Learn More about the Budget Process
Local government units that receive property taxes are responsible each year for submitting their planned budgets for the following year. These units include:
- Cities and towns
- Public libraries
- Special districts (sewer and water, conservancy are examples)
- School corporations
As part of this annual process, the unit of government also determines how much property tax to impose on your property. The budget-setting process includes multiple steps described below. (View the glossary if you desire additional explanation of key terms.)
The Life Cycle of a Budget
The first stage of the budget process requires local units of government to publish a proposed budget, property tax levy and property tax rate for each of its funds. The unit must also publish the time, date and location of the upcoming public meetings at which the budget will be discussed. This information must be published in a local newspaper two separate times, at least one week apart. These figures are shown as “published amounts” throughout Gateway.
The published budget amounts create “ceilings” for the upcoming year. A unit may not increase its budget, property tax rate or property tax levy above what it published for a particular fund. For this reason, units of government at times inflate published figures to create more “room under the ceiling.” Published figures, accordingly, are not the most accurate representation of what the unit of government intends to spend for the upcoming year.
#2: County Council Review
Once the unit of government has published its proposed budget, property tax levy and property tax rate, it also submits that information to the County Council. (The County Council is an elected body that makes financial decisions for county government.) The County Council must review the information and make its recommendation about the action proposed by the unit. The County Council’s recommendation is “non-binding,” which means that the unit of government does not have to follow the recommendations.
#3: Public Hearing & Adoption Meeting
Once the unit of government has received its recommendation from the County Council, it then holds a public hearing. Taxpayers may attend the hearing to voice their opinions about the proposed budget, property tax levy and property tax rate. The unit must then wait 10 days and then hold an adoption meeting, at which the unit formally adopts the budget, property tax levy and property tax rate. This must be done by November 1 in the year before the budget takes effect. These figures are shown as “adopted amounts”
State law contains a number of provisions that limit the budgets, property tax levies and property tax rates that local units of government may impose. The Department of Local Government Finance (“DLGF”) is the state agency responsible for ensuring that these laws are followed. Therefore, the budgets, property tax levies, and property tax rates must be approved by the DLGF before tax bills are sent. The DLGF reviews the published and adopted amounts to ensure that the following conditions are met:
- The unit did not adopt a budget, property tax levy or property tax rate that is larger than what the unit published.
- The unit did not adopt a property tax levy or rate that is outside of the maximum thresholds in state law. For example, operating funds may not grow faster than the average growth in Indiana personal income, averaged over the previous five years.
- The revenue expected to be received by the unit of government is sufficient to fund the amount of spending in the budget. (In other words, the budget must be “balanced.”)
- The unit of government completed all the appropriate financial reporting for the previous year.
- The unit followed the appropriate timelines laid out in state law for publication, notice of public meetings, County Council review and adoption.
At the end of the DLGF review, the DLGF certifies a budget, property tax rate and property tax levy which become the official authority to spend and tax for that unit of government. The DLGF must complete its certification of budget figures for all units of government statewide by February 15 of the year the budget takes effect. These figures are shown as “certified amounts” throughout the Gateway website.
Please note that the constitutional property tax caps may further reduce property tax amounts below the amount certified by the DLGF. Those caps are administered locally when tax bills are calculated.
Forms for Collecting Budget Data
There are multiple budget forms web-enabled in Gateway to allow local government taxing units to enter the required information and submit to DLGF and the data are made available in the report builder and download sections of this site.
- Budget Form 1: Local Government Budget Estimate (Budgeted Spending Detail)
- Budget Form 2: Estimate of Miscellaneous Revenue (Budgeted Revenue Detail)
- Budget Form 3: Notice to Taxpayers of Budget Estimates and Tax Levies (these are published in local newspapers)
- Budget Form 4: Ordinances for Appropriations and Tax Rates
- Budget Form 4A: Certificate of Appropriations (Budget Summary)
- Budget Form 4B: Budget Estimate – Financial Statement – Proposed Tax Rate (Budget/Financials/Tax Rate)
- Certification of Net Assessed Values by Tax District
Year-End Financial Reporting
With its approved authority to spend and its property tax revenues set, the unit of government then finances its operations and programs for the year. As with any budget, the actual spending does not line up perfectly with the planned, or budgeted spending for each particular item. For example, the unit of government may have budgeted for $5,000 in copier rental, but may have gotten a better deal than planned and only spent $4,500.
The unit of government reports its actual spending after the close of the year. These reports are collected and audited by another state agency called the State Board of Accounts (SBOA). The report must be submitted by March 1 of the year after the budget is effective. Actual spending may be below the budget amount overall, but it should never be above the budget for any particular fund. These figures are shown as “actual expenditures” throughout the Gateway website.