The Budget Process

Tim Magee Administrative Services (Finance) Director City of Helena, Montana

Approach Use the Local Government Budget Laws as an outline (one law = one slide) Note each statute – do not “present” details – expand in response to Questions DO expand upon: – Cash Flow, including Reserves – Capital Planning and Financing

Handouts / E-Files Briefly Explain the Use of Each 1.Excel – Personnel Sheet 2.Excel – Cash Flow Sheet 3.Excel – Statement of Changes (Fund Summary) 4.Word – Tax Increase Resolution 5.Word – Budget Resolution 6.Word – Tax Levy Resolution

Outcomes / Understanding The Budget Process Making and communicating budget justifications Tracking, Monitoring and Amending a Budget Dealing with budget issues during the year – changing circumstances / various scenarios – budget problems

Helena’s Calendar JanuarySend Budget Instructions Jan/FebDevelop Department Budgets March/AprilManager’s Budget Review April/ MayPreliminary Budget Presented May/JuneComm. Budget Work Sessions Early JuneNotices of Budget Hearing Late JuneBudget Hearing & Adoption “Back” into a Budget Development Calendar

Basic Budget Steps Give City Staff current budget copies and a deadline to tell you what changes they want. Do a complete personnel worksheet Basic Personnel - in Excel format Do Revenue Estimates Cash Flow - in Excel format Input Budget Forms

Title 7, Chapter 6, Part 40 The Local Government Budget Act Completely Rewritten in 2001 Applies to all local governments The Budget Process

Definitions Governing Body Local Government Municipality Working Capital(Available Cash?) – (+) Current Assets(Cash + Receivables?) – (-) Current Liabilities – (-) Reserves

Working Capital - Reserves General Fund, Cash Flow Reserve allowed – MCA, – 50% of Appropriations / Expenditures Enterprise Cash Flow – typically 1.5 months Debt Service Reserves Discretionary Reserves – Capital, etc. Special Revenue Fund Balances = Reserves Other

Budget & Levies to DOA By October 1 st OR 60 days after Tax Values On Department of Administration (DOA) forms OR on Acceptable Alternative Budget Format

DOA Forms Internet: mt.gov/LGSB (local government services bureau) Accounting and Financial Reporting Section Documents

Budget fund structure “BARS” – Budget Accounting and Reporting System – Department of Administration (DOA) – Local Government Services Bureau How many want a brief overview of fund accounting ??

Expenditures Limited to Appropriations – Expenditure Limitation – OK to under spend This does not apply to revenue budgets – Over/Under collection of revenues not limited – Revenue budgets do not need to be amended

MCA Appropriation power -- requirements. 1.Council may appropriate 2.Use of Appropriations limited to Working Capital Fund and Appropriate before spending 3.Amendment by Authorized Procedures 4.Council Action to Amend Budgets

continued 3.Amendment by Authorized Procedures a.Debt payments b.Trust Funds c.Grants (budget the $$ match) d.Special Assessments e.Sale of Land f.Gifts or Donations g.Debt Borrowed

Use of bond proceeds and borrowed money MCA thru 4010 Reserved Automatic budget amendment for Bonds which are authorized by – election or – the council (revenue bonds, lease purchase)

Fee based budgets - adjustable appropriation In the annual budget resolution fee based budget amendments may be authorized For any proprietary and specially identified fee based appropriations

Fees for services - hearing and resolution Must be reasonable and related to the cost of providing the service. Municipal rate hearing required -- notice. – Utility rate hearing notice – Utility rate hearing – Publication of notice – Mailing of notice

Utility rate hearing notice Notice Published per , except: – publish 3 times – 1 st notice no more than 28 days prior to hearing – 3 rd notice no less than 3 days prior to hearing Also – Notice Mailed – to all customers – no more than 30 days and no less than 7 days prior to public hearing

Utility rate hearing Conduct of municipal rate hearing Rates effective 10 days after decision/filing

Publication of Notice Notice must be – published twice, – with 6 days between notices. Utility Rates must obey & Mailing of Notice

Restriction on tax-financed expenditures if voter approval required. Can't spend in anticipation of approval of expenditure requiring voter approval. Voter approved levies see: & 425

