LEDC Update

This week marks the beginning of a new fiscal year for the LEDC as well as for most government organizations. The federal government mandates an October 1st to September 30th fiscal year for its budgets and most other state and municipal governments in the U.S. follow that example.

Fiscal years are allowed to start at the beginning of any quarter (January 1st, April 1st, July 1st, & October 1st). For many individuals and small businesses, they coincide their fiscal year with the calendar year beginning on January 1st. This is done to keep in line with the tax year that follows the same cycle.

Corporations tend to employ more strategy when deciding on their fiscal year. For instance, a corporation may use April 1st as the beginning of its fiscal year for tax advantages.

Utilizing an April 1st to March 30th fiscal year, the corporation can defer revenues and expenses to one month outside of the fiscal year to improve their taxable income. Seasonal businesses also employ a similar strategy when selecting a fiscal year.

A corporation that sees the brunt of its business in summer may choose to start its fiscal year on July 1st so that it realizes the majority of its income early on in its year and has more time to budget out its annual expenses accordingly. The same can be said for a business that selects October 1st because it anticipates seeing most of its income in fall.

However, the federal government does not select October 1st as the start to their fiscal year for any seasonal reason—at least not any conventionally seasonal reason. The reason why the U.S. selects October 1st is so that newly elected officials who are elected in November and installed in January have an opportunity to have input in budget discussions for the next fiscal year.

For example, President Trump was elected in November of 2016, took office in January of 2017, and the Trump administration proposed its budget for the 2018 FY in February of 2017.

Now, while the LEDC employs the same fiscal year as the federal government, we thankfully do not have to conduct budget deliberations nearly as long as they do.

For our 2020 FY budget this year, creation of the budget began in June, proposal took place in July where it was approved by our board of directors with minor amendments, and it was submitted to city council for their seal of approval in August.

Similarly, Linden’s municipal budget and Cass’s county budget were being drafted, discussed, and approved around the same time. It goes without saying that larger budgets take much longer to create and implement, but thanks to the hard work of city and county employees, the budget processes are worked through at a very efficient pace across the board.

Budgets are a major part of any organization, business, or government. They essentially represent a 12 month roadmap of predicted directions to be taken in the coming year. They are not ironclad and they may see amendments. The planned route on the roadmap may take some detours.

However, reading and understanding an organization’s budget is crucial in understanding that organization’s function and purpose. Budgets aren’t flashy, exciting, or fun, but they should be paid attention to and if you ever have a question about any budget for a public entity, you shouldn’t hesitate to ask questions.

Drafting a budget may be the responsibility of a few people, but accountability is the responsibility of us all.