Letter to the Editor

Legality VS Ethics in the Creation of a Town Default Budget
Submitted by Susan Caldwell   3-15-18

Let’s talk default budgets. Boring, right? I hear you but I’ve learned that not understanding how they are created can cost money. More importantly dollar amounts that can legally be carried forward from the prior year can be vastly different from actual future expenditures. That’s where the ethical question comes into play.

 I knew very little about how default budgets were created up until a couple of months ago. As a reasonably intelligent person, I assumed that a default budget total would be lower than a budget created by the budget committee. Imagine my surprise when I learned that this year, the reverse was true, for both the town of Raymond, NH and the Raymond School District. This motivated me to learn all I could about how this default budget was calculated.

Per RSA 40:13 sec IX
(b) "Default budget" as used in this subdivision means the amount of the same appropriations as contained in the operating budget authorized for the previous year, reduced and increased, as the case may be, by debt service, contracts, and other obligations previously incurred or mandated by law, and reduced by one-time expenditures contained in the operating budget. For the purposes of this paragraph, one-time expenditures shall be appropriations not likely to recur in the succeeding budget, as determined by the governing body, unless the provisions of RSA 40:14-b are adopted, of the local political subdivision. 

The determination of what is a contractual expense is fairly easy, however the categorization of a “one-time expense” is not, and this categorization is left solely to the official/employee who is creating the default budget.

According to the NH Municipal Association:
What would be an example of a “one-time expenditure” that would not be included in the default budget calculation?
If the town had to buy a piece of equipment that was not likely to be needing replacement on a regular basis, that would be a “one-time expenditure” not likely to reoccur in a succeeding budget.  For instance, police cruisers must be replaced on a regular basis and the scheduled purchase of new police cruisers in any municipal budget would not be a one-time expenditure.  On the other hand, the purchase of a new backup electrical power generator for town hall would not likely be a reoccurring capital expense and would be categorized as a one-time expenditure.  The same would be true about a one-time exterior improvement to town hall, such as installing handicap access ramps. 

What this means is that legally the creation of the default budget begins with the dollar amount for each subsection of the prior year’s budget. This amount can only be increased by the categories listed above and need only be reduced by the items in the same category. The ethics problem in my opinion then comes into play when last year’s total gets carried forward into this year’s default even though the person creating this budget knows, by reviewing the budget committee’s totals, that the carry forward amount is not an accurate reflection of the next year’s expense.

For example, the Raymond School District budget committee reduced the salaries by over $200,000 due to positions that would be eliminated. However, the person creating the 2018 default budget carried forward the total from the 2017 budget. In addition an increase was added to reflect contracted salaries for some of the employees. The result was that the 2018 default budget amount was not only higher than the budget amount (for salaries) but higher than last year’s budget as well. And, this is perfectly legal. My question is, is it ethical? If the budget committee tirelessly works on creating a reasonable budget, how can these dollars be totally ignored?

As a result the School District default budgeted totals were in excess of $400,000 higher than the budgeted totals. The same thing was done with the Town budget except to a lesser extent. Again, how is this ethical?

I’m raising this issue because I think more taxpayers need to understand how this process works and make town and school district officials aware that being legal is just not sufficient. If officials are aware that the next year’s legal expenses, etc., will be cut in half, while they have the right to charge us for the previous year’s total, I think that’s unethical. This is obviously an issue that I would like to see clarified by state law but in the meantime there is nothing stopping taxpayers from making their voices heard.








































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