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The Fundamentals of Budgeting for Local Governments
Oregon Government Finance Officers Association Fall 2018 Conference
Tuesday October 16, 10:30
Craig Gibons Executive Director Tax Supervising and Conservation Commission
Survey How Many of You Have…
Never prepared a budget? Created a private sector budget? Contributed to a budget? Balanced a fund? Balanced a whole budget?
Is anyone here from a school district or community college?
Has anyone just moved here from another state?
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Key Concepts
What is the legal purpose of creating a budget?
To Create Appropriations.
How important is it that the public have an opportunity to weigh in on a budget?
Mandatory.
Who sets the rules for how budgets are made?
The State Legislature.
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Key Concepts
What is the purpose of Local Budget Law? 294.321
Standard Set of Procedures for all Municipal Corporations
Program and Policy Descriptions
Revenue and Expenditure Estimates
Specific Methods for Pubic Input
Means of Controlling Expenditures
Financial Transparency 4
Key Concepts
What are statutes?
Laws Created by Legislature and signed by Governor. 294.305 to .565
What are administrative rules?
State Agency Created Rules That Elaborate on State Statutes.
Handout 1, LBL Admin Rules Index
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Key Concepts
What happens if your district does not follow Local Budget Law?
Your District Can Not Levy Taxes Or Expend Money. 294.338(1)
Any Public Official Who Expends Public Money
In Excess of the Amounts authorized by Law Or for a Purpose other than Authorized by Law
Shall Be Civilly Liable.
294.100
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Key Concepts
What are the three stages of building a municipal government budget in Oregon?
Proposed Approved Adopted
What group of people is the acting body in each of these three stages?
Staff Budget Committee Governing Board
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Step 1: Get Organized The Board appoints a Budget Officer who is responsible for assembling budget material and information and physically preparing the proposed budget. 294.331
What is that person’s first duty? Create a budget calendar.
Handout 2, Sample Budget Calendar
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Step 1: Get Organized
What is a Budget Committee? 294.414
• The governing body and
• Equal number of electors o May not be officers agents or employees
o Serve with no compensation
o Appointed by governing body to staggered 3-year terms
• Board can remove a member, but only with caution
• Elects a president at first meeting
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Step 2: Create the Proposed Budget
What is Fund Accounting and why do public bodies use it?
Restricted Revenues
Resources = Requirements 294.388(1)
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Step 2: Create the Proposed Budget
What are the types of funds according to Oregon Revised Statutes and Administrative Rules? 150-294-0420.
• General Fund • Special Revenue Funds • Capital Projects Funds • Debt Service Fund • Special Assessment Funds • Enterprise Funds • Internal Service Funds • Trust and Agency Funds
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Step 2: Create the Proposed Budget
So the budget is organized by funds and each fund is divided into resources and requirements.
Each fund has at least six columns for numbers.
