MBAX 6431 Week 3 Budget Cycle Memo Example

Memorandum

To: Council Member, Ward 3, City of Ashford Falls

From: Budget Analyst, Office of Management and Budget

Date: September 14, 2026

Re: How the annual budget cycle works and where your influence is greatest

Summary

You will vote on the budget at a public hearing in December, but most of the decisions in it will have been made by then. This memo walks through the four phases of the cycle in the order you will experience them and points out where a council member's questions have the most effect. Ashford Falls is used here as a composite city; dates and figures are illustrative.

Phase 1: Preparation, April to August

Preparation is where the budget is built, and it gets the most space here because it is where most decisions happen. In April the budget office issues instructions to departments, including a target for next year's spending, usually last year's budget adjusted for known cost increases such as negotiated wage raises. Departments then submit requests that build on their current budgets. The base, what a department spent last year, is rarely reexamined; attention goes to the increment, the change from last year. Wildavsky (1964) described this pattern as incrementalism, and it remains a fair description of how most local budgets are prepared. Requests above the target go through rounds of review with the budget office and the city manager through the summer, and by August the manager's proposed budget reflects months of negotiation.

Phase 2: Proposal and Review, September to November

In September the manager presents the proposed budget to the council. Council work sessions follow, department by department. This is where your questions count most, because the proposal is still open and departments are present to answer. Questions that ask what a department would do with ten percent less, or what a requested increase would buy, are more useful than questions about individual lines, because they test the base rather than only the increment.

Phase 3: Adoption, December

The public hearing in December is real: residents testify, and occasionally the council changes an allocation in response. But testimony arrives late, after the proposal already reflects the manager's and departments' choices, so changes at this stage are usually small. The council adopts the budget by ordinance, which turns it into a legal limit on spending for the year. Adopting the budget also sets the property tax levy within the state cap.

Phase 4: Execution, January to December

After adoption, the budget is carried out under rules that limit what the manager can change without you. Appropriations are released to departments in quarterly allotments, which lets the budget office slow spending if revenue falls short. When a department signs a contract, the amount is encumbered, meaning it is set aside so it cannot be spent twice. Under the city charter, the manager may transfer money between lines within a department, but transfers between departments or into personnel categories need a council resolution. Mid-year changes in revenue or need come back to you as budget amendments. Rubin (2020) notes that the execution phase is where adopted priorities are either protected or quietly eroded, so the monthly financial reports you will receive are worth reading.

A Note on Language

Three terms will come up in every briefing. An appropriation is the council's legal authorization to spend up to a stated amount for a stated purpose in the fiscal year. A levy is the total property tax the council decides to raise, from which the tax rate is calculated. Fund balance is the accumulated difference between revenue and spending in past years, part of which the city's policy holds in reserve for emergencies.

Where Your Influence Is Greatest

Your influence is greatest early: in the spring, by telling the manager which priorities you want reflected in the targets, and in the fall work sessions, by questioning base spending. By the December hearing, the realistic options are adjustments at the margin. During the year, budget amendments and transfer requests are your chance to see whether adopted priorities are being kept (Mikesell, 2018).

Key Dates for This Cycle

Spring priority session with the manager, April 8. Proposed budget presented, September 21. Work sessions, October 5 to November 9. Public hearing and adoption, December 7.

References

Mikesell, J. L. (2018). Fiscal administration: Analysis and applications for the public sector (10th ed.). Cengage Learning.

Rubin, I. S. (2020). The politics of public budgeting: Getting and spending, borrowing and balancing (9th ed.). CQ Press.

Wildavsky, A. (1964). The politics of the budgetary process. Little, Brown.