Payments for Judgments thru Reserved

Preliminary annual operating budget 1.Must be prepared -- No “Approval” of Prelim 2.County officials 3.County - by June 1 notify - components required 4.Preliminary Budget - Minimum Content 5.Estimated amount to be raised by property taxes

part 3 continued Preliminary Budget – Minimum Content a.3 Year list of sources - Prior, Current, Proposed b.3 Year list of expenditures c.Projection of changes in cash balances d.List both proposed capital expenditures and capital projects e.Debt Obligations data f.Personnel Schedules - listing not required in budget document g.Other estimates for the budget

part 3 continued b. 3 Year list of expenditures 1 - Prior, 2 - Current, 3 - Proposed i.salaries & wages ii.operations & maintenance iii.capital outlay ** iv.debt service v.transfers out ** FY13 CCIP Fire Example Example in Excel Format

part 3 continued c. Projection of changes in cash balances Start withBeginning balance AddEstimated Revenue DeductProposed Expenditures (note: year end carryovers) DeductProposed/Required Cash Reserves EqualsEstimated Ending Balance Statement of Balances and Changes Example in Excel Format

Notice of preliminary or amended budget 1.Budget Hearing – content a.State preliminary or intent to amend b.On file, open for inspection c.date, time, place of meeting (hearing) d.taxpayer or resident may appear and be heard 2.Publication per

District court budgets Repealed (State grants to District Courts – rules)

Hearing on preliminary budget 1.Hold hearing per notice 2.Officials to attend to answer questions 3.Hearing may be continued from day to day a.approve and adopt by resolution b.by 2nd Monday in August or within 30 days of DOR tax values

Receipt and expenditure of money prior to adoption of final budget. – provides authority due to budget adoption deadlines thru Reserved

Budgeting Increase of tax revenue Before Budgeting Increased Tax Revenue 1.Public Hearing on intent to increase TAX REVENUE a.Includes inflation allowed under b.Excludes tax revenue from new growth c.May hold hearing in conjunction with budget hearing 2.Special advertisement -- wording of notice Tax Increase Resolution Example in Word Format

Final budget - resolution - appropriations 1.May amend preliminary - hearing & comments 2.Must be balanced 3.Final Resolution - establish legal spending limits (what level? Fund? Line Item?) 4.Effective date of Resolution is July 1st - regardless of adoption date Annual Budget Resolution Example in Word Format

In-House Administrative Budgeting Subfunds - Project Accounting Supplemental record keeping. Project Accts = Supplemental Official “Master” Budget (Legal Limits) – Administratively create to subfunds/projects – Total of Subfunds/Projects = Master Budgets No “Formal” Budget Amendments

Budget amendment procedures 1.Resolution may delegate authority to transfer appropriations within same fund 2.Amend as provided in or Public Hearing to amend budget - EXCEPT as provided in , , , ,

Budget amendment procedures 2.Amend as provided in: , Appropriation power -- requirements, amendment process , Fee Based Budgets (if authorized)

Budget amendment procedures 3.Amend as provided in: , Appropriation power -- requirements, amendment process , Bond Proceeds , Fee Based Budgets (if authorized) , Judgements , Emergency expenditures

Emergency expenditures. Requires approval by 2/3rds of governing body

Expenditures limitation Limited to annual appropriation limit Exceptions as outlined in (3) Limited by classifications in (3) – Legal spending limit set by Council

Determination of fund requirements -- property tax levy. 1. Tax Levy Needs Formula a. + Appropriations / Expenditures b. + Cash Flow Reserve needs c. - Working Capital d. - Estimated Revenue (excluding tax levy) 2. Reserve allowed = 50% of Appropriations / Expenditures (excluding election & emergency)

Tax levies for boards and commissions -- bond exemption. City Commission approval required for all tax levies Subject to Exceptions: – Port Authority – Legally pledged payment of debt – Operations of a “Regional Resource Authority”

Fixing tax levy by 2nd Monday in August or with 30 days after DOR tax values after Tax Increase hearing under after Final Budget Adoption All Levies Subject to Annual Tax Levy Resolution Example in Word Format