the municipal secretary desktop reference manual - Southwestern ...

SECTION VIII
MUNICIPAL BUDGET
Foreword
Developing and implementing the municipal budget is the most important operation
municipal officials undertake during the year. The budget is the only legal means which a
municipality can use to determine resource needs, and which it can use to allocate these
resources among competing community needs. Succinctly, the budget addresses and answers a
most fundamental political question: “who gets what at what cost”?
The Aat what cost@ part of the budget equation is represented by the local revenues, such
as taxes and fees, collected by the municipality during the fiscal period. These revenues are the
major sources of moneys to finance the annual budget.
Given this dependency relationship, it is critical that revenue estimates be sound and
conservative. To make reliable estimates, one must have an understanding of factors which affect
various revenue flows. For each revenue source, there are two essential components: a base,
which is the economic entity to be taxed or assessed a fee and a revenue rate, which is the
amounts levied against the base. Yield from a revenue source is a product of these two figures:
Base x Rate = Revenue Yield - Estimate of uncollectables.
The “who gets what” element is the estimated expenditure program proposed in the
annual fiscal plan. In developing operating expenditure estimates, the most important, and costly,
factor is consideration of the number and types of personnel and expenditures for them. Fiscal
data from this category, together with information from numerous object expenditures, form the
basis for estimating proposed programs or functional expenditures. Under most circumstances,
historical cost plus adjustments to reflect current economic environment factors can be used to
make these estimates. However, the magnitude and nature of past expenditures must be analyzed
to determine whether they should be challenged as being adequate and appropriate.
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