Every municipality in South Carolina is required to adopt balanced budgets “which provide for sufficient income to meet its estimated expenses for each year,” according to the SC Constitution’s Article X, Section 7(B). State law also governs the process for city councils passing their new budgets.
Forecasting and planning the budget
Creating a forecast of revenue, the first step in a budgeting process, does not come with specific timeline requirements in the law. Even so, having an accurate understanding of revenue will help the city in its operations, and can help reduce the potential need for budget amendments.
Comparing past revenues and expenses, such as across a three to five-year period, can improve the council’s ability to anticipate the coming fiscal year. Waiting as late as possible to finalize revenue projections can reduce surprises as well. For example, a city with a July 1 fiscal year start date may want to have a budget work session in May, and then two readings of the budget ordinance in June.
Who prepares the budget?
Municipalities operating in the council form of government may designate the person or people responsible for preparing the budget for consideration.
In the other two forms of municipal government in South Carolina, state law sets the person who prepares the budget. In the mayor-council form, the mayor is charged with preparing the budget for the council’s consideration. In the council-manager form, the city or town manager prepares the budget.
Adjusting the millage cap
Act 388 of 2006 constrains municipalities’ ability to increase property tax millage. Under the law, cities are allowed to 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 population as provided by the SC Revenue and Fiscal Affairs Office. The Municipal Association makes the calculated municipal millage caps from the RFA available in a list online.
The law allows a “look-back” period of three years. City councils that did not impose the millage increase allowed by Act 388 during the previous three years may impose that increase in addition to their current-year allowance.
In property tax 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 known as the “rollback millage calculation.”
Adopting the budget
As with passing other ordinances, a city council must use public meetings for consideration of their budget ordinances — meetings that are subject to the posting and 24-hour-notification requirements of the SC Freedom of Information Act.
The budget ordinance, however, has the additional requirement of a public hearing, as outlined in SC Code Section 6-1-80. The municipality must advertise this public hearing at least 15 days in advance “in at least one South Carolina newspaper of general circulation in the area.” There are even requirements for its size on the newspaper page, as it must be “a minimum of two columns with a bold headline.”
This requirement means that the city must consider newspaper publication schedules when setting up the timeline for budget adoption ahead of the new fiscal year. While some local newspapers publish seven days a week, others publish only on select days out of the week, or publish weekly, bi-monthly or monthly. The SC Press Association maintains a list of South Carolina newspapers.
Completing the budget before the new fiscal year
The State of South Carolina operates on a July 1 to June 30 fiscal year. At times, the General Assembly, having not passed its budget by July 1, will instead pass a continuing budget resolution that temporarily maintains funding at previous levels. Under the SC Constitution, municipalities most likely do not have the authority to use a continuing budget resolution, and should avoid allowing the beginning of the fiscal year to arrive without a newly passed budget.
In a case where a budget has not passed for the new fiscal year, the city council should at least adopt a provisional budget using the previous year’s revenue and expenses. Later, the council could amend the provisional budget as new information on revenues and expenditures arrives, but would still need to have the two readings and public hearings when doing so.
Learn about the budget process in the Handbook for Municipal Officials in South Carolina. The handbook discusses estimating expenditures as well as the process for executing a budget during a fiscal year, using financial controls and a reporting system to stay on budget.