Defining a Budget
In simple terms, a budget is an entity's plan for its financial resources. It is an estimate of proposed expenses for a given period and the proposed means of paying for them. Two basic components of the budget are the revenue section and the expenditure section.
Defining Revenue and Expenditure
Revenue is an increase in the financial resources of a government. Some examples of local government revenues are property taxes, assessments, permits and fees, licenses, fines, charges for service, grants, and payments from other governments. Monroe County has a large va-riety of revenue sources.
An expenditure is a decrease in the financial resources of a government. Expenditures include, for example, current day-to-day expenses such as salaries, payment of principal and interest on long term debt and bonds, utilities and material costs, and purchase of vehicles, equipment or property.
Budget Structure – Fund Accounting
An important concept in government accounting and budgeting is subdividing the budget into what are called "funds". This is called fund accounting. Fund accounting allows a government to budget and account for funds restricted by law or policy. These funds allow the County to segregate certain revenues and then account for expenditures from these revenues.
The County budget has approximately 70 funds. These funds can be compared to a company spreading its business among 70 banks. The County uses these funds for example, to make payments on different types of County debt or to track fees collected to pay for certain County services.
Each of these funds must balance - that is, revenues must equal expenditures - and each must be separately monitored. The County budget, adopted each year by the Board of County Commissioners (BOCC), is actually the total of the separate funds or accounts.
Rationale for the Budget Structure
Monroe County produces its budget in conformance with rules and regulations developed for local governments. While it does not take an accountant to understand a local government budget, the reader should understand the County develops its budget in accordance with uniform accounting concepts and budgeting standards. Some of the more important standards are:
National Accounting Standards - Just as businesses follow what are known as generally accepted accounting principles (abbreviated as "GAAP"), governments follow national standards for financial reporting. A government using consistent standards can look at itself over time to measure its financial strengths. Comparative measures of performance can then be made with other units of government.
Some of the standards Monroe County uses are those of the Government Finance Officers Association (GFOA) and the Governmental Accounting Standards Board (GASB).
State of Florida Budgeting Standards - The State of Florida establishes budgeting and financial rules for local Florida governments. An example is its rule for timing of the annual budget cycle. The fiscal year for counties begins October 1st and ends September 30th of the following calendar year. Another example is its rule about how a county adopts a budget and how a county sets property tax rates.
Federal and State Grant Requirements - Monroe County receives grants from several federal and state agencies. To insure the County uses these funds for specific programs, these agencies require the County to keep these grant funds separate from other County revenues. This segregation requires a more complex financial structure to manage these “restricted” dollars.
Local Budgeting Standards - Finally, the Board of County Commissioners establishes uses for some fees collected by the County to insure they are spent on specific programs. Impact fees and permit fees are examples of revenues with such self-imposed restrictions.
An Important Revenue – Property Taxes
A "property tax," more specifically called an "ad valorem" tax, is a tax based on the value of the property. We derive the term, "ad valorem” from the Latin phrase meaning "according to value."
In Florida, there are three factors for calculating the amount of property tax assessed on a piece of real estate: the value of the property, the amount of the value exempted from tax, and the tax rate. Each county's Property Appraiser's Office calculates property values and Florida law dictates the exemptions. The tax rates are set by the various local governments authorized to collect property taxes according to Florida law.
The ad valorem tax rate is expressed in “mills.” A mill equals $0.001. The rate at which the tax is charged is called the "millage rate". If the ad valorem tax rate is 8 mills, the “millage rate” is 8 mills. This means that per dollar of property value, a property or ad valorem tax of $0.008 is paid. It is much easier to think of the rate as how many dollars of tax will be paid per thousand dollars of prop-erty value. For example, if the property is valued at $10,000 and the millage rate is 8 mills, you would pay $8 per $1,000 value or $80.
PROPERTY TAX ALERT: Transfers of title to residential property for estate planning purposes may have a negative impact on the retention of homestead exemption and entitlement to the Save Our Homes cap on assessable value. You should consult your attorney and tax professional with regard to both issues when considering such a transfer.
