The South Carolina Constitution, Article X, Section 7(b), requires municipalities to pass a balanced budget each year, with revenues equaling expenditures.
Goal setting and preparation
Budget processes need a council and staff working together, but specifics vary based on the municipality’s form of government. In the council-manager form, the manager is responsible for budget preparation, and in the mayor-council form, the mayor has this responsibility. Under the council form, the council has discretion for how it is prepared. In all forms, the council is ultimately responsible for setting and maintaining budget enforcement standards.
The council should set budgeting goals ahead of their fiscal year, considering major projects and initiatives, and guidelines for how staff can request a budget for their areas.
Budget forecasting
Revenue comes from such sources as property taxes, business license taxes, franchise fees and permit fees, the state’s Local Government Fund, and any local accommodations tax, hospitality tax or local option sales tax. In setting a budget, councils should study and adjust revenues and expenditures from the last several years.
As they evaluate revenue streams, it's important to distinguish between recurring and one-time sources. Recurring revenue like property taxes, business licenses, and utility fees supports consistent budgeting and planning.
However, one-time revenues like grants, past-due collections, insurance payouts, or permit fees because of temporary boosts from new developments require caution. Factors like fluctuating investment returns or the influence of weather events on water, sewer, natural gas and electric sales may impact revenue unpredictably.
For expenditures, the largest category is usually personnel, and other main types are operating and capital expenses. Possible increases to consider are health insurance premiums, state retirement contributions or utility rates.
Utility fund transfers
If the municipality intends to transfer revenues from its enterprise or utility fund to its general fund, the budget should establish that those transfers are for expenses that have a legally sufficient connection, or nexus, to the utility fund, or are from surplus revenues that remain after providing for all expenses, contingencies and reserves required for the utility fund.
Adjusting the millage cap or fees
Municipalities seeking to increase a property tax millage rate are constrained by Act 388 of 2006. They may increase millage for general operating purposes in one year by the previous calendar year’s average consumer price index increase and the percentage increase in the municipality’s previous year population as provided by the SC Revenue and Fiscal Affairs Office.
The law allows a “look-back” period of three years. Councils that did not impose the millage increase allowed by Act 388 during the previous three years may impose that increase in addition to their current-year allowance.
When imposing new fees, councils must provide notice of the new fee and have a public hearing before adopting the ordinance for it, and must disclose if the fee will fund a service previously funded by property taxes, according to SC Code Section 6-1-330.
Adopting the budget
Councils must adopt their annual budget by ordinance using the number of readings specified by local code during public meetings.
Under SC Code Section 6-1-80, councils must conduct a public hearing on the budget, giving at least a 15-day public notice in a newspaper of general circulation in the area. The notice should follow the requirements of this section of law exactly, giving
- the name of the local government;
- the date, time and location of the hearing;
- total operating revenues and expenditures in the current-fiscal-year budget;
- the projected operating revenues and expenditures of next year’s budget;
- the percentage change;
- the millage for the current fiscal year; and
- the estimated millage in dollars as necessary for next year’s budget.
Learn about the budget process in the Handbook for Municipal Officials in South Carolina.