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Step 2: Create the Proposed Budget
Resources First
Beginning Fund Balance
Property Taxes
Everything Else
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Step 2: Create the Proposed Budget
Beginning Fund Balance
This year’s Ending Fund Balance is next year’s Beginning Fund Balance
Fund balance as of today (2-1-18) $3,000,000
Estimates from today to June 30th:
Resources +1,000,000
Requirements -2,000,000
Ending Fund Balance $1,000,000
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Step 2: Create the Proposed Budget
Property Taxes
Budgeting Permanent Rate and Local Option Levies
Assessed Value x Tax Rate = Taxes Extended
(Taxes Extended – Loss to Compression) x Collection Rate = Budget
Budgeting GO Bond Property Tax Levy
Debt Service Required x Collection Rate = Budget
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Step 2: Create the Proposed Budget
District: East Multnomah SWCDPermanent Rate 0.1000
2014-15 2015-16 2016-17 2017-18 2018-19
Assumptions Actual Actual Actual Actual Assumed
Actual Assessed Value 44,341,355,333 46,019,324,981 48,021,224,815 49,953,115,275
Actual Growth 4.81% 3.78% 4.35% 4.02%
Assumed Growth 1.04
Assumed Assessed Value 51,951,239,886
Taxes Extended 4,449,759 4,631,422 4,833,985 5,024,356 5,195,124
Actual Compression 249,330 182,921 162,545 170,394
Compression as a % of Taxes Extended 5.60% 3.95% 3.36% 3.39%
Assumed Compression Percentage 0.0340
Assumed Compression 176,634
Taxes Imposed 5,018,490
Assumed Discount and Delinquency Rate 5.0%
Taxes Estimated to be received 4,767,000
Assumption Worksheet2018-19
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Step 2: Create the Proposed Budget
Total Resources Dictate Maximum Requirements
Taxes
Business Licenses
Franchise fees
Fines
Interest income
Charges for services
Donations
Transfers in from Other Funds Transfers In
Beginning Fund Balance Beginning Fund Balance
Revenues
Resources
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Step 2: Create the Proposed Budget
Wages
Benefits
Retirement
Statutory Benefits
Professional Services
Utilities
Office Supplies
Travel and Meeting
Equipment
Property Maintenance
Capital Projects Capital Outlay
Transfers to Other Funds Transfers Out Transfers Out
Contingency Contingency Contingency
Ending Fund Balance Ending Fund Balance Ending Fund Balance Unappropriated
Personnel Services
Materials and Services
Expenses
AppropriationsRequirements
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Step 2: Create the Proposed Budget
Some Rules for Requirements
Personnel Services: Individual positions do not need to be listed in budget, roll them up to a wages line item. Include Full Time Equivalent (FTE) tally.
Capital Outlay: The district determines what qualifies as a capital expenditure. Document that decision in financial policies.
Debt Service: Budget must show separate amounts for principal and interest 294.388(6)
Contingency: In operating funds only, no limit on size, but can not be used for expenditures-must be transferred to an expenditure line item.
150-294-0430 and 294.463(2)
Ending Fund Balance: not an appropriation. Use is severely restricted.
150-294-0440
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Step 2: Create the Proposed Budget
Revenues – Expenditures = Increase or (Decrease) in Fund Balance Appropriations are listed in the budget resolution and are the legal spending limit for the fiscal year. Requirements must equal Resources.
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Step 2: Create the Proposed Budget
Finish the Proposed Budget
• Total budget has to balance.
• Total transfers have to balance. • At a minimum, proposed budget consists of the detail budget
sheets and budget message 294.403
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Step 3: Budget Committee Process
Budget Committee Meeting Notice 294.426 (3, 4, & 5) • Use the state form.
Budget Committee Duties 294.426
• Receive the budget message and document • Provide for public comment • Deliberate, revise, and approve the budget and ad valorem tax amount or rate for all funds
Budget Committee Rules • Meeting quorum is one more than half the committee 150-294-0450 • Affirmative votes require “yes” votes from one more than half the full committee 150-294-0450 • Individual members have no authority to act, only the committee can act 294.428(3) • Deliberations must be done in public at committee meetings 294.426(6)(a) • Committee may compel attendance and/or documents 294.428(2)
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Step 3: Budget Committee Process
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Step 3: Budget Committee Process
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Step 3: Budget Committee Process
• Budget Committee duties are finished when the Committee approves the budget.
