GilfordGrok

Since the public hearings, I've done a slow take and am quite disturbed about the reserve fund articles in both Town and School warrants. 

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I won't go into the intrinsic merits they may or may not have, some seem rather trivial, but the form they take I consider unacceptable.   This year's draft warrants would establish three new expendable reserve funds for the School District and four for the Town.  

I believe that, with very rare exceptions, we should never approve the establishment of expendable trusts.

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First the distinction between expendable and non-expendable trusts.   The traditional Capital Reserve Fund was not expendable.   It was a matter of one annual meeting putting money aside for anticipated future capital expenditures, with the money staying in trust until a subsequent town or district meeting voted to take it out.   RSA 35:15, I, says "Persons holding such capital reserve funds in trust, . . . shall hold the same until such town, district or county shall have voted to withdraw . . . or shall have named agents of the town, district or county to carry out the objects..."   So if the warrant article names the selectmen or school board as agents to expend, it's expendable and otherwise not.   The purpose of the trust fund was, and still should be, to smooth out fluctuations in the tax rate by putting aside money in years when the net expenditures are relatively low and taking it out when they are high.   Such funds should be established only for purposes where expenditures are irregular and where they are likely to be large enough to have a significant affect on the budget but not large enough to warrant a bond issue.   And a non-expendable fund retains the authority of the Town Meeting or School District Meeting to determine when the money should actually be spent.

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The one and only case that I can remember where an expendable trust was warranted was the school district a few years ago proposing an expendable special education trust to take care of unexpected expenditures like court-ordered placement of special-needs students.   This got a lot of debate, and we were finally convinced that these situations can come up suddenly and in large enough amounts to really screw up the operating budget.  A non-expendable trust fund wouldn't help much because you'd have to get a court order to call a special meeting to appropriate money out of the fund to pay for the emergency.   In my opinion, none of the funds proposed in this year's warrants come anywhere close to meeting the requirements for expendability that the special ed one did.

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 The other problem I see is the wording in the three School District articles that makes the appropriation "from the June 30 unreserved fund balance (surplus) available for transfer on July 1 of this year".  If there are unexpended appropriations at the end of the fiscal year they lapse (with some exceptions; see RSA 32:7).   In the case of a school district, the lapsed appropriations (surplus) then go to reduce the district's assessment against the town for the ensuing year;  it is the town that has to levy the taxes.   Any capital reserve fund appropriation in that ensuing year, along with all other appropriations, would normally add to the assessment against the town.   But the wording of the articles in this case would short circuit the normal procedure.   Supposedly, it comes out in the wash but it gives the appearance of free money.   Actually, RSA 35:5 allows a town or district to transfer to a fund "any of its unencumbered surplus funds remaining on hand at the end of any fiscal year", but I think that's a lousy and confusing way to do it and it doesn't cost any less.   And it raises some questions:

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    1.   How does the school board know, only half way through the school year, that there is going to be a $150,000 surplus at the end of the year?
    2.   If they do know that, then doesn't it imply that the budget for the current year was overly padded?
    3.   If the surplus turns out to be less than $150,000, then is the new appropriation reduced?  The warrant article doesn't say. 
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    Dick Campbell