The Official Budget Committee: Roles and Responsibilities

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. 

No town is required to have a budget committee, but many towns do. If your town does have a budget committee, understanding the committee’s role starts with determining whether the budget committee is official or advisory.

Whether the committee is referred to as a budget committee, an advisory budget committee, a finance committee, or another name, unless it was adopted by the voters pursuant to RSA 32:14, it is not an official budget committee. Non-official budget committees serve in an advisory capacity to the governing body (select board), which is in control of the budgeting process.

However, if the voters did adopt an official budget committee under RSA 32:14, the responsibility for budgeting has been delegated from the governing body to the official budget committee. In addition to the three to twelve members-at-large, an official budget committee must have one select board ex-officio member, and one village district and/or school board member ex-officio, if there is a village district and/or school district that lies wholly within the town’s borders. RSA 32:15.

Therefore, while sections 1 – 13 of RSA Chapter 32 apply to all towns, village districts, and school districts that adopt an annual budget, sections 14 – 24 apply only to those with official budget committees. This article discusses the roles and responsibilities of official budget committees.

Overview of Official Budget Committee’s Roles and Responsibilities

The purpose of the budget committee is to “assist voters in the prudent appropriation of public funds.” RSA 32:1. RSA 32:16 enumerates the four essential functions of the budget committee.

Prepare the budget. While the governing body still prepares its own proposed operating budget, it is the budget committee’s proposed line-item operating budget that is submitted to the Department of Revenue and presented to the voters for adoption at the annual meeting. That being said, the governing body (select board, school board, and village district board of commissioners), not the budget committee, has the authority to propose other appropriations (i.e., separate warrant articles containing appropriations). When a village district or school district lies wholly within a town with a budget committee, the town budget committee also prepares the proposed budget for that village district and/or school district. This is not optional. In addition, in SB 2 towns and districts, the budget committee prepares the default budget as well as the proposed operating budget. RSA 40:14-b; RSA 40:13, IX(b). 

Recommendations: As part of the budget committee’s role of assisting voters in the prudent appropriation of public funds, the budget committee is required to put a notation on every “special article” (separate appropriations articles that fall into categories listed in RSA 32:3) of whether the budget committee does or does not recommend it. The governing body is also required to do this. Furthermore, if the voters previously approved a warrant article under RSA 32:5, V-a or RSA 40:13, V-a to require these recommendations be displayed with the vote tallies 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, 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 even when the town meeting has not voted to do so. It should be noted, however, that there is no authorization in the law for a budget committee to place its recommendations on any article that does not include an appropriation.

Communicate with the governing body and other officials and employees. The budget committee has the duty to “confer with the governing body or bodies and with other officers, department heads and other officials, relative to estimated costs, revenues anticipated, and services performed to the extent deemed necessary by the budget committee.” RSA 32:16, II. The statute goes on to say that it is “the duty of all such officers and other persons to furnish such pertinent information to the budget committee.”

Therefore, the basic process should work as follows: First, all officers and departments submit statements of estimated expenses and receipts to the governing body. RSA 32:4. (In towns with a town manager, all officers and department budgets are submitted to the manager. The manager prepares a recommendation to the select board by January 31 of each year. RSA 37:6, V.) Then, the governing body 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, and including all sub-accounts used by the governing body. RSA 32:17. The governing body is supposed to provide this information to the budget committee “at such time as the budget committee shall fix.” RSA 32:17, I.

RSA 32:16 and RSA 32:17 also make it clear that the budget committee has the authority to request information directly from department heads and other officials. In addition, RSA 32:17, II states that the information provided to the budget committee by both the governing body and other officials “shall be in a format acceptable to the budget committee.” This obligation may be satisfied, however, by “providing the assistance of a knowledgeable staff person who will attend the budget committee meetings with access to and the ability to provide the required information.” RSA 32:17, II. 

All of these provisions should be understood in the context of the purpose of the official budget committee. The committee exists to help the voters “in the prudent appropriation of public funds.” In other words, voters have decided to create a budget committee so that there is one group whose sole function is to prepare the proposed budget and provide recommendations on other proposed appropriations. This system recognizes that all of the other municipal boards and officials (including the governing body) have many, many other functions and obligations all year long. The budget committee obtains information from these other boards and officials (who have on-the-ground experience and knowledge) and uses it as the starting point for the budget the committee ultimately proposes.

So, while the budget committee has the authority to request information from other boards and officials, and while those boards and officials have the obligation to provide it, the budget committee must remember that it has no authority to direct municipal staff work duties or to interfere with the duties of other officials. Requests for information should balance the budget committee’s need for the information with the realities of the day-to-day obligations of the department heads, boards and officials who are required to respond to them. One of the best ways to do this is for the budget committee to establish a schedule early in the process, ideally in cooperation with the governing body and department heads. This schedule should take into account the times of year when certain boards or departments may be particularly busy. The schedule should be made available to everyone affected so that requests for information don’t come as a surprise.

