The Monadnock Regional School District and the Monadnock District Education Association -NEA-NH had entered into a collective bargaining agreement that annually allocated a lump sum amount for health insurance for Association members. The Association was then responsible for selecting insurance plans and determining the amount to be contributed by each eligible employee. Any amount of the allocated healthcare budget not expended in any fiscal year would be deposited into a health care pool to offset healthcare coverage for employees electing plans that exceeded the District’s allotment per employee. There was a health care pool fund balance as of June of 2016 in the amount of $392,381 that the District claimed could not be further distributed to employees because the funds had lapsed pursuant to RSA 32.
Relying on RSA 32:7 the District took the position that since all appropriations lapse at the end of the fiscal year, any unexpended portion in the health care pool could not be expended without further appropriation. The Association claimed that that the funds in the pool had become encumbered by a legally enforceable obligation and thus the funds in the pool did not lapse. RSA 32:7, I.
The Supreme Court ruled that to prevent the lapse of the unspent portion of an appropriation two conditions must be satisfied. First, the unspent funds must be encumbered by a legally enforceable obligation for their expenditure. Second, the obligation must attach to the funds before the end of the fiscal year for which they were appropriated.
In this instance the CBA required that unexpended health care funds that were budgeted each year were to be placed in the pool. Because the pool funds were encumbered by an obligation for their expenditure, and because each year’s unexpended health insurance appropriation was required to be placed in the pool once the District satisfied its yearly contribution to premiums and buyout payments, the required obligation arose each year no later than at the moment the District satisfied its yearly contribution. Thus, the Court concluded that both conditions of RSA32:7, I, were satisfied as to the unspent amount of each year’s health insurance appropriation, and the funds in the pool did not lapse could be distributed to employees according to the CBA.
The Court rejected the argument of the District that the funds had to be expended before the end of the fiscal year. The Court ruled that RSA 32:7, I placed no requirement on the time at which the required expenditure must occur.