A budget is a financial plan for how an organization will receive and spend money for a set period of time. It identifies the purposes for which money will be spent and appropriates (sets aside) specific amounts for each purpose. The budget needs to reflect your community's goals and objectives and identify the services and activities to be provided. Many people make up the budgeting team: department heads provide information on expected revenues, expenditures, and needs for each department; the mayor, manager, and/or the treasurer gather estimates of revenues and expenditures and prepare a draft budget; the governing body and the public review the budget and provide input on community wants and needs; and finally, the governing body approves the budget appropriations ordinance, with or without changes.

State law allows the local governing body to establish the manner for the preparation and submission of the budget and capital improvement program, but requires municipalities to make appropriations by ordinance and to hold a public hearing to provide the public an opportunity to speak on the budget before it is adopted. The budget appropriations ordinance provides the legal authority to receive and spend money: it should be adopted before the beginning of each new fiscal year. Once the budget is adopted, the governing body is responsible for assuring that money is spent only as approved in the budget.

What does the council (or assembly) have to do with budgets?
The council (or assembly) is responsible for adopting the budget, assuring that it is properly implemented, and amending it if necessary. The council (or assembly) must:

• set long-range policies and objectives;
• determine annual budget goals and priorities;
• review the draft budget and make changes if necessary;
• provide opportunity for public input on the budget;
• adopt the budget appropriations ordinance;
• assure actual revenues and expenditures are in compliance with the budget; and
• approve amendments to the budget as needed.

What period of time is covered in a budget?
A budget typically covers a 12-month period of time known as a fiscal year. Most municipalities in Alaska follow the State of Alaska's fiscal year, which is July 1 through June 30 of the following year. Some follow the federal fiscal year, October 1 through September 30, and some use the calendar year, January 1 through December 31.

What is the difference between an operating budget and capital budget?
An operating budget deals with money; for operating expenses for services and activities such as general administration, public safety, recreation, road maintenance, and water and sewer. The money received for operations is frequently referred to as unrestricted revenue because it can be used for any purpose authorized by the governing body.

A capital budget deals with money for planning, purchasing, constructing, or improving major community facilities and/or equipment. The capital budget normally consists of money from grants, and is frequently referred to as restricted revenue because it can only be used for the specific purpose(s) approved by the funding source.

The annual budget should identify money for both the operating and capital budgets.

When must the budget be adopted?
The annual budget must be adopted before the beginning of a new fiscal year. State law prohibits municipalities from making payments except in accordance with the approved budget appropriations ordinance. It is recommended that the budgeting process begin four months before the end of the fiscal year, to provide enough time to gather and adequately review the information before making any final decisions.

Who prepares the budget?
Under state law, preparation of the budget is the responsibility of the chief executive officer (mayor or manager). In many communities, the task of preparing the draft budget is delegated to the treasurer or other appropriate staff, who then presents the draft to the mayor, manager, or governing body.

How is a budget prepared?
Preparing a budget requires that you estimate future revenues and expenses based on reliable information. This can be done fairly accurately by basing estimates on actual expenses and revenues in the financial reports for the current and previous year. Estimates should take into consideration any recent or anticipated trends and changes in programs, services, and conditions, and should allow room for minor variations and potential cost increases due to inflation and other factors. Department heads should be consulted for information about any specific department needs. You should also estimate the amount of any carryover income and expenses from the current fiscal year. The budget should be organized in a way that identifies the source of income and the allowable expenses for wages, supplies, utilities, and other appropriate line items for each department. Once a draft budget is prepared, it should be reviewed for accuracy, for assurance that it reflects the priorities established by the governing body, and for assurance that it is balanced.

DCRA has several publications available on preparing a budget and DCRA staff is available to provide training and technical assistance on budgeting.

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What is a balanced budget?
A balanced budget is one in which total available revenue is greater than or equal to total estimated expenses. If estimated expenses exceed available revenue, you must either reduce expenses or raise revenues. A budget that is not balanced is nothing more than a plan to run out of money.

How is a budget adopted?
The budget should be presented to the governing body in the form of a (non-code) budget appropriations ordinance. The proposed ordinance must be introduced, in writing, at a public meeting of the governing body, which must then set a date for a public hearing on the ordinance. Notice of the public hearing must be posted for at least five days unless your local code requires a longer notice period. After the public hearing, the governing body may approve the budget with or without amendments and appropriate the money for the approved budget.

The original signed budget ordinance must be kept on file. Copies of the approved budget should be provided to the mayor, manager or administrator, treasurer, and appropriate staff so they will know what expenditures have been authorized. Communities must provide a copy of the budget to DCRA in order to receive any available community revenue sharing funds from the state.

Why is the budget adopted as a non-code ordinance?
The budget is adopted as a non-code ordinance because it authorizes appropriations only for one year. Before the beginning of the next fiscal year, a new budget must be adopted. The budget is still adopted as a code, or law, but after the year is over and the money spent it would not be practical to have the budget codes be incorporated into a municipal code book.

How is the budget implemented?
The budget must be monitored regularly through a system of monthly financial reporting. Every month the manager or appropriate staff should provide financial reports to the governing body comparing actual income and expenses to the budget. The governing body should review the reports to ensure the budget projections are accurate and the plan is being followed.

How can the budget be changed after it is adopted?
Even the most carefully adopted budgets cannot foresee everything that will occur during a fiscal year. The budget can be changed by moving amounts from one line item to another (transfer appropriation) or by adding additional amounts to the budget (supplemental appropriation). Any changes to the budget must be made by adopting an ordinance to amend the budget ordinance. The new ordinance must be introduced at a public meeting, a public hearing must be held, and the governing body must approve the amendment by majority vote.

Publications

• A Primer for City Council Members
• City Budget Manual
• City Budget Manual- Forms in Excel
• Model Financial Record Keeping System, this oldie but goodie is a large PDF file

Alaska Statutes:

• AS 29.20.390 Municipal treasurer.
• AS 29.20.500(3) Manager to prepare, submit, and execute annual budget.
• AS 29.20.640(a)(4) Requirement to file annual budget with DCRA.
• AS 29.25.010(a)(4) Appropriations required to be made by ordinance.
• AS 29.35.100 Budget and capital program.
• AS 29.60.850 -880 Community Revenue Sharing Program.

Alaska Administrative Code

• 3 AAC 180.010 Application (for Community Revenue Sharing program).
• 3 AAC 180.020 Financial reports (for Community Revenue Sharing program).