Local Government in Connecticut, Third Edition

10. Where Does the Money Come From?

ChApTEr 10 Where Does the Money Come From? The early settlers of New England had a reputation for frugality. Luxuries were avoided, necessities were made to last, and bargains were boasted. Much of this old attitude has carried over into the operations of today’s local governments, especially in the smaller towns. Citizens at the local level have the opportunity to closely examine budget proposals and express their opinions, often quite vocally, on where and how their money is being spent. And since local governments have to balance their budgets each year, each item is carefully scrutinized. The state also has to balance its budget; it is only the federal government that does not have to balance its budget, and it is the only level of government that annually runs its operations on a deficit basis. It is also the only level of government that can print money, which is not an option at the local level. Ending the fiscal year in a deficit makes headlines and bodes ill for elected officials. The Local Budget The municipal budget is adopted each year, usually in late May or June. Who adopts the final budget varies by municipalities. It can be adopted (or rejected) by a town meeting or by a legislative council. In some towns the adoption process can drag on through the summer months or even later, causing serious spending and cash-flow problems. The mill rate or taxing rate has to be set each year, and since this is done normally after the budget is adopted, the failure of a budget to pass can result in a delay in sending out the tax bill, causing problems both for the municipality and for the taxpayers themselves. The budget is more than a series of numbers. It is a policy document, setting the stage for where the town wants to go. Will there be an emphasis on public education, increased police protection, or a new senior center? These are all policy decisions that are carried out by the allocation of dollars in the local budget. The debates on these issues can become very intense and often personal. At the annual town meeting why is ThE budgET imporTAnT? The town or city’s budget is more than a series of numbers and spreadsheets. It is a policy document, establishing priorities and setting the course for where the municipality wants to go. The state requires all municipalities to be on the same fiscal year as the state, and this is called the uniform fiscal year, July 1 to June 30. Where Does the Money Come From? 63 on the budget there are often very heated discussions, and not infrequently, name-calling. Indeed the debates in Washington over spending a billion here or a billion there on some remote country pale in comparison to the local battles on the municipal budget. All Connecticut municipalities operate on a budget that runs from July 1 to June 30; this is known as the uniform fiscal year (UFY). It is the same fiscal year that the state operates on. Preparation of the budget that becomes effective on July 1 begins the previous fall and continues to build until its adoption in the spring. See chapter 23 for details of the budgetary calendar. At the close of the fiscal year on June 30, the annual audit starts, and by law has to be completed by December 31. It is common for a town’s finance office to have three fiscal years going on at the same time. For example, in December, the audit of the prior fiscal year that ended June 30 has to be completed, the spending on the current fiscal year’s budget is taking place, and the preparation of the next fiscal year budget is beginning. Members of the finance staff have to remain aware which fiscal year they are working on, and ensure that the correct fiscal-year finance software is open, and that when they are posting information to the finance software that it is to the correct fiscal year. To further complicate matters, the federal fiscal year is different. The main operating fund of the unit of local government is called the general fund, and it is out of this fund that operating costs are paid. There are numerous other funds for specific purposes, such as a sewer and water fund, landfill fund, and pension fund, to name a few. It is out of the general fund that the basic services of...