Special Municipal Budgeting Legislation for the 2009 Budget Year

New Hampshire Town and City, September 2009

By C. Christine Fillmore

Two special laws passed by the New Hampshire Legislature this summer will allow municipalities to take immediate action in response to federal stimulus programs and reduced revenue from the State. These laws, which apply only to the 2009 budget year, permit special meetings with streamlined procedures in certain circumstances.

Municipal Action Under the American Recovery and Reinvestment Act of 2009 (ARRA)

In response to the national recession, the federal government passed the American Recovery and Reinvestment Act of 2009 (ARRA). The purpose of the Act was to boost the national economy by providing funds to create jobs, strengthen the nation’s infrastructure, expand education and health care opportunities and reduce tax burdens. Federal ARRA funds are made available to state and local governments for a wide variety of projects and programs. In New Hampshire, federal funds are administered through existing state-run granting agencies, overseen by the New Hampshire Office of Economic Stimulus.

Because the law requires ARRA funds to be managed and expended as quickly as possible, the application, award and expenditure of these funds has been taking place on a very compressed schedule. Municipalities have had to apply for funds on short notice, and priority has been given to projects and programs that can be undertaken immediately.

However, under the Municipal Budget Law, municipalities may not spend money without an appropriation. RSA 32:8. Even in a municipality which has adopted RSA 31:95-b (granting the governing body the authority to apply for, accept and expend unanticipated revenue during the budget year), problems may arise because most grants require local matching funds, which the governing body cannot approve on its own. This means that many municipalities will be required to hold special town meetings during the 2009 budget year. Under RSA 31:5, special town meetings to appropriate money may only be held if (a) at least 50 percent of the town’s registered voters attend the meeting and vote, or (b) the superior court grants permission for the meeting in advance. It is very difficult to guarantee 50 percent attendance in any municipality. As a result, most municipalities have to go through the somewhat lengthy process of obtaining court permission as well as the ordinary public hearing and notice requirements.

To streamline the process and permit municipalities to meet the federal government’s mandate for expedient award and expenditure of ARRA funds, the New Hampshire legislature passed a special law permitting municipalities to hold expedited special meetings to approve appropriations and expenditures under ARRA. The law, Chapter 229:5 of the 2009 Session Laws (House Bill 239), applies only to the 2009 budget year and will not appear in the codified RSAs. It was signed by the Governor on July 16, 2009, but is retroactive to April 17, 2009.

The law provides the following:

The governing body of a town, village district or school district may call one or more special meetings during the 2009 budget year without obtaining superior court permission or meeting the 50 percent voter turnout requirement of RSA 31:5.

The meeting may address “an appropriate response" to ARRA, including authorizing the appropriation and expenditure of any funds allocated to the municipality by the federal act, the appropriation and expenditure of any local matching share, and the issuance of bonds for any local share. According to guidance from the New Hampshire Department of Revenue Administration (DRA), appropriations for these purposes may be made from grants, bonds, notes, existing capital reserve funds, unreserved fund balance and/or taxation. To the extent it relates to ARRA funding, a vote could also be taken on a previously rejected appropriation under RSA 32:10, I(e), commonly referred to as “no means no." The law also allows the meeting to address the adoption of a warrant article under RSA 31:95-b (towns) or RSA 198:20-b (school district) authorizing the governing body, indefinitely until rescinded, to apply for, accept and expend future unanticipated funds.

Only purposes and business related to ARRA may be addressed at an ARRA special meeting. If the meeting addresses any other business, it must meet the ordinary procedural requirements for a special meeting.

The governing body of an official ballot referendum (SB 2) municipality may choose to hold and conduct the meeting under the procedural rules of a “traditional" town meeting (RSA Chapter 39 and Chapter 40) instead of the deliberative/voting sessions under SB 2. However, if the governing body does not exercise this option and the meeting will be held according to SB 2 procedures, the deliberative session must be held at least 15 days before the official ballot voting takes place.

Notice for these special meetings (including the warrant) must be posted in at least two public places, one of which may be the municipality’s website, at least seven days before the meeting. Notice must also be published in a newspaper at least seven days before the meeting; however, if there is no newspaper in which notice can be published by that time, notice must be posted in a third place in the municipality instead.

DRA has stated that no separate budget form is required for these meetings. Documents must be submitted to DRA within 20 days after the meeting as required in RSA 21-J:34.

The governing body must hold a public hearing on the proposed warrant articles. This hearing may occur at the special meeting itself. If the meeting includes a warrant article for a bond or a note under RSA 33:8-a (in excess of $100,000), the hearing held at the meeting will satisfy the public hearing requirement of RSA 33:8-a.

