Local Government Budget 101
Local government services cost money.
Local governments pay their employees, provide equipment for services, pay for public works, parks, repairs, and all the things you expect from your city. Your City Manager and their staff are responsible managing the financial health of your city. They need to make sure there is enough revenue (money coming in from taxes, fees, or grants) to cover all the expenses of running city.
The budgeting process is a lot of work, so here are a couple things to keep in mind:
A budget is the local government's plan of how to spend and raise money over the next year (or two years in some places).
In the state of Oregon, municipalities are required to have your involvement in the process of developing the budget. Oregon's Local Budget Law establishes specific procedures for the budgeting process and requires municipalities (cities, counties, and special districts) to have a budget committee consisting of community members. The budgeting process is your opportunity to share with your local officials what you think the community values and should prioritize over the next year or several years.
By law, local government budgets must be balanced at the end of the fiscal year (usually June 30 every year). That means all the expected revenues from taxes, grants, or fees must be equal to the planned spending and expenditures.
Watch the Ask a City Manager video series to learn more.
REVENUES
Where does the money come from?
Cities collect revenue from property taxes, various fees for services or permits, local taxes like a lodging tax or cigarette tax, grants, or intergovernmental revenue (money coming from another government agency like the state or a neighboring city).
EXPENDITURES
Where does the money go?
Expenditures are the services you see and use everyday and include employee salaries, public safety, parks, urban renewal, infrastructure projects, materials for projects, and any debt your city may have from big projects.
Your city's revenue and expenditures are divided into different funds. Funds are like different accounts that track revenues and expenditures for certain programs, projects, and activities. **The revenue in each fund can only be used for expenditures in that fund.**
Your city's fund balance is like a savings account and helps your city deal with unexpected expenditures, like from natural disasters or pandemics. Click each fund below to explore more.
Watch the City of Hillsboro's video on the budget process for an idea of how your city creates a budget and aligns spending with community goals.
General Fund:
This is the biggest operating fund of a city. Revenue sources include property taxes, permit fees, intergovernmental revenue (money from other governments). The general fund often pays for police, fire, personnel services (salaries and equipment costs), and capital outlay (money to buy equipment and city assets).
Enterprise Fund:
Enterprise funds are like the business operations of your city. When you pay for a permit or license or pay to use a facility, you are often paying into the enterprise fund. Cities use these funds to pay for water, sewer, stormwater, or other utilities.
Debt Service Fund
The debt service fund is the annual payment of principal and interest on the City’s debt. City's take on debt to pay for capital projects.
Capital Projects Fund:
Capital projects are major infrastructure projects in your city like new bridges, buildings, or major construction. Capital projects are long-term projects that are paid for over several years. Revenues for this fund could include charges for services, user fees, or system development charges (one time charges for new development projects).
Can we move money from one fund to another to pay for needed services?
No. In local government budgets, there are discretionary funds and restricted funds. Discretionary funds can be used to pay for a lot of different projects and programs. For example, the general fund is discretionary. All revenues that go into the general fund can be used for any of the projects in that fund. Restricted funds like a water or sewer fund can only be used be for water or sewer projects. This keeps your city government accountable to keeping track of all revenues and expenditures in your city.
As more people move to my city and pay property taxes, can't we pay for more city services?
Not necessarily. This is for several reasons:
Some local government funds are restricted, which means the money has to be spent on certain programs and projects.
Local governments have debt. Big projects like building a new bridge or community center, or updating facilities and assets costs a lot money (sometimes millions of dollars). Like businesses, local governments take out loans to pay for big projects. Governments get good deals on loans, but they still need to pay off debt.
How can I be involved in helping my city's budget process?
For many communities in Oregon, the process of deciding next year's budget begins in March (the budget takes effect on July 1 of every year). There are several ways to be involved throughout the year:
Attend City Council meetings throughout the year. Local officials need to hear from you and other residents about your priorities and values for your city.
Apply to be on the budget advisory committee. Every local government in Oregon has a budget advisory committee consisting of community residents. This committee is responsible for reviewing and approving the budget presented by city staff. You will receive training to be on the committee, and you'll help shape the future of your community.
Pay attention to local news during the 'budget season' (March-June).
SOURCES:
Douglas F. Morgan et. al. Budgeting for Local Governments and Communities (Abingdon, Oxon ; New York: Routledge, 2015).
Gordon Whitaker and Ricardo Morse, Local Government in North Carolina, 5th Ed. (University of North Carolina at Chapel Hill School of Government, 2021). Retrieved from https://localgovernment.pressbooks.com/
League of Oregon Cities, Oregon Local Government Budgeting Overview, March 2019, retrieved from https://www.orcities.org/application/files/5215/7195/7454/BudgetCommitteeTrainings2019Revised.pdf
Oregon Department of Revenue, Local Budgeting in Oregon, retrieved from https://www.oregon.gov/DOR/forms/FormsPubs/local-budgeting-oregon_504-400.pdf