January marks the midpoint of the fiscal year for any municipality that begins its fiscal year on July 1. This makes now a good time for these cities and towns to give their budgets a careful review.
A review can help city officials get a sense of
- whether the revenue projections and expenditure estimates on which the budget was originally based are proving to be accurate;
- whether the budget is helping the council meet its goals for the year. The council can ask whether the goals are likely to be met by the end of the fiscal year; and
- whether adjustments are needed for the second half of the year. Generally, by the fiscal year midpoint, the municipality should have made half, or less than half, of budgeted expenditures.
When examining revenues at the halfway point of the fiscal year, items like utility payments and hospitality taxes should total about half of their estimated amounts. This is not the case for property tax revenue and business license revenue. Payments for those are typically due in the third and fourth quarter of a fiscal year beginning July 1.
Six months' worth of data is typically enough for council to see overall trends large enough to require adjustments to the budget. For example, fuel costs are notoriously volatile. Higher prices lasting for a single month may not reveal a trend, but six months of increases can call for budget changes.
Steps for revising a budget
State law requires councils to amend the budget ordinance when revisions are made to the annual budget. The ordinance must have readings at two meetings, separated by at least six days. Some cities and towns have established procedures requiring additional readings for budget ordinances and amendments.
Council must also conduct a public hearing on the amended budget ordinance before adopting it. The city should advertise this hearing the same way it provided notice for the public hearing on the original budget ordinance.