Can a Louisiana parish amend a budget after the fiscal year has ended to handle adjustments that came in late?

Plain-English summary

The District Attorney for the Fortieth Judicial District wrote to the AG on behalf of St. John the Baptist Parish. Her question: can the parish amend a previously adopted budget for a fiscal year that has already ended, to account for adjustments that the parish could not estimate or did not know about during the year?

The AG said no. Two sources control: the parish's home rule charter and the Local Government Budget Act (LGBA, La. R.S. 39:1301 et seq.). Neither one allows a retroactive amendment.

The home rule charter. Under La. Const. art. VI, § 5 and La. R.S. 33:1395, St. John the Baptist Parish operates under a home rule charter. The charter's Article V (financial procedures) sets the fiscal year as January 1 through December 31, requires the parish president to submit a balanced budget, and provides for amendments during the fiscal year through Article VII, Section F. The procedure for amendments contemplates two scenarios:

• Supplemental appropriations during the year when excess revenue is certified.
• Reductions or remediation when revenue falls short during the year.

If the council borrows money to remedy a deficit, the repayment becomes a fixed charge on the following year's revenue and must be included in the next year's operating budget. The charter is silent on amendments after the fiscal year ends. The AG read the charter together with the LGBA as not authorizing a retroactive amendment.

The Local Government Budget Act. La. R.S. 39:1310 requires a budget amendment when one of three conditions occurs:

1. Total projected revenue for the remainder of the year is failing to meet budgeted revenues by 5% or more.
2. Total actual plus projected expenditures for the remainder of the year are exceeding budgeted expenditures by 5% or more.
3. The actual beginning fund balance fails to meet the estimated beginning fund balance by 5% or more, and the fund balance is being used to fund current-year expenditures.

The first two conditions reference "the remainder of the year," meaning the current fiscal year. The AG says the third condition also occurs in the current fiscal year, though it concerns funds expected by the end of the previous year.

When adjustments become known after year-end. The AG says the parish cannot amend the prior-year budget. If the council borrowed money to remedy a deficit, repayment becomes a fixed charge on the following year's revenue. If it did not borrow and a particular beginning fund balance is short by 5% or more, the opinion says a current-year budget amendment is required.

What this means for you

If you handle the parish budget. Do not amend a closed fiscal year's adopted budget to account for an adjustment discovered afterward. Check whether the current year's beginning fund balance meets the threshold described in the opinion, and apply the current-year amendment rule if it does not.

If you are a parish council member or president. Make amendments during the fiscal year. The charter says repayment of money borrowed to remedy a deficit becomes a fixed charge in the following year's budget.

If you review St. John the Baptist Parish budgets. This opinion concludes that the parish cannot amend an adopted budget for a prior fiscal year under its charter and the LGBA. The AG does not prescribe an audit adjustment.

If you advise the parish on a late budget adjustment. The opinion separates an impermissible prior-year amendment from the current-year amendment required when the stated beginning-fund-balance shortfall occurs. It does not decide how to record a particular accounting entry.

If you are reading parish budget records. Compare the amendment's adoption date with the fiscal year it amends. The AG concludes that St. John the Baptist Parish may not amend an adopted budget for a prior fiscal year.

Common questions

Q: What about accruals that legitimately belong in the prior fiscal year under GAAP?
A: The opinion addresses amendments to an adopted budget after the fiscal year ends. It does not address financial-statement accruals or how the parish should record an accounting adjustment.

Q: What if the issue is a misallocation rather than a deficit or surplus?
A: The AG says an adopted prior-year budget cannot be amended after year-end. It does not prescribe the accounting treatment for a misallocation.

Q: Does this opinion decide the rule for a municipality?
A: No. It decides whether St. John the Baptist Parish may amend a prior fiscal year's adopted budget under its charter and the LGBA. It does not analyze a municipal charter or decide a municipality's budget question.

Q: What if the parish council passes a "ratifying" resolution to bless a year-end adjustment?
A: The opinion does not analyze ratifying resolutions. Its conclusion is that St. John the Baptist Parish may not amend an adopted budget for a prior fiscal year.

Q: What about an amendment introduced at the last meeting before year-end but adopted only after year-end?
A: Footnote 8 says the opinion does not address an ordinance to amend an adopted budget that was introduced at the parish council's last meeting in the current fiscal year. It gives no answer about later adoption in that scenario.