Other Sources of County Revenues
Monroe County raises revenues from sources other than property taxes such as licenses and permits, revenues from federal and state sources, charges for services, fines and forfeitures, grants, rents and interest.
It is important to understand the County has the ability to combine property taxes and other revenues to support a broad range of activities. The County also uses property taxes and other revenues to supplement programs receiving grant funds from the state and federal government. If grant or other funding decrease, the County must decide whether to raise tax revenues to support these various programs rather than re-duce service.
The Dual Roles Florida Counties Serve
In Florida, a county may serve a dual role. It can provide some services to all county residents regardless of whether or not the residents live in a city. These services are called "countywide" and use the Countywide Property Tax as a means of financing. It may also provide municipal-type services to residents in the unincorporated areas. These areas are por-tions of the county, which are not incorporated as cities. These services are called "MSTU" services and use Municipal Services Taxing Unit Property Tax as one of the means of financing these services.
Multiple Taxing Authorities - Florida law allows a county to charge one property tax rate countywide for services provided to the entire county population. State law also requires a county to charge another property tax rate in only the unincorporated area for the city-type services supplied by the county. If you look carefully at your annual tax bill, you will see several lines for the various property taxes:
The General Revenue Fund - The “General Revenue Fund” line in your tax bill is a county-wide tax that finances a diverse number of services such as environmental protection, shelter and care for impounded animals, general assistance for the indigent, public facilities maintenance, and libraries.
It also pays for a variety of administrative functions required of a large organization: computer systems, communications purchasing, budget, human resources, finance and legal services.
The Law Enforcement, Jail, Judicial Fund - The “Law Enforcement, Jail, Judicial Fund” line on your tax bill is a countywide tax that pays for operation of the Sheriff’s Department, jail maintenance and the County’s court support system.
The Health Clinic - This is a countywide tax used to support the operation of the County’s public health clinic.
The General Purpose MSTU - Another name for the property tax on the unincorporated area is the Municipal Services Taxing Unit Property Tax, or General Purpose MSTU tax. This line in your tax bill pays for services normally provided by municipalities. MSTU services and includes land use planning, zoning, fire marshal, code enforcement, emergency medical services, fire services, and maintain county parks.
There are also separate property taxes levied for special assessment tax districts such as Fire and Ambulance, Mosquito Control and South Florida Water Management. Monroe County also taxes for the operation of its schools under the separate authority of the School Board.
Special Assessment Property Tax
A non-ad valorem assessment, also called a special assessment, is a fee levied on certain properties to defray all or part of the cost of a specific capital improvement or service deemed to benefit primarily those properties. The value of the property is not considered when calculating a special assessment. Instead, the cost of the facility or the service is allocated to the properties in a defined area. This allocation is based on the degree to which the property will reasonably benefit from the facility or service.
It is important to note that Monroe County is not the only jurisdiction levying these special assessments in the unincorporated area. There are a number of separate special assessment districts and with the ability to levy these assessments.
Other Governments in Monroe County
One frequent misunderstanding is that the Monroe County Board of County Commissioners oversees the local school system. While school boards in other states have their budgets approved by the county commissioners or the county board of supervisors, school districts in Florida are separate taxing authorities. The property tax levy for the school system is separate from the County’s on the annual tax bill.
Other units of government which levy property tax separately from Monroe County are the Mosquito Control District and a multi-county district -- the South Florida Water Management District.
There are also five cities in the county: Key West, Islamorada, Marathon, Layton and Key Colony Beach. These cities have separate budgets and revenue sources.
Tracking the County’s Budget
With 5,000 line items and dozens of organizations within its purview, Monroe County relies on computers with sophisticated budgeting software to help with budgeting and accounting.
Like many counties in Florida, the Monroe County Clerk of the Circuit Court performs the day-to-day accounting such as writing checks to vendors and processing payroll. The Monroe County Office of Management and Budget under the County Administrator prepares the budget using a computerized budget preparation system.
Developing the Budget
The process of compiling the annual budget is actually a year-round activity. The basis for the process is a framework of statutory deadlines established by the State of Florida. The County Administrator and the OMB Department staff establish the remainder of the process. County administration sets interim deadlines to insure necessary information is collected, priorities are determined, and recommendations can be made by the County Administrator to the Board of County Commission-ers. The County Administrator has been designated to serve as the official budget officer for Monroe County, to the Board of County Commissioners, which, in turn establishes tax rates and adopts the annual budget.
