Illinois Optional Municipal Budget
Law Fiscal Management; Municipalities
By MICHAEL WOELFFER —
Director, Department of Commerce and Community Affairs

Today the need and demand for efficient and effective uses of public monies have never been greater. Budgeting and financial management policies of cities and villages are receiving a great deal of attention. Local government officials are focusing on ways to improve their fiscal planning and management skills.

Illinois Revised Statutes (Ch. 24, par. 8-2-9) provides the authority and procedures that must be followed by non-home rule cities and villages in order to expend public monies. Municipalities are unique when compared to other units of local government in Illinois. All other units of local government must prepare and adopt an annual budget document which also serves as an appropriation ordinance.

For municipalities, there is no legal requirement to prepare a budget. The only requirement to expend monies is the passage of an Annual Appropriation Ordinance within the first quarter of each fiscal year. The ordinance appropriates monies to defray the necessary expenses of the municipality for the fiscal year. It should cover all possible needs of the municipality regardless of expected revenues to support the proposed expenditures. As such, the appropriation ordinance, by itself, does not address the financial planning needs of a municipality when compared with a detailed annual budget.

A budget is a comprehensive financial plan which projects both anticipated revenues and proposed expenditures for a fiscal year. It is a document in which decisions are made that commit the municipality to services and expenditures in the current fiscal year and may create needs for future funding. Those responsible for preparing and controlling the budget must carefully examine the existing services and programs, set goals and priorities for the coming fiscal years, as well as look at future consequences, all within the context of allocating the limited resources of the municipality.

Recognizing the limitations of the appropriation ordinance by itself, many Illinois municipalities also prepare an "administrative or operations budget" to assist in the day-to-day management of their spending. In this way, the municipalities achieve a degree of informal, non-binding control.

In 1967, the Illinois General Assembly passed the Illinois Optional Municipal Budget Act (Ch. 24, par. 8-2-9.1 thru 10). The intent of the Act was to further strengthen municipal budgeting and management practices. However, the Act is voluntary and, to date, only a small number of the 1280 municipalities have opted to use it.

Some local municipal officials are still unaware of the existence of the Illinois Optional Municipal Budget Act and its provisions. The Act requires a 2/3 majority vote of the corporate authorities holding office for adoption. It may be abandoned by a similar vote. Highlights of the Act include:

(1) A budget officer is designated.

(2) The budget officer is responsible for establishing and encouraging sound fiscal management procedures.

(3) The budget officer must compile the budget with revenue estimates and expenditure recommendations for all of the municipal departments. A Chart of Accounts must be established, using any of the formats recommended by the National Committee on Governmental Accounting, the Department of Commerce and Community Affairs, or the Comptroller of the State of Illinois.

(4) The annual budget serves in lieu of the appropriation ordinance and must be adopted prior to the beginning of the fiscal year.

(5) An amount of money (up to 3% of the equalized assessed valuation) may be specifically set aside in a separate fund for capital improvements, repair or re-

February 1986 / Illinois Municipal Review / Page 7

placements. Also the budget may contain an amount set aside for contingencies (unforseen expenditures). This amount cannot exceed 10% of the total budget — less the amount set aside for contingency purposes.

(6) The budget may be revised by deleting, adding to, changing or creating new objects or purposes at any time during the fiscal year by a 2/3 majority vote of those holding office. Of course, no increase can be made to the budget unless funds are available.

(7) The tentative budget must be made available for public inspection at least ten days prior to passage of the annual budget. A notice must be published not less than one week after the budget is made available for public inspection and at least one week prior to the public hearing.

Two legislative changes were made in recent years that affect the appropriation/budget process during the current fiscal year. These are:

(1) In 1977, Public Act 80-307 became law requiring municipalities over 2,000 population to hold at least one public hearing prior to adoption of the appropriation ordinance. This law was designed to increase public participation; because of the population requirement, 64 percent of the municipalities are exempt. Federal Revenue Sharing requirements, however, provide that a public hearing is required on the appropriation ordinance if a municipality receives Federal Revenue Sharing monies and plans to expend them during the current fiscal year. With the possible loss of Federal Revenue Sharing monies in the future, this would again exempt the majority of municipalities from the requirement of holding public hearings.

(2) Public Act 83-0881 became law on September 26, 1983, and requires that within 30 days of adoption, a certified copy of the municipal appropriation ordinance, as well as an estimate of revenues, by source, anticipated to be received and certified by the chief fiscal officer must be filed with the County Clerk.

Local municipal officials are entrusted with sound management of public monies. The Illinois Optional Municipal Budget Act, if adopted and fully implemented, can be an important tool in carrying out that responsibility.

If you want additional information on this Act or need some assistance, contact our Office of Local Government Management Services. Simply call our new local government HOTLINE.

Local Government Hotline
The Department of Commerce and Community Affairs has set up a toll-free Local Government Hotline.

This new service will make it even easier for local officials to call the agency and obtain information on a variety of local government matters. The number is 1-800-562-4688 ("LOC-GOVT").

Staff of the department's Office of Local Government Management Services man the hotline. Staff of this office regularly work with local governments throughout the state.

The hotline permits local governments to call and get information and help on matters relating to local government operations. Typical requests expected on the hotline include information on: local revenue sources and budget procedures, financing of public services and projects, availability of grant and loan programs, Federal Revenue Sharing requirements, Truth-In-Taxation procedures. Open Meeting Act requirements, etc. The hotline can also be used to request the department's local government publications, like the new "Capital Improvement Planning and Budgeting: A Guide for Illinois Municipalities." Hotline callers will be put in contact with department staff members to receive more information on many other local government topics.

This new hotline provides free, ready access to the Department of Commerce and Community Affairs. It will further strengthen our already strong working ties with local governments.

The hotline will operate from 8:30 a.m. to 5:00 p.m. on weekdays. •

Page 8 / Illinois Municipal Review / February 1986