Town Tax Cap Rules Clarified

Since Nottingham implemented a tax cap on its town budget in 2022 (there’s no tax cap on the school budget), there has been confusion about how to interpret the statute. For the 2023 budgeting season, the former Interim Town Administrator told the town that this meant the Budget Committee could not propose an operating budget that would increase taxes by more than 4%. This was later determined to be incorrect. The tax cap applies to the entirety of the spending recommended by the Budget Committee. This is not just the operating budget; it also includes the warrant article spending the Budget Committee recommends. This error was corrected in the 2024 budgeting season.

A new point of confusion then arose about at what points in the process is the Budget Committee constrained by the tax cap. It’s clear that the Budget Committee may not present to the voters at the deliberative session recommendations for spending that exceeds a 4% increase in taxes. At the deliberative session, however, the legislative body can change the figures in the budget and the warrant articles. Is the Budget Committee constrained by the 4% tax cap in recommending these changed figures to the voters on election day?

Selectman Dabrieo reports to the Nottingham Blog that the town has received an answer to this question from the NH Municipal Association. The answer is no. Per RSA 32.5.V, the Budget Committee is not constrained by the tax cap. Instead, a different limitation applies. Per RSA 32.18, the voters may not vote to spend more than 10% of what the Budget Committee originally recommended.

Note that it’s possible for the spending proposals on the ballot to be more than 10% above what the Budget Committee originally recommended. That’s okay. But the voters are not allowed to pass them all. When push comes to shove, the order of the warrant articles on the ballot matters. If the 10% rule is exceeded, the last warrant articles on the ballot are the ones that don’t get funded.