Balanced Budget Requirement
A legal mandate (usually from state law or city charter) that requires a city to adopt a budget where projected revenues equal or exceed projected expenditures.
How It Works
Most U.S. cities operate under some form of balanced budget requirement, though the specific rules vary. Some require a balanced budget only at adoption, while others require actual revenues to match actual expenditures at year-end. These requirements prevent deficit spending on paper but can be circumvented through accounting maneuvers like deferring payments, drawing down reserves, or using one-time revenue to cover recurring costs.
Related Terms
- Structural Deficit — A persistent gap where a city's recurring expenses exceed its recurring revenue — meaning the budget is fundamentally unbalanced even in a normal economy.
- General Fund — The primary operating fund for a city government, covering most day-to-day services like police, fire, parks, and administration.
- Fund Balance — The accumulated surplus (or deficit) in a government fund — essentially a city's savings account. A healthy fund balance provides a cushion against revenue shortfalls.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.