Page 112 - DLIS406_ACADEMIC_LIBRARY_SYSTEM

Unit 11: Budgets

11.1.5 Terms and Distinctions Notes
Types of Budgets

A line item budget is probably the most common form, listing specific revenue sources (such
as levy, county payment, fines, print and copy, etc.) and expenditure categories (such as
personnel, supplies, equipment, print materials, AV, serials, etc.)
A program budget (sometimes called cost center or product budget) is further broken down
into particular program or project areas of service such as reference, collection, and programs
(which may have further divisions such as youth, adult, and outreach).
A Zero base budget (more common in private industry than in local government) requires that
each program be justified each year.

Types of Guidelines for Budget Development
When your municipality issues budget instructions, the guidelines may fall into the following
categories. Steady state assumes no changes in the budget or allows only an increase for inflation.
Controlled growth establishes a determined percentage for the total increase in expenditures.
Selected growth establishes targeted or permitted increases (e.g., no new personnel but added
funding for wage increases and health insurance). Overall reductions (what we dread most)
calls for a set percentage for total decrease in expenditures, whereas selected reductions targets
specific decreases (e.g., reduced staff hours; lower expenditures for materials and supplies;
reduced hours and personnel).
Note that sometimes two types are combined. For instance, guidelines may allow increases for
a set wage percentage increase and health insurance increases, but require a reduction in other
expenditures. And, keep in mind that, while the municipality may establish budget goals with
specific budget freezes in certain categories, it is ultimately the library board’s authority to
determine how the municipal appropriation and other available funds may be used to address
library service needs in the community.

Operating vs. Capital Costs

In planning for the financial needs of the library and recording financial activities, it is important
to keep operating and capital activities separated for reporting purposes. Operating activities
are those that recur regularly and can be anticipated from year to year. Included as operating
expenditures are staff salaries and benefits; books and other media acquired for the library;
heating, cooling, and regular cleaning and maintenance of the building; and technology support
contracts. Capital activities, in contrast, are those that occur irregularly and usually require
special fundraising efforts or municipal borrowing. These would include new or remodeled
library buildings, major upgrades of technology, or the purchase of expensive equipment or
furnishings. Many municipalities have cost thresholds for purchases or projects to be considered
capital expenses, such as projects in excess of $5000. You should present the operating and
capital activities separately in your library budget. Some municipalities may have separate
budget processes for capital requests, since they may borrow for large projects, and then
include the debt retirement in the general budget.

Revenue vs. Expenditures

In both operating and capital budgets, you will need to show revenue (or income) and expenditures.
Revenue should be broken down by the source of the funding-for instance, municipal appropriation,

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