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Senate approves bill to fix problem with local tax cap

State House Bureau

January 31. 2013 8:29PM

CONCORD - The Senate approved a bill Thursday to fix a problem with local tax cap legislation that had the Newfound Area School District needing quick legislative action last month.

The bill changes how a school district's allowable budget is determined under a tax cap.

The Newfound district, the first and only district to use the 2010 tax cap law, passed a tax cap in March 2011, limiting next year's spending to a 2-percent increase above what was raised in taxes the previous year.

Several months after the cap passed, the school district announced it had a $700,000 surplus. When the Department of Revenue Administration determined tax rates for the communities for 2012, it followed the law and applied the $700,000 to the amount to be raised to the current year's budget reducing that figure from $11.6 million, which was approved by voters last year, to $10.9 million.

The problem arose when the district began to set the upcoming school year's budget and learned its budget base was $10.9 million and not the district-approved $11.6 million.

As a result, the school board and budget committee cannot legally approve a budget 2 percent greater than $10.9 million, or about $11.1 million.

A law was passed on the first day of the 2013 session to fix Newfound's problem, and the Senate approved SB2 Thursday to change the law so similar problems do not arise in the future.

The bill makes clear any surplus money from the previous year does not reduce the bottom line of the previous year's budget.

SB 2 now goes to the House for action.

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