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Municipal spending and revenue sources are both planned and authorized within a city's annual budget. A city budget details the municipal fiscal policy, which means that any money spent or raised must be outlined in that document. Beyond simple revenues and expenditures, it also highlights any program goals, changes in financial procedures, and any particular foreseen details pertinent to the functioning of the city for the fiscal year.

The actual structure of the budget is up to the city's legislative body, but it must be approved via ordinance. (For more information on this see “Budgetary Process” in related topics.) Some cities -- typically with higher revenues -- will separate capital and operating expenditures into separate budgets much like the state budget model, but state law does not require such a structure.

Kentucky cities must adopt a budget in which the appropriations do not exceed the revenue within the fiscal year. The fiscal year for cities runs July 1 through June 30. If a city does not pass a budget by the time the next fiscal year begins, the previous year's budget will prevail until city leaders adopt a new budget.