How are over-expenditures of appropriations required to be raised in a municipal budget?

The option that states over-expenditures of appropriations must be fully excluded from the "CAP" is correct because municipalities need to maintain budgetary discipline according to statutory requirements. The "CAP" refers to the limits set on the growth of municipal budgets, which are designed to control spending and ensure fiscal responsibility.

When municipalities exceed their budgeted appropriations, these over-expenditures must be accounted for outside of the limit established by "CAP" in the following year’s budget. This exclusion helps to prevent the over-expenditure from affecting the calculated growth rate of the budget, thus allowing for a clearer reflection of ongoing fiscal health and stability.

This approach ensures that municipalities can manage their finances prudently, adhering to legal restrictions while also addressing any unanticipated expenses from previous years without penalizing the budgeting process for the current year.