While the process may change somewhat from year to year, an examination of the process illustrates the many steps to adopting an annual budget.
An annual budget, including all such funds as required by law, shall be prepared and approved each fiscal year. The budget process is conducted in accordance with Chapters 125, 129, 200 and 218 of the Florida Statutes as amended. Monroe County processes the budget in four basic phases:
1. Planning Phase (January - March)
2. Preparation Phase (April - July)
3. Adoption Phase (July - September)
4. Implementation and Adjustment Phase (Year-round)
The phases are outlined as follows:
Planning Phase - Early in the budget process, OMB staff prepares budget instruction packages which are used by County departments to submit their annual budget requests. Departments are asked to develop statistical measures to describe the levels of services they offer. Management evaluates the statistical measures to determine what services can be maintained at a particular level of operational funding. During the planning phase, departments are also asked to estimate their capital needs for the upcoming fiscal year as well as estimated needs for an additional six years. These estimates form the basis for the long-range Capital Projects Plan.
Preparation Phase - The County Administrator and OMB conduct a budget “kickoff” meeting in March for all departments funded by the Board of County Commissioners (BOCC). Internal service fund departments provide their revenue and expense estimates. All other departments are required to submit their expense estimates by April 8. Most Constitutional Officers submit their budgets by June 1. The County Administrator conducts a series of budget review meetings with the departments and makes final decisions on a proposed Tentative Budget to be presented to the BOCC.
Adoption Phase - The County Administrator presents a proposed Tentative Budget to the BOCC at policy workshops in July. All policy workshops, as well as public hearings, are televised live and videotaped for re-broadcast. After receiving priorities from the BOCC in the policy workshops, the Tentative Budget is modified and a public hearing is held between 65 and 80 days following certification of taxable value. This hearing serves to explain the budget components and to receive requests and complaints from the public and amend the budget as they see fit. In accordance with State “Truth-in-Millage” (TRIM) requirements, the BOCC establishes tentative property tax millages which are publicly announced and mailed to all property owners in August. The BOCC
schedules three public budget hearings in September: Key Largo, Key West and Marathon. The Adopted Budget and all final millages are formally approved at the last public hearing.
Implementation and Adjustment - Once the Adopted Budget is implemented on October 1, OMB monitors actual spending versus the budgeted spending. Changing circumstances usually require minor adjustments within department budgets during the year which are handled by requests to OMB. Any major adjustments that require movement of budgeted funds between departments must be approved by the BOCC by resolution or formal budget amendment in a properly noticed public meeting.
The multi-year Capital Projects Plan which is approved during the September public hearings should not be confused with the capital budget. The capital budget represents the first year of the capital projects plan and is legally approved as a part of the Adopted Budget in September. Projects and financing sources listed in the Capital Projects Plan beyond the current year are not authorized until the annual budgets for those “out years” are legally adopted in the process described above.
Distinguished Budget Presentation Award
The Government Finance Officers Association of the United States and Canada (GFOA) presented an award of Distinguished Presentation to Monroe County for its annual budget for the fiscal year beginning October 1, 2003.
In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communication device.
The award is valid for a period of one year only. We believe our current budget continues to conform to program requirements, and we are submitting it to GFOA to determine its eligibility for another award.
Finding Information About the Budget
The budget for Monroe County is available in draft form any time after presentation of the tentative budget by the County Administrator to the Board of County Commissioners in early July. Based on the County Administrator's recommendations, OMB produces a budget summary. Copies of the summary document are available in the public libraries in July and August.
Changes may be made in the County Administrator's TENTATIVE BUDGET prior to the public budget hearings in September.
In accordance with Florida law, the County also advertises a summary budget in a newspaper of general circulation prior to final adoption.
After the Board of County Commissioners approves the budget in September, the OMB Department compiles the final budget document. Information on where detailed budget documents are available for public review can be obtained by calling the Monroe County OMB Department at (305) 292-4470.
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