Adopting a budget is one of the critical responsibilities of municipal councils. A council may only adopt a budget using an ordinance of council and through a statutorily established process. The work of enacting a budget can be a rewarding opportunity for both elected officials and staff to work together and see goals translated into plans.
Even with a great deal of effort and research, however, budgets are ultimately a statement of plans and expectations, and as the saying goes, “even the best laid plans can go awry.” As real-world conditions change and unforeseen needs arise, councils can often find themselves in need of budget amendments to ensure that their spending aligns with actual priorities and demands.
Although SC Code Section 6-1-80 establishes a technical process for adopting a budget, there is no direct statutory guidance on the process to amend a budget.
In the absence of clear legal guidance, decisions on how to undertake the amendment process must be made with careful, fact-specific consideration, and may still expose municipalities to legal challenges.
Equal dignity rule
South Carolina courts have adopted the so-called equal dignity rule, which is sometimes also referred to as the legislative equivalency rule.
The rule provides that amending a legislative act requires the same formality, or “dignity,” as the original act. In other words, if the act to be amended was an ordinance, then the amendment itself will also require an ordinance.
When applying the equal dignity rule to budget ordinances, the further question arises of whether the amending ordinance must comply with the procedural requirements established by SC Code Section 6-1-80 for the initial budget ordinance. These requirements include
- conducting a publicly noticed hearing with specific standards for the publication,
- formatting of the notice, and
- content of the notice.
The courts have not yet addressed whether the equal dignity rule requires that these additional procedural requirements — which were applicable to the original ordinance — are automatically carried over to amendments to that document. Complying with these procedural requirements can be costly and burdensome for municipalities, especially when attempting to act on short notice.
The safest course, however, is to assume that equal dignity does require that amendments follow the same procedural course as the document to be amended. This would mean that municipalities should provide public notice and a public hearing for each amendment to the budget.
Drafting techniques
To avoid the potential burdens and costs associated with amending a budget ordinance, some municipalities deploy drafting techniques to reduce the likelihood that formal amendments will be required. Under this approach, the ordinance adopting the budget provides the municipality’s chief administrative officer with flexibility to make certain budget adjustments without requiring council action.
This authority can be broad, allowing transfers between line items, departments or divisions, so long as the aggregate of the transferred amounts does not increase the total dollar amount of the budget. In these circumstances, there would need to be careful consideration to make sure that no transfer violated fund restrictions or financial covenants.
The authority may also be more narrowly drawn to permit transfers only within a specific fund or department. For example, a manager may be permitted to transfer money within the public works department budget from a supplies line item to capital expenses.
There is no clear legal guidance on the validity of either approach, and municipalities that adopt these methods may face potential legal challenges. Nevertheless, both practices are widely used across the state and are often adopted as a policy decision to balance legal risk with the practical needs of effective governance.
Year-end budget ordinance
Another method would be to authorize each amendment by ordinance without following the additional procedural requirements, and then to adopt a final year-end budget ordinance after providing the required public notice and public hearing. This final ordinance, in effect, reconciles the budget with actual expenditures and affirms all expenditures from the prior year. Municipalities that do this should be careful, however, to ensure that expenditures prior to the final reconciliation ordinance do not exceed the amounts appropriated in the original budget.
The Handbook for Municipal Officials in South Carolina has more information on preparing, adopting and executing a budget.