Annual budgets for municipalities must typically include which key component?

Annual budgets for municipalities primarily need to include a projection of tax revenue as a key component because this projection serves as the foundation for the entire budgetary process. Tax revenue is often the main source of funding for municipal services and programs, allowing officials to plan expenditures accordingly. This revenue estimation relies on various factors such as property values, tax rates, and economic conditions, ensuring that the municipality has a realistic outlook on its financial capabilities for the upcoming fiscal period.

While the other components can be important to the budgeting process, they serve different purposes. A detailed plan for capital projects, for example, complements revenue projections but is not always essential to the basic structure of an annual budget. Previous year’s budget figures can provide useful context and benchmarks for planning, but they are historically oriented and do not directly reflect future revenue needs. A balance sheet of assets offers a snapshot of financial health at a specific time, rather than a projection of future revenue, which is critical for ongoing municipal operations.