• Off Season Budget Committee meetings 294.428 (2) and state handout
Handout 3, Pre-meeting Topics for Budget Committee Discussion
26
Step 4: Prepare Budget for the Board
Update detail sheets with changes from Budget Committee
Give notice of Budget hearing 249.438 Notice requirements Use state form: https://www.oregon.gov/DOR/forms/FormsPubs/form-lb-1-municipal_504-073-2.pdf
Handout 4, Notices of Budget Committee Meetings
Error in the notice, notify board at next available meeting 294.451
Keep track of any staff-initiated suggestions for changes to the budget
27
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Step 4: Prepare Budget for the Board Create budget resolution and LB-50
Format of budget resolution: 294.456(3)(a)
Manner of Appropriations: 150-294-0510
Include tax rates, tax amounts, and categorization in budget resolution
Handout 5, Budget Resolution
Create Notice of Property Tax and Certification of Intent to Impose a Tax, Fee, Assessment, or Charge on Property (Form LB-50)
Handout 6, LB-50
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Step 5: Hold the Budget Hearing
150-294-0480 Quorum and voting
One more than half the board must vote in the affirmative to pass resolution
294.453 any person may appear
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Step 6: Adopt the Budget & Levy Taxes
• Staff introduces suggested changes
• Board considers public testimony, deliberates, and changes budget
• Cannot increase taxes 294.456 (1)(c)(C)
• Changes limited to 10% of expenditures in each fund 294.456 (1)(c)(A)
• Budget must be balanced
• Board votes on Budget Resolution and ad valorem taxes
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Step 6: Adopt the Budget & Levy Taxes
What has the Governing Board done by adopting the budget?
Created Appropriations, the legal authority to send money-and the legal limit.
Authorized the County Assessor to levy taxes on its behalf.
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Step 7: Compile Adopted Budget Doc
The adopted budget document contains all the legally required notices and documents prepared as part of the budget process. 150-294-0310
• The 2 budget committee meeting notices and affidavit of publication
• The budget hearing notice (the LB-1) and affidavit of publication
• Budget detail sheets
• Budget Resolution
• Tax levy Resolution
• Notice of Property Tax and Certification of Intent to Impose a Tax, Fee, Assessment or Charge on Property (Form LB-50)
• Sample ballot of any new voter-approved ad valorem taxes
• Any other documents the district chooses to include
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Step 8: File Documents
For districts not levying property taxes
On or before July 15, file with the State Department of Revenue the resolution adopting the budget 294.458(1)
For districts levying property taxes
On or before July 15 File with County Assessor, 2 copies each of: (294.458(3) and 150-294-0530)
• LB-50
• Certification that the Budget Committee approved the ad valorem taxes
• Voter approved ballot measures for new local option or permanent rate ad valorem tax levies
• Resolution(s) adopting the budget and certifying the ad valorem taxes
On or before September 30 File with the County Clerk or Assessor the complete budget document 294.458(5)(a and b)
35
Step 8: File Documents
Missing the July 15 Filing Deadline?
File for an extension in advance (150-294-0520)
Notify County and File an Amended LB-50 in arrears
Check here if this is
. Be sure to read instructions in the Notice of Property Tax Levy Forms and Instruction booklet an amended form.
FORM LB-50
To assessor of ________________ County
2018-2019Notice of Property Tax and Certification of Intent to Impose
a Tax, Fee, Assessment or Charge on Property
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Step 9: Changing the Budget
The Appropriations as shown on the budget resolution are the legal spending limits for your district.
Appropriations can be increased during the year to adjust the budget for unexpected expenditures.
The process to increase appropriations is complex.
Here is a flow chart to help determine the method to use.
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Proposed, Approved, Adopted
Step 1: Get Organized Step 2: Create the Proposed Budget Step 3: Manage the Budget Committee Process Step 4: Prepare Budget for Board Step 5: Hold Budget Hearing Step 6: Adopt Budget And Levy Taxes Step 7: Compile Adopted Budget Document Step 8: File documents Step 9: Change the Adopted Budget
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Key Concepts
The State Legislature Makes the Local Budget Law.
Local Budget Law Creates a Standard Way to Budget.
Budgets Create Appropriations.
Appropriations are Legal Spending Limits.
Public Input Required.
Failure to Follow Budget Law Precludes Your District from Levying Taxes or Spending Money.
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Thank you!
Craig Gibons Executive Director
Tax Supervising and Conservation Commission Fall 2018 OGFOA Conference
503 988-4131
https://www.oregon.gov/DOR/programs/property/Pages/local-budget.asp
http://www.tsccmultco.com/
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