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e-Li: Electronic Library

Operating Budgets

What is a budget? Why have a budget? For the person who has never worked for a governmental entity, those questions would seem legitimate; however, to the person who has been involved with governments, it would be nearly impossible to operate a government without a budget.

A budget is a method used by governments and many businesses to manage the current and future resources (cash) and to anticipate revenue to provide critical services—law enforcement, health department, education, highways, etc. This financial plan estimates the available funds to be received and the cost of providing services to the public for a 12-month period beginning July 1 and ending June 30.

There are two basic budgets that governments adopt:  (1) Operating (2) Capital. A capital improvements budget is a finance plan to purchase or contract for capital improvements.

The operating budget includes funds (referred to as revenues) received from federal, state, and local sources, and expenditures for the various services provided by the government. The expenditures would include salaries, supplies and materials, interest and principal on outstanding debt, and other current operating expenses. This budget would be for the 12-month period referred to as a fiscal year.

In Tennessee, the three types of state laws applicable to the county financial function are general laws, general laws with local option application, and private acts for a specific county. Each of these are reviewed under the Financial Structure of County Government tab. General law also provides county charters and metropolitan government charters as an alternative structure for financial management.

Within a governmental entity, there are separate operations supervised by different elected or appointed officials. Each department may have different laws that govern the operation, and the local legislative body may have little or no power over the operation other than adopting the budget. This is the case with county governments in Tennessee; the county legislative body has no authority over any department other than to approve the budget, and even this is very limited with regard to education budgets and fee officials’ budgets. This is not the case with the state legislature or a city legislative body since they can make rules and regulations and adopt budgets as they deem best.