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

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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

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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)

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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

craig.gibons@multco.us

503 988-4131

https://www.oregon.gov/DOR/programs/property/Pages/local-budget.asp

http://www.tsccmultco.com/

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