Municipal Government

Plain English Breakdown

The official source material does not provide specific details on the fiscal impact or frequency of budget disagreements, leaving these points as unknowns.

Municipal Budget Rules for Schools and Operations

This bill sets rules for continuing funding when municipal legislative bodies and local education agencies cannot agree on budgets or when municipalities fail to adopt new budgets by their fiscal year start dates.

What This Bill Does

• Removes the current rule that allows a previous budget to continue if a new one is not adopted before the next fiscal year starts.
• Sets a minimum funding level for local education agencies (LEAs) if the municipal legislative body and LEA governing body do not agree on a budget by August 31st.
• Requires a mandatory increase in funding for schools after three consecutive years of disagreement, unless the LEA fails to submit its budget proposal by May 1st.
• Allows the previous fiscal year's operating budget to continue if no new budget is adopted by the start of the next fiscal year, but with limits on spending increases without specific authorization.
• Establishes a process for extending this continuing budget into the third month of the fiscal year under certain conditions.

Who It Names or Affects

• Local education agencies (LEAs) in municipalities that have established them.
• Municipal legislative bodies and their agencies.
• Schools receiving funding from local sources.

Terms To Know

Local Education Agency (LEA)

An organization responsible for providing public education within a defined area, established by a municipality.

Maintenance of Effort

A requirement that local governments maintain or increase their funding levels to schools over time.

Limits and Unknowns

• The bill does not specify the exact fiscal impact on municipalities.
• It is unclear how often disagreements between municipal legislative bodies and LEAs occur in practice.
• The extent of additional information requested by the comptroller for budget extensions is unspecified.

Official Summary Text

Present law provides that if
for any reason a budget ordinance is not adopted prior to the beginning of the next fiscal year,
then
the appropriations for the last fiscal year become
s
the appropriations for the next fiscal year, until the adoption of the new budget ordinance.
This bill removes this provision and, instead, determines the budget as described below.

If the municipal legislative body and the governing body of
a local education agency
LEA
established by a municipality ("LEA")
fail to agree upon a budget for the LEA by August 31 of any year, then, by operation of law,
this bill provides that
the budget for the LEA is equal to the minimum budget required to comply with the local match and maintenance of effort provisions of the TISA. However, if for
three
consecutive fiscal years the municipal legislative body and the governing body of the LEA fail to ag
ree upon a budget and the LEA receives the minimum required funding for that fiscal year in accordance with th
ese provisions
, then the budget for the LEA for the third fiscal year must include a mandatory increase that is equivalent to 3% of the required funding from local sources for schools
. H
owever, this increase is not required if during any of the
three
consecutive fiscal years the governing body of the LEA failed to submit its budget proposal to the municipal legislative body by May 1.

If a municipal legislative body has not adopted a budget by the first day of any fiscal year, and until a final operating budget is adopted,
this bill generally provides that
the operating budget for the fiscal year just ended and the appropriation ordinance for the fiscal year just ended continues in effect by operation of law without further action of the municipal legislative body
. H
owever, all agencies of the municipality and other entities receiving appropriated funds
must
not, during any month, encu
mber funds in excess of the allotment for a comparable month of the preceding fiscal year, unless specifically authorized to do so by ordinance of the municipal legislative body. The authorizing ordinance must identify a corresponding funding source equa
l to the amount of any excess allotment authorized. Any excess allotment authorized becomes part of the final operating budget. During the time that the continuing operating budget is in effect, the budget may be amended in accordance with the procedure
s
for amending a final operating budget, and amendments may be made as necessary to provide for debt obligations and court-ordered expenditures.

This bill authorizes the
continuing operating budget authorized
above to
continue in effect for the first
two
months of the fiscal year and, upon approval from the comptroller of the treasury or the comptroller's designee after a showing of extraordinary circumstances, may continue for the third month of the fiscal year
.

