Fiscal Responsibility

A city may choose to either become a joint city-county library, pursuant to 22-1-316, MCA or assume the functions of a county library, pursuant to 22­-1-315, MCA.   

In either case, however, the respective governing bodies of the city and the county, or the governing body of the county and the city library board of trustees must enter into a contract. 

A county that has established a county free library pursuant to 22-1-303, MCA is authorized to contract directly with the board of trustees of the free public library of any incorporated city to assume all county library functions and to pay the sum agreed upon out of the county free library fund. 

If there is no contract in place, then the library does not have to fulfill the role of a city-county library.    

If a city library board of trustees accepts money from the county, it must be treated as provided in 22-1-309 (8), MCA. Thus, it must be expended only for the "specific purpose" of the gift, grant, donation, etc. (if one is specified by the county).

According to 54 Op. Att'y Gen. No. 7, the fact that 7-6-4035, MCA gives final budgetary authority to the local governing body takes precedent over 22-1-309 (6), MCA. However, this generally does not apply to voted library levies. 

The amount of resources dedicated to the free public library are subject to review and approval of the Board of County Commissioners, but the details within the budget may not be.  22-1-309, MCA references the trustees’ “exclusive control of the expenditure of the public library fund, of construction or lease of library buildings, and of the operation and care of the library.” This stronger language indicates that the library board is responsible for the detailed allocation of whatever funding is granted [by the local governing body].  (54 Op. Att'y Gen. No. 7) 

This question was addressed in 47 Op. Att'y Gen. No. 6. 

Double taxation occurs when “the same property or person is taxed twice for the same purpose for the same taxing period by the same taxing authority.” (Lake Havasu City v. Mohave County, 675 P.2d 1371, 1381 (Ariz. Ct. App. 1983)).   

Under this definition, there is no double taxation when two different local government entities impose a tax. There could be no double taxation because the county and the city are two separate taxing jurisdictions.   

Neither the United States Constitution nor the Montana Constitution prohibits taxation by two different taxing jurisdictions for the same service.    

A city and county may join to establish and maintain a joint city-county library. No parameters have been set by the legislature with respect to the funding of a city-county library. Per 22-1-316, MCA the expenses of the joint city-county library are apportioned between the city and the county on such a basis as shall be agreed upon in the contract establishing the joint library.   

For the budget, common practice is for the director to prepare a preliminary budget for the board’s review; for the board to review, revise as necessary, and adopt an official budget; for the director to spend the budget within the parameters of the approved budget and strategic plan; and for the board to authorize expenditures. 

General knowledge of the Local Government Budget Act can help with accountability for deadlines and budget adoption.

MCA clearly outlines board authority but does not define the working relationship between the board and the director. Libraries tend to be successful when boards and directors share a mutually understood, trusting, and respectful balance of authority. 

It may be helpful to think of the library board as the legislative body which sets the library’s policies, plans, and budget, and the library director as the executive who has been hired by the board to implement the work set forth in the library’s policies, plans, and budget.  

A chart outlining areas of responsibility for the board and the director is available in the Library Director Manual, pages 13-15 and also in the Trustee Handbook Volume 1 on page 19. 

22-1­-309, MCA states that the library board of trustees shall have exclusive control of the expenditure of the public library fund. The public library fund is authorized by 22-1-304, MCA which empowers the governing body of a city or county that has established a public library to levy taxes to maintain adequate public library service. The proceeds of the tax constitute a separate fund known as the "public library fund."  

Subsection (5)'s requirement that money from the public library fund be disbursed by the treasurer of the city or county supports the conclusion that the treasurer, rather than the library, has actual custody of the fund. Because the local governing body has actual custody of the funds, attorney opinions have indicated the local governing body shall be the bookkeeper. 

Thus, the city or county treasurer may not take money from the fund, as only the library has that authority. The city or county treasurer may not take money from the fund without the library board's consent or acknowledgement. 

The proceeds of the tax levy for library services, known as the public library fund, shall not be used for any purpose except those of the public library. 22-1-304 (4), MCA. 

While the city or county may have authority over the total amount of tax revenue given to the library, the 54 Op. Att'y Gen. No. 7 opinion and MCA give line-item authority to the library board. The board can determine how the revenue is spent.   

• General fund refers to the property taxes and other sources of tax revenue local governments levy that are used to fund multiple government services including the general administration of the city or county. 
• A voted levy refers to revenue that is raised because people within a community voted to pay more taxes to fund a specific service or project. 
• For city, county, or city-county libraries created by a resolution of their respective city council or county commission, the local governing body has the final authority over the budget amount.  
• For independent public library districts formed by Title 22, the county commission has the final authority over the budget amount.  
• For school-community libraries, multijurisdictional service district libraries, or other libraries with interlocal agreements – if formed by an interlocal agreement as defined in Title 7, you may be protected from this opinion. An interlocal agreement is considered a contract and as such it gives your library some protection since it defines the support level of the county or city. 