Background and statutory framework

Louisiana home rule charter authority. La. Const. art. VI, § 5 authorizes parishes (and municipalities) to adopt home rule charters. La. R.S. 33:1395 supplies the procedural framework for adoption. A home rule charter governs the parish's affairs unless its provisions violate state law or the state constitution. As a charter parish, St. John the Baptist is subject to the LGBA as a state-law floor; the charter may add stricter requirements but may not relax LGBA minimums.

The St. John the Baptist Parish Home Rule Charter. Relevant provisions:

• Article V (financial procedures): fiscal year January 1 to December 31; balanced-budget requirement; budget ordinance effective on first day of fiscal year.
• Article V, Section D: parish council may amend the budget before adoption, but total expenditures must not exceed anticipated revenue.
• Article VII, Section F: procedures for amendments to adopted budgets. Supplemental appropriations during the year on a presidential certification of excess revenue. Required reporting and remedial action when revenue falls short. Borrowing to remedy deficits becomes a fixed charge on the next year's revenue.
• Effective date: ordinances authorizing supplemental appropriations or reductions take effect immediately on adoption but cannot be adopted at the same meeting as introduced.

The Local Government Budget Act. La. R.S. 39:1301 et seq. is the statewide budget framework for Louisiana local government. Key provisions:

• La. R.S. 39:1310 requires budget amendments in defined circumstances, all referencing the current fiscal year.
• La. R.S. 39:1311(A) defines the three trigger conditions for amendments: 5% revenue shortfall, 5% expenditure overrun, or 5% beginning-fund-balance shortfall with that balance being used to fund current expenditures.
• The chief executive or administrative officer is required to advise the governing authority in writing when the trigger conditions are met.

St. John the Baptist Parish factual context. The district attorney asked on behalf of the parish government about adjustments that could not be estimated or were unknown during the fiscal year.

Jeff Landry was the Attorney General of Louisiana at the time of the opinion. Brett A. Robinson signed as Assistant Attorney General.

Citations and references

Constitution and statutes:

• La. Const. art. VI, § 5 (home rule charter authority)
• La. R.S. 33:1395 (home rule charter adoption framework)
• La. R.S. 39:1301 et seq. (Local Government Budget Act)
• La. R.S. 39:1310 (budget amendment requirements)
• La. R.S. 39:1311 (notification and trigger framework)
• La. R.S. 39:1311(A) (advisory notice requirements, 5% triggers)

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/23-0080

Original opinion text

State of Louisiana
DEPARTMENT OF JUSTICE
CIVIL DIVISION
P.O. BOX 94005
BATON ROUGE
70804-9005

Jeff Landry
Attorney General

December 20, 2023

OPINION 23-0080

84 PARISHES
La. R.S. 39:1310
La. R.S. 39:1311

The Honorable Bridget A. Dinvaut
District Attorney
Fortieth Judicial District
1342 La Hwy 44
Reserve, LA 70084

St. John the Baptist Parish may not amend an adopted budget for a prior fiscal year. All amendments to an adopted budget must take place in the current fiscal year as per the St. John the Baptist Parish Home Rule Charter and the Local Government Budget Act.

Dear Ms. Dinvaut:

You have requested an opinion from our office on behalf of St. John the Baptist Parish Government regarding whether the Parish can amend the previous fiscal year adopted budget after the fiscal year has ended to account for adjustments that could not be estimated or were unknown during the previous fiscal year. Your request has been assigned to me for research and reply.

St. John the Baptist Parish has adopted a home rule charter form of government in accordance with La. Const. art. VI, § 5 and La. R.S. 33:1395. Thus, the parish is governed by its charter (the "Charter"), unless its provisions violate state law or the state constitution. As a political subdivision operating under a home rule charter form of government, St. John the Baptist is subject to the Local Government Budget Act found at La. R.S. 39:1301, et seq. ("LGBA"). However, the provisions of the LGBA are only minimum standards that must be met, and thus, the Charter may include stricter standards than those imposed by the LGBA and may include other rules not otherwise prohibited by the LGBA or other state law.

Under Article V of the Charter regarding financial procedures of the parish, the fiscal year begins on January 1 and ends on December 31. The parish president must submit a budget and it must be balanced. A budget ordinance adopted by the parish council becomes effective on the first day of the fiscal year, unless otherwise provided therein. Section D of Article V of the Charter provides that the parish council may amend the budget before adoption but in no event shall the parish council cause the total expenditures to exceed anticipated revenue.

