MUNICIPAL FINANCE

Cities and towns are financed in many different ways -- from how and when they set their budgets to how they spend money.

BUDGET PROCESS

A budget is a plan of expected expenditures and outcomes for the upcoming fiscal year.  A local government's fiscal year may or may not correspond to the calendar year.  Budget schedules for municipal governments include:

July 1-June 30:  Approximately 50% of municipalities
January 1-December 31:  Approximately 25% of municipalities
October 1-September 30:  Less than 20% (mostly Florida and Texas municipalities)
Any one year period:  Less than 5% (mostly Illinois municipalities)
August and April start dates:  Less than 1%

Although the details of the budget process vary significantly from city to city, there are four main stages in the process: preparation, approval, implementation and evaluation.  Budget preparation involves the development of expenditure estimates for departments in light of available revenues.  Following this, budget estimates are submitted to a council or board for approval in the form of appropriations.  Once approved, the adopted budget is then implemented by the departments across the year.  Finally, there is an evaluation stage, where the performance of governmental units in implementing their budgets is evaluated. 

In addition, under state law, nearly all cities operate under balance-budget requirements, meaning that cities almost always plan on ending the fiscal year with a balance to carry forward.  This ending balance, often referred to as a "reserve" or "rainy day fund," becomes available revenue for the next fiscal year.

For more information:
Revenues
Expenditures
City Fiscal Conditions