A successful special mill levy election requires the governing body of a city or county to levy an amount authorized by the voters and create the public library fund to be used exclusively for public library purposes.  

Only the Board of Trustees can authorize disbursement of money from the public library fund.  (22-1-304, MCA)

The procedure for calculating an allowable mill levy is outlined in 15-10-420, MCA. 

Procedure for calculating levy.

There are limits to how much a local government can levy. To exceed the maximum levy, they must place a vote on the ballot. Local governments cannot easily raise funds for the general fund. This is why they may ask library boards and directors to consider a voted levy per 22-1-304, MCA or 22-1-709, MCA for district libraries.

A reserve fund is the terminology used to describe the amount of cash the library has on hand to pay expenses incurred during periods of time where there is little revenue. Libraries tend to receive their funds in two large deposits that occur after community members have paid their taxes in May and November.   

Per 22-1-309, MCA the library board alone has authority to spend any funds allocated to the library. However, if the library has a reserve fund exceeding the legal limit of 33 1/3% of its total annual appropriations for counties or 50% of its total annual appropriations for cities, this can be a red flag for auditors and can also erode public trust in the library’s ability to responsibly manage public funds.

It would be prudent for the library board and the director to work together to create a spending plan for any funds that exceed the legal limit for cash reserves.

22-1-305, MCA authorizes a local governing body in which a public library has been established to set up a library depreciation reserve fund. 

Funds deposited in a library depreciation reserve fund can be used for large capital projects. Libraries that are raising funds or receive donations for capital improvement may wish to use the library depreciation fund to hold the money until the library has enough funds to complete the project. 

• Please see the Library Depreciation Reserve Fund Handbook for more information. 

22-1-306, MCA explains that moneys for the library depreciation reserve fund are those funds which have been allocated to the library in any year but which have not been expended by the end of the year. Such moneys include but are not limited to city or county or city-county appropriations, federal revenue sharing funds, and public and private grants.

22-1-307, MCA provides that money held in the library depreciation reserve fund may be invested as provided by law. All interest earned on the fund must be credited to the library depreciation reserve fund.   

These statutes establish that a library board of trustees has the power to accept gifts, donations, grants, etc. of money or property from public or private sources. If the local governing body exercises the discretion granted to it in 22-1-305, MCA by setting up a library depreciation reserve fund, then any money received by the library board as a gift, donation or grant that is not expended by the end of the year maybe deposited into the library depreciation reserve fund per 22-1-306, MCA.  

Moneys in the fund may be invested "as provided by law" per 22-1-307, MCA. The statutes do not appear to limit the library boards in the method by which they may exercise the power conferred by section 22-1-309 (8), MCA, other than that the money received be expended or held, worked, or improved for the specific purpose of the gift, grant, donation, devise or bequest.  

In the case where a library depreciation reserve fund has not been established, when the gift, grant or donation does not prohibit investment, the library board should ask the donor to give the money to the foundation to invest the funds. 

If the board chooses to use the local government's existing accounting system, the board and local government must follow the MCA. They can still invest the funds, but they must follow the guidelines below [adapted from the Montana Municipal Officials Handbook]: 

Finally, 7-6-207, MCA specifies the security necessary to ensure the safety and prompt payment of all deposits. 

22-1-309, MCA clearly states that the library board of trustees shall have the power to accept gifts, grants, donations, etc, and to expend or hold such funds for the specific purpose of the gift or donation. 

The Attorney General determined that library boards of trustees have powers and duties that reflect "substantial autonomy from the governing body of the local governmental unit within which the library has been established." (41 Op. Att’y Gen. No. 91) 

If the library receives an unexpected grant the local governing body will need to do a budget amendment in order for the library to use the funding. Budget amendments have a high standard for public notification and create quite a bit of work for the finance office, clerk, or treasurer. 

The library should be able to use the funding for the purpose for which it is intended, so if the finance person suggests not using it until the following fiscal year the director should work with their board and the local government officials to find a way to follow the instructions of the funder who gave the library the grant. 

Donations or other private funding can be accounted for in two different ways: 

• The library can ask the funder to give the money to a 501c3 organization that supports the library. This may be a Friends of the Library, a Library Foundation, or even a local community foundation that holds funds for the library. 

• The library can work with the finance officer for local government to create a donations and/or trust fund where donations and other private funding sources can be deposited. A special revenue fund can be created for grants. 

There are pros and cons to both methods. Some libraries prefer to have a private group manage the donations and/or other sources of private funding. Others find it easy to work with their local government officials.