Middleton, Milton and Nottingham.
Amendments to RSA 32:5-b adopted this year will have a significant impact on towns that have adopted tax caps or will adopt tax caps in the future. These changes do not affect cities.
HB 200
HB 200 eliminates the current ability of town meeting to override an adopted tax cap and requires any override to be approved by the legislative body (town meeting) by ballot 3/5th vote. Prior to the enactment of HB 200, a tax cap did not limit the amount the voters could actually appropriate at the annual town meeting; it was only a limit on the budget submitted to the voters for consideration. In a traditional town meeting, the voters were allowed to 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 did 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 apropriation or the total amount of all proposed appropriations. It is important to note, of course, that in a town with an official budget committee, the ten percent limitation still applied, effectively capping the total amount that may be appropriated.
HB 200
Amended paragraph III of RSA 32:5-b to provide that to override an adopted tax cap the business meeting of a traditional town meeting shall vote by secret ballot to exceed the tax cap, and the vote to override shall be approved by a 3/5 majority. Presumably, the need to a conduct a ballot vote to exceed a tax cap would arise anytime a motion to amend an appropriation warrant article would have the effect of exceeding an adopted tax cap. For a town using the SB 2 form of government, HB 200 provides that if the warrant article for the operating budget results in appropriations exceeding the tax cap and receives less than 3/5 majority in favor, “the adopted operating budget shall be reduced by appropriations already raised to remain compliant with the tax cap under this section." Needless to say, what this provision means by referring to “appropriations already raised” is confusing and open to significant debate. If the proposed operating budget in an SB 2 with a tax cap is amended at the deliberative session to exceed the tax cap, and the operating budget is nevertheless approved by a 3/5 majority, how does this vote affect the votes on subsequent warrant articles also containing appropriations? Must all such
additional warrant article appropriations that were amended at the deliberative session so as to exceed the tax themselves individually or collectively be approved at the ballot session by a 3/5 majority?
This amendment controlling the override of a town tax cap applies to all towns with tax caps adopted prior to the effective date of HB 200. HB 200 is effective as of September 13, 2025.
HB 374
HB 374 was also adopted this year further amending 32:5-b by clarifying how a tax cap using inflation and changes in population or attendance at school districts will be calculated. New definitions on “Attendance,” “Base Amount,” and “Population” are provided along with a clarification that official inflation figures (from either the Bureau of Labor Statistics or American City and County) shall be as of October 1st preceding the date of the budget hearing held under RSA 32:5, I. HB 374 also amended RSA 32:5-c concerning the phrasing of the questions for the adoption of a tax cap specifying the ballot language for a tax cap using a multiplication factor. HB 374 is effective September 13, 2025.
SB 105
Finally, SB 105 has been adopted that introduces new options for Town Budget Caps, RSA 32:5-g and RSA 32:5-h, effective August 23, 2025. A budget cap adopted under this provision would limit a proposed budget so as not to exceed the dollars spent per resident in the prior fiscal year times the current town population plus a fixed percentage, or percent annual increase for inflation from the Bureau of Labor Statistics or American City or County.
This new budget cap option also contains the restriction imposed by HB 200 that any override of a budget cap must be approved by a 3/5 ballot vote in favor by the annual meeting. Furthermore, this legislation also introduces a new limit on the authority of town meeting to amend warrant articles. Any question to adopt
a budget cap under RSA 32:5-g shall not be subject to amendment by the legislative body. RSA 32:5-h, V.