H
owever, a continuing operating budget must not extend beyond the last day of the third month of the fiscal year. The municipality
must
submit its justification for extending the continu
ing operating budget through the third month of the fiscal year to the comptroller or the comptroller's designee for approval by the
15
th

day of the
second
month of the fiscal year. The comptroller or the comptroller's designee may request additional information deemed necessary to properly review the continuing operating budget extension request. The comptroller or the comptroller's designee
must
report the comptroller's approval or disapproval to the municipal legislative body within
seven
business days
from the date on which the request was received or the date on which any requested supplemental documentation was received, whichever is later, at which time the municipal legislative body may take action to extend the continuing operating budget for the
third month of the fiscal year.

Current Bill Text

SENATE BILL 1592
By Hatcher

HOUSE BILL 1516
By Moon
HB1516
010714
- 1 -

AN ACT to amend Tennessee Code Annotated, Title 6,
Chapter 56, Part 1 and Title 6, Chapter 56, Part 2,
relative to municipal budgets.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Title 6, Chapter 56, Part 1, is amended by
adding the following as a new section:
(a) This section applies to all municipalities that have established an LEA, as
defined in § 49-1-103, pursuant to § 49-2-401.
(b) If the municipal legislative body and the governing body of the LEA fail to
agree upon a budget for the LEA by August 31 of any year, then, by operation of law, the
budget for the LEA is equal to the minimum budget required to comply with the local
match and maintenance of effort provisions of the TISA, as defined in § 49-3-104.
However, if for three (3) consecutive fiscal years the municipal legislative body and the
governing body of the LEA fail to agree upon a budget and the LEA receives the
minimum required funding for that fiscal year in accordance with this subsection (b), then
the budget for the LEA for the third fiscal year must include a mandatory increase that is
equivalent to three percent (3%) of the required funding from local sources for schools;
provided, however, that this increase is not required if during any of the three (3)
consecutive fiscal years the governing body of the LEA failed to submit its budget
proposal to the municipal legislative body by May 1.
SECTION 2. Tennessee Code Annotated, Title 6, Chapter 56, Part 1, is amended by
adding the following as a new section:

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(a) If a municipal legislative body has not adopted a budget by the first day of
any fiscal year, and until a final operating budget is adopted, the operating budget for the
fiscal year just ended and the appropriation ordinance for the fiscal year just ended
continues in effect by operation of law without further action of the municipal legislative
body, except as required in subsection (b); provided, however, that all agencies of the
municipality and other entities receiving appropriated funds shall not, during any month,
encumber funds in excess of the allotment for a comparable month of the preceding
fiscal year, unless specifically authorized to do so by ordinance of the municipal
legislative body. The authorizing ordinance must identify a corresponding funding
source equal to the amount of any excess allotment authorized. Any excess allotment
authorized becomes part of the final operating budget. During the time that the
continuing operating budget is in effect, the budget may be amended in accordance with
the procedures for amending a final operating budget, and amendments may be made
as necessary to provide for debt obligations and court-ordered expenditures.
(b) The continuing operating budget authorized by this section may continue in
effect for the first two (2) months of the fiscal year and, upon approval from the
comptroller of the treasury or the comptroller's designee after a showing of extraordinary
circumstances, may continue for the third month of the fiscal year; provided, however,
that a continuing operating budget must not extend beyond the last day of the third
month of the fiscal year. The municipality shall submit its justification for extending the
continuing operating budget through the third month of the fiscal year to the comptroller
of the treasury or the comptroller's designee for approval by the fifteenth day of the
second month of the fiscal year. The comptroller of the treasury or the comptroller's
designee may request additional information deemed necessary to properly review the
continuing operating budget extension request. The comptroller of the treasury or the

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comptroller's designee shall report the comptroller's approval or disapproval to the
municipal legislative body within seven (7) business days from the date on which the
request was received or the date on which any requested supplemental documentation
was received, whichever is later, at which time the municipal legislative body may take
action to extend the continuing operating budget for the third month of the fiscal year.
SECTION 3. Tennessee Code Annotated, Section 6-56-210, is amended by deleting the
section.
SECTION 4. This act takes effect upon becoming a law, the public welfare requiring it.