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4. MAJOR: The estimated budgetary sales tax revenue shortfall is between $400,000 and $500,000, or the estimated annual sales tax revenue is 4% less than the adopted budget. a. Prepare a Reduction in Force Plan. b. Implement a salary freeze. c. Reduce overtime budgets. d. Eliminate unfunded capital improvement projects. e. Defer payments to City-owned utilities for electricity, street lighting, water and wastewater services. 5. CRISIS: The estimated budgetary sales tax revenue shortfall exceeds $500,000, or the estimated annual sales tax revenue is 5% less than the adopted budget. a. Service level reductions, elimination of specific programs, reduction- in-force and other cost reduction strategies will be considered. b. Reduce departmental budgets by a fixed percentage or dollar amount. c. Departments will prioritize service levels and programs according to City Council goals and obj ectives. d. Consider four-day work weeks to reduce personnel costs. e. Reduce external program funding -social service agencies. VI. EXPENDITURE POLICIES A. Apbropriations -The point of budgetary control is at the department level budget for all funds. Following formal adoption, the budget is amended as necessary through a submission made by a Department Director to the City Manager. The Department Director forwards a budget amendment form detailing the reason, line items and amounts to be effected to the City Finance Department to verify available dollars. The form is then forwarded to the City Manager who then reviews the amendment for overall appropriate objectives and purposes. If the budget amendment requires a transfer between departments, funds, or requires the use of fund balance or contingent appropriations, the amendment is submitted to City Council for approval; otherwise, the City Manager, or designee, has the authority to approve or disapprove. Budget amendments requiring the use of fund balance or a transfer between departments or funds shall be formally adopted as an ordinance of the City Council. Budget amendments involving the use of contingent appropriations shall be formally approved by a motion of the City Council. B. Encumbrance Accounting S, s? - An encumbrance accounting system will be used to alert Department Directors when their maximum budget limits have been reached. Encumbrances are expenditure estimates and will reduce budgeted appropriations in the same manner as an actual expenditure. Once the actual expenditure amount is paid or the encumbrance lapses, the encumbrance will be deleted. Department Directors should use the encumbrance accounting system for all purchases. City of San Marcos Financial Policy -Proposed Sept 2008 Page 9