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Budgeting comes but once a year. . .

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By Mark Mallon, on May 24, 2012

They’re here. Budget proposals, that is. Municipalities in North Carolina are required by law to have a budget adopted by June 30th for the next fiscal year, starting July 1st. In my first week and a half on the job in Rocky Mount, I have mainly been working on the proposed budget, checking it over for errors and making graphs to show sources of revenues and expenditures.  On Tuesday I put together budget notebooks for Fiscal Year 2012-2013, to be distributed to the Mayor and City Council for their review

Municipal budgeting is both art and science. Yes, it involves a lot of number crunching. But there are also subtleties involved. For instance, North Carolina law dictates that municipal budgets be completely balanced in terms of revenues and expenditures. That means that any adopted budget must have total spending and total revenue amounts that are exactly the same. You aren’t allowed to budget for a surplus or a loss. At the same time, municipalities usually like to build up and maintain a cash reserve (called fund balance) for emergencies. They may also draw on fund balance from time to time to help balance the budget.

“How can municipalities build up a cash reserve if they can’t budget for a surplus?” you might ask. That’s where the art comes in. Budgets are essentially informed guesswork. A budget manager can’t simply look into a crystal ball and determine exactly how much property tax revenue will be collected in the next year. So he or she makes an educated guess. The key is to be just a little conservative in some of your revenue estimates, and maybe overestimate some of your expenditures. If it all works out, the municipality will spend what it needs to during the course of the year and still kick some cash into fund balance. Of course, budgets can be amended during the course of the year.

If this process sounds simple, believe me, it isn’t. Like many municipalities, Rocky Mount is under financial pressure due to the sagging economy. Plus, a large chunk of the City’s operating revenue comes from selling electricity. When there is a mild winter, like the last one, revenues go down. This makes everything a lot more complicated. Some projects have been pushed back a year or two. Departments might not be able to do everything that they want. In order to continue the current level of services, the City Manager and Budget Manager are recommending a modest property tax increase to the City Council. Now, usually when you say the words “tax increase,” people get a little worked up because they think they’re going to pay it through the nose. However, it’s important to understand the true impact before making a judgment. The proposed tax increase would be $30 or less (for the year) for about two-thirds of Rocky Mount’s residents. Not so bad when you consider all the services that the City provides.

Tags: Budget, fund balance | Categories: City of Rocky Mount | No Comments
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