If the meeting includes a warrant article for a bond or note, a vote of two-thirds of those present and voting is required in a traditional meeting municipality. In an SB 2 municipality, a three-fifths vote is required even if the governing body has elected to hold the meeting according to traditional meeting procedures instead of SB 2 procedures. If a local charter includes a provision specifically stating an alternate vote requirement, that provision will apply.

Procedural rules of RSA 40:1 through RSA 40:11 regarding the moderator, secret ballots, recounts and reconsideration apply to special meetings under this law.

The most recently updated checklist shall be used. This means that the supervisors of the checklist do not have to meet or prepare a new checklist for these meetings.

These are the only procedural requirements for these special meetings to address ARRA issues. Except for the procedures listed in this law, the provisions regarding special meetings in RSA 31, RSA 32, RSA 39, RSA 49-D, RSA 52, RSA 197, RSA 654, RSA 669, RSA 670 and RSA 671 do not apply. For example, the ordinary procedures for the budget committee and supervisors of the checklist are not required at all for a meeting under this law.

Special Meeting to Rescind or Reduce Appropriations

Because municipalities will experience significant revenue shortfalls as a result of the State budget passed for the 2009-2010 biennium, a special law was passed to permit municipalities to call a special meeting to consider reduction or rescission of appropriations made at the annual meeting for the fiscal year beginning January 1, 2009 or July 1, 2009, as the case may be.

This problem arose because municipalities were required to prepare and adopt their budgets before the State adopted its budget. The State budget cut long-established and expected revenues to municipalities by a significant amount. Many municipalities justifiably relied on the continued revenue in adopting their budgets. While the governing body might react to these unexpected revenue reductions by spending less than the legislative body has appropriated, the local property tax rate is established in the fall based on the amount appropriated, not the amount spent. As a result, the loss of State revenues could lead to significant property tax increases. The only way to avoid this situation is for the legislative body to reduce appropriations. Chapter 229:4 of the 2009 Session Laws (House Bill 239) provides municipalities with a way to do this. This is a special law that applies only to the 2009 budget year and will not be codified in the RSAs.

Under this special law, which took effect on July 16, 2009, the governing body of a municipality may call a special town meeting for the voters to consider reducing or rescinding appropriations made at the 2009 annual meeting. A special meeting for this purpose may not be called by citizen petition and petitioned articles may not be inserted into the warrant. The following procedural requirements apply:

The governing body of an official ballot referendum (SB 2) municipality may choose to hold and conduct the meeting under the procedural rules of a “traditional" town meeting (RSA Chapter 39 and Chapter 40) instead of the deliberative/voting sessions under SB 2.

The warrant for the special meeting must specify, in one or more articles, the amount(s) of appropriations proposed for reduction or rescission from the operating budget or separate warrant articles, or both, adopted by the 2009 annual meeting.

The governing body must hold a public hearing on the proposal(s) at least 14 days before the meeting. Notice of the time, place and subject of the hearing must be posted at least seven days before the hearing in at least two public places, one of which shall be on the municipality’s website (if any).

Notice of the special meeting, including the warrant, must be posted at least seven days in advance in at least two public places, one of which shall be the municipality’s website (if any). Notice must also be published in a newspaper at least seven days before the meeting; however, if there is no newspaper in which notice can be published by that time, notice must be posted in a third place in the municipality instead.

Procedural rules of RSA 40:1 through RSA 40:11 regarding the moderator, secret ballots, recounts and reconsideration apply to special meetings under this law.

The most recently updated checklist shall be used. This means that the supervisors of the checklist do not have to meet or prepare a new checklist for these meetings.

The legislative body may approve or disapprove any proposed reduction or rescission of appropriations, or may approve lesser reductions, but the legislative body may not approve greater reductions, increase appropriations, reduce or rescind any appropriation not specified in the warrant, or act on any other business at the meeting.

These are the only procedural requirements for these special meetings to reduce or rescind appropriations. Except for the procedures listed in this law, the provisions regarding special meetings in RSA 31, RSA 32, RSA 39, RSA 49-D, RSA 52, RSA 197, RSA 654, RSA 669, RSA 670 and RSA 671 do not apply. For example, the ordinary procedures for the budget committee and supervisors of the checklist are not required at all for a meeting under this law.

Christine Fillmore is a staff attorney with the New Hampshire Local Government Center’s Legal Services and Government Affairs Department.