1 See Article V of the St. John the Baptist Parish Home Rule Charter.

2 Id.

3 Id. at Section D.

4 See Article VII, Section F of the St. John the Baptist Parish Home Rule Charter.

Procedures for amendments to adopted budgets are contained in the general provisions in Section F of Article VII of the Charter. Supplemental appropriations may be made during the fiscal year if the parish president certifies that there are available revenues in excess of those estimated in the budget. If during the fiscal year, it appears probable that the revenues available will be insufficient to meet the amount appropriated, the president shall report to the parish council without delay, indicating the estimated amount of the deficit, any remedial action taken and recommendations as to any other steps to be taken. In any event, the parish council shall take action as it deems necessary to prevent any deficit. If an emergency appropriation is made or the parish council borrows money it deems necessary to remedy the deficit, the repayment shall be a fixed charge upon the revenue of the following year and shall be included in the operating budget for that year.

Finally, an ordinance authorizing supplemental appropriations, or a reduction or transfer of appropriations may be made effective immediately upon adoption but may not be adopted at the same meeting as introduced.

As can be gleaned from above, the St. John the Baptist Parish Charter expressly provides that budget amendments are to be made during the fiscal year when supplemental or reduction of appropriations are required or appropriate. The Charter is silent regarding budget amendments after the close of the fiscal year. However, the Charter requires the parish to place a fixed charge on the revenue for the following fiscal year when the council borrows money to remedy a deficit/reduction in appropriations.

An adopted budget and any adopted amendments form the framework from which the chief executive or administrative officers and members of a governing authority of the political subdivision must monitor revenues and control expenditures. A review of the LGBA is necessary in order to determine whether budget amendments to the previous fiscal year are authorized. The budget amendment process of the LGBA is set out in La. R.S. 39:1310. It provides the following:

When the governing authority has received notification pursuant to La. R.S. 39:1311 or there has been a change in operations upon which the original budget was developed, the governing authority shall adopt a budget amendment in an open meeting to reflect such change. In no event shall a budget amendment be adopted proposing expenditures which exceed the total estimated funds available for the fiscal year.

Pursuant to La. R.S. 39:1311(A), the chief executive or administrative officer must advise the governing authority in writing when: 1) total and projected revenue, including other sources, for the remainder of the year are failing to meet total budgeted revenues and other sources by five percent (5%) or more, 2) total actual expenditures plus projected expenditures for the remainder of the year are exceeding total budgeted expenditures by five percent or more, and 3) the actual beginning fund balance fails to meet estimated beginning fund balance by five percent or more and fund balance is being used to fund current year expenditures. Two of the three of the conditions that require an amendment to an adopted budget reference the remainder of the fiscal year. It is clear that these amendments must take place during the fiscal year and not after the fiscal year ended. The third condition requiring an amendment to an adopted budget also occurs in the current fiscal year but is related to not receiving the expected revenues or sources of funds by the end of the previous fiscal year.

5 Id.

6 Id.

7 Id.

8 This opinion does not address a scenario in which an ordinance to amend an adopted budget is introduced at the last meeting of the parish council in the current fiscal year.

9 La. R.S. 39:1311(A).

Neither the Charter nor the LGBA set forth a condition that mandates or provides for a budget amendment to occur after a fiscal year has ended. More importantly, the language used in both the Charter and LGBA consistently refer to budget amendments being made during the fiscal year. In the instance where accounting adjustments cannot be estimated or are unknown before the fiscal year end, the parish must place a fixed charge on the revenue for the following fiscal year when the council borrows money to remedy a deficit/reduction in appropriations. If the council does not borrow money and a shortfall of beginning funds for a particular fund balance is five percent (5%) or greater occurs, then a budget amendment must be made in the current fiscal year.

It is the opinion of this office that St. John the Baptist Parish may not amend an adopted budget for a prior fiscal year. All amendments to an adopted budget must take place in the current fiscal year as per the St. John the Baptist Parish Home Rule Charter and the Local Government Budget Act.

We trust that this adequately responds to your request and the issue that you have raised. If our office can be of any further assistance, please do not hesitate to contact us.

With best regards,

JEFF LANDRY
ATTORNEY GENERAL

BY:
Brett A. Robinson
Assistant Attorney General

JL/BAR