The key to a good budget process is a well-structured, organized and executed budget plan implemented through a team effort. While this approach may be time consuming, it can greatly improve the effectiveness of the budget process and ensure the city complies with state mandates and uses best budgeting practices.
- All municipalities, regardless of size, must adopt by ordinance a balanced annual budget. Revenues must equal expenditures.
- All budget meetings are public meetings, and the municipality must provide written notice of the meetings and an agenda. Written notice includes, but need not be limited to, posting a copy of the meeting agenda at least 24 hours before the meeting at the town/city hall or at the building in which the meeting is to be held and notifying the press and anyone who has requested individual notice. The meeting notice and agenda must also be posted on the municipal website, if the municipality has a website.
- General budget discussions do not qualify for executive session.
- Before adopting an annual budget, council must conduct a public hearing giving at least a 15-day public notice of the hearing in a newspaper of general circulation in the municipality. S.C. Code of Laws § 6-1-80 gives specific details of what the notice must include.
- State law requires a public hearing and ordinance, approved by a positive majority vote of the municipal council, to impose new service fees. S.C. Code of Laws § 6-1-330 gives specific details of what the notice must include. A positive majority is a majority of the total members of the council, not a majority of a quorum of council members present at a meeting.
- State law caps the annual increase in municipal property tax millage. A municipality may increase millage for general operating purposes in one year by the prior calendar year’s average Consumer Price Index increase and the percentage increase in the city’s previous year population as provided by the Revenue and Fiscal Affairs Office, plus the increase allowed in millage as similarly calculated for each of the three previous years but not imposed by council.
- Municipalities with the local option sales tax must reconcile prior year LOST collections with the revenue estimate used to calculate the tax credit factor. Any shortage in credit given in the current budget year must be rolled over into the calculation of the credit factor for the next year. The municipality should calculate a new local option sales tax credit factor every year as part of the budget process.
- 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. This is referred to as the rollback millage calculation.
Budgeting best practices
- The most important step to a successful budget is for the city council to agree up front on the process.
- A detailed budget calendar is the most important budget tool.
- The budget process should start a minimum of three months in advance of the budget due date. Many municipalities begin budget preparation six months before the start of the new fiscal year.
- In the council form of government, city council should designate the individual(s) responsible for preparing the budget. By state law, the mayor in the mayor-council form and the city manager in the council-manager form of government are charged with preparing the budget for council’s consideration.
- A prioritized list of council goals can help in making decisions on how to allocate scarce resources.
- 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 carefully examining and adjusting prior year revenues and expenditures to account for unique situations. Examples on the revenue side include one-time dollars budgeted the prior 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 which should be double checked on the expenditure side.
The council is responsible for ensuring the municipality is submitting 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 the following tasks:
- Submit an annual audit to the state Treasurer’s Office by the 13th month after the end of the city’s fiscal year end, or state funds may be withheld.
- Submit the Local Government Finance Report to the Revenue and Fiscal Affairs Office by January 15 (S.C. Code of Laws § 6-1-50). The state can withhold funds for failing to submit this report on time. Some municipalities choose to include preparation of the LGFR 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 state Treasurer’s Office.
- Submit the city’s annual audit to creditors, grant agencies and local banking institution(s) with which the city conducts business.