Once the budget committee has received the governing body’s proposed budget and any other information that it might request, the committee reviews everything and prepares its own proposed budget. In doing so, the budget committee may make its own decisions about which purposes and amounts it chooses to propose. The budget committee is not required to maintain the same level of funding or keep all of the same purposes of appropriation in the budgets that were forwarded to them; they may add, reduce, or change purposes and amounts in any part of it and for every department. In many cases, the proposed appropriations put forward by the budget committee and the governing body will agree or at least be fairly close; in other situations, they may differ. In the end, however, the budget committee’s proposed line-item budget is the one on which the voters will act, and the budget committee’s recommendations on the separate warrant articles proposed by the governing body or by petition will affect the 10 percent limitation on the final amount appropriated (discussed below).

Conduct the budget hearings. When there is an official budget committee, it becomes responsible for scheduling, noticing, and presiding at the public budget hearings. At least one budget hearing must be held to “disclose or discuss” all purposes of appropriations. RSA 32:5. The deadline for holding at least one budget hearing depends on whether the town or district holds a “traditional” annual meeting or an “SB 2” format meeting. See RSA 32:5; RSA 40:13. If it is an SB 2 town or district, the budget committee is also responsible for making the default budget available for discussion and questions at the first budget hearing. RSA 40:13, XI(a).

At the public budget hearing, not only the proposed operating budget but also all separate warrant articles that contain an appropriation must be disclosed or discussed. No new purpose or amount (i.e., one that wasn’t disclosed or discussed at the hearing) can be added to the proposed budget by the budget committee after the hearing has ended unless the budget committee holds an additional budget hearing (although they can still reduce or eliminate items in the budget). Additional budget hearings can be held up until the deadline for finalizing and posting the budget. However, all budget hearings require at least 7 days’ public notice. In addition, any petitioned warrant article that includes an appropriation must also be presented at the budget hearing. To avoid a scramble at the deadline when an unanticipated extra budget hearing is needed, it is good practice to schedule and notice at least two budget hearings, one of which will be immediately after the deadline for filing petitioned warrant articles. If the second hearing isn’t needed, it can be cancelled at any time by posting whatever notice is reasonable. For budget hearing and other deadlines, see NHMA’s Important Date Calendars at https://www.nhmunicipal.org/.

Forward the budget. The budget committee must forward copies of the final budgets to the clerk, as required by RSA 32:5, VI, and deliver two copies of the budget and recommendations on special warrant articles (along with the default budget for SB 2 towns and districts) to the respective governing body at least 20 days before the date of the town meeting, to be posted with the warrant. If the budget committee fails to deliver a proposed budget as required, the governing body’s recommended budget will be the one acted on by the meeting. RSA 32:5, IX.

Additional Key Matters

Reviewing (not controlling) expenditures: In conjunction with budget committee’s responsibility to prepare the budget, the committee also has the authority to review current expenditures by obtaining from the governing body, town manager or other administrative official a “comparative statement of all appropriations and all expenditures, including all sub-accounts used by the governing body, by them made in such detail as the budget committee may require.” RSA 32:22. In fact, RSA 32:22 says that the budget committee “shall meet periodically to review such statements.” The governing body and administrative officials are supposed to provide such information to the budget committee “forthwith” when requested. It is, once again, best practice for the budget committee to bear in mind the myriad other duties and obligations incumbent upon the governing body and administrative officials throughout the year and for both the budget committee and governing body/administrative officials to act reasonably and diligently in both making and responding to such requests.

The budget committee’s review of current expenditures should, again, be viewed in light of the purpose of the official budget committee, which is to assist the voters in the prudent appropriation of funds. The law says nothing about controlling spending during the year. In other words, the purpose of reviewing current expenditures is to determine whether the current year’s budget is meeting the needs of the town or district and to assist the budget committee in putting together the next proposed budget. It does not give the budget committee any control or official input into the way that the governing body or any other officials are spending money in the current year. In fact, RSA 32:22 makes this clear: “The provisions of this section shall not be construed to mean that the budget committee, or any member of the budget committee, shall have any authority to dispute or challenge the discretion of other officials over current town or district expenditures....”  In other words, reviewing current and past expenditures assists the budget committee in preparing future budgets, but it does not give the budget committee authority to control expenditures.

The 10% Limitation: In towns, school districts and village districts whose budget is prepared by an official budget committee, the total amount appropriated by the voters, 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. The 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 “fixed 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 official 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 first (deliberative) session, even if the budget committee changes its recommendations after amendments are made at the first session. RSA 32:5, V(b).

There are two exceptions to the 10 percent limitation:

• Vote to override, RSA 32:18-a. If a warrant article for a bond 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.” The decision to put this language into the article is solely up to the governing body, not the budget committee. If the article passes by the usual required 3/5 vote for long-term debt, it will override the 10% limitation and still take effect. This override option is available only for bond articles, not for other appropriations.
• Cost items excluded, RSA 32:19. Under RSA 32:19, amounts that are included in a budget for funding the cost items of collective bargaining agreements are automatically exempt from the 10 percent rule.

As a final point, remember that an individual budget committee member has no authority to act on his or her own. The duties and authority described in RSA Chapter 32 are granted to a budget committee, not a budget committee member. Therefore, official action on behalf of the committee (such as making requests for information from other boards, officials, and employees) must be conducted through a quorum of the board. 

This is just an overview! For more information on municipal budget law, refer to NHMA’s publication, The Basic Law of Budgeting.