The key to a good budget process is a well-organized budget plan, executed by a council and staff working together as a team. Preparing a budget can be time-consuming, but it can help make sure the council is using the best budgeting practices while also complying with state law.
The budget process
The South Carolina Constitution, in Article X, Section 7(b)
, requires all municipalities to adopt a balanced annual budget, with revenues equaling expenditures. As cities and towns craft their budget ordinances, they must use public meetings. General budget discussions do not qualify for executive session.
The SC Freedom of Information Act spells out the requirements for giving notice of all public meetings. This includes posting an agenda at the meeting site at least 24 hours in advance and notifying the press and anyone else who has requested notice at that time as well. Cities and towns must also post the agenda on the municipal website, if one exists.
Under SC Code Section 6-1-80
, councils must conduct a public hearing on the budget, giving at least a 15-day public notice in a newspaper of general circulation in the area. The law also lists the specific details of what the notice must include.
The budgeting process should start a minimum of three months before the budget adoption date. Many municipalities begin budget preparation six months before the start of the new fiscal year. Detailed budget calendars, agreed upon by councilmembers ahead of time, can help with the process. A prioritized list of council goals can guide decisions on how to allocate scarce resources.
For municipalities using the council form of government, the council should designate the individuals responsible for preparing the budget. For the other two forms of government, state law designates who is responsible for budget preparation. In the mayor-council form, the mayor is charged with preparing the budget for the council’s consideration. In the council-manager form, this responsibility rests with the city or town manager.
Municipalities wishing to increase a property tax millage rate are constrained by Act 388
of 2006. A municipality may increase millage for general operating purposes in one year by the previous calendar year’s average consumer price index increase and the percentage increase in the municipality’s previous year population as provided by the South Carolina Revenue and Fiscal Affairs Office.
The law also allows a “look-back” period of three years. Councils that did not impose the millage increase allowed by Act 388 during the previous three years may still impose that increase in addition to their current-year allowance.
In reassessment years, municipalities must adjust the millage rate to account for the change in the assessed value after reassessment, excluding the increase in value associated with new construction, the renovation of existing structures and the resale of a property to produce no more property tax revenue than the previous year. This is referred to as the rollback millage calculation.
Forecasting the budget
Staff can expedite budget forecasting by maintaining detailed historical records on revenue and expenditures in a format that can be easily compared and analyzed for a minimum period of three to five years.
Council can avoid unexpected budget problems by examining and adjusting prior-year revenues and expenditures carefully to account for unique situations. Examples on the revenue side include one-time dollars budgeted the previous year, such as grants, collection of past-due revenues, cash from insurance settlements, and opening or closing of businesses or industries. Health insurance premiums, state retirement contributions, utility rate increases and one-time payments are examples of items to double-check on the expenditure side.
Some key issues to consider when forecasting in 2021 are coronavirus revenue disruptions as well as budget changes related to the business license standardization process, now required by Act 176. For more information on the standardization process, visit www.masc.sc (keyword: standardization).
Councils may want to wait as late as possible when finalizing revenue projections. For example, a city with a July 1 fiscal year start date may want to consider a budget work session in May, followed by two readings of the budget ordinance in June.
The council is responsible for ensuring that the municipality has submitted the required financial information and payments to the appropriate agencies. The start of the budget process is a good time to confirm that the municipality has completed these tasks:
- Submit an annual audit to the Office of the State Treasurer by the 13th month after the end of the city’s fiscal year, or the city’s share of state revenues may be withheld, including any local option sales tax funds.
- Submit the Local Government Finance Report, which his generally due to the Revenue and Fiscal Affairs Office by March 15. The state can withhold the municipality’s share of the Local Government Fund for failing to submit this report on time. Some municipalities choose to include the preparation of this report in their annual audit contract’s scope of services. This practice relieves municipal staff of this challenging task.
- Confirm the municipality is current on submitting state court fines and victim assistance assessments to the Office of the State Treasurer.
- Submit the city’s annual audit to creditors, grant agencies and local banking institutions with which the city conducts business.