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Best Practices - General Revenue Principles

April 15, 2026

Definition - General Revenue Principles

General revenue principles guide how governments project, generate, and manage revenue in a way that is transparent, sustainable, and aligned with long-term financial health. These principles emphasize realistic forecasting, responsible use of different revenue types, and clear justification for revenue decisions within the budget process.

Why it matters 

Sound revenue practices are foundational to fiscal sustainability. When governments rely on unrealistic projections, one-time resources, or poorly structured revenue systems, they risk mid-year budget gaps, service disruptions, and long-term structural deficits.

  • Unrealistic or unsupported revenue projections undermine fiscal credibility and can result in mid-year budget gaps that require service cuts, reserve use, or emergency measures
  • Lack of transparency in assumptions prevents stakeholders from evaluating whether a budget is reasonable and sustainable
  • Overreliance on a narrow or volatile set of revenue sources increases exposure to economic downturns and reduces stability across the economic cycle
  • Misuse of one-time revenues creates structural imbalances by deferring difficult fiscal decisions and increasing future budget pressure
  • Poorly structured revenue decisions can weaken long-term financial planning and reduce public trust in government financial management

Strong revenue practices help governments:

  • Maintain stability across economic cycles
  • Improve transparency and public trust
  • Align revenue decisions with long-term financial planning
  • Avoid structural imbalances 

What good looks like (criteria)

1. Realistic and Transparent Revenue Projections

Revenue projections should be realistic, and assumptions disclosed within the budget document. If optimistic projections are used within the budget, contingency plans for how the government will handle revenue shortfalls should be disclosed.

While this may seem obvious, governments we study have in the past included increases to projected revenues outside of the range of other local governments without providing an explanation. It is not possible for the Civic Federation or other stakeholders to evaluate whether the projections are reasonable if assumptions are not disclosed. Additionally, overly rosy revenue projections intended to help “balance” a budget can cause problems during the year, forcing cuts or use of reserves to compensate for revenue performance short of too optimistic projections.

The best performance of this principle among the local governments the Civic Federations studies is Cook County, which set up an Independent Revenue Forecasting Commission made up of experts, who review projections and provide counsel to the Chief Financial Officer. 

The State of Illinois provides another example of more transparent revenue projections, with both the Governor’s Office of Management and Budget and the Illinois General Assembly’s Commission on Government Forecasting and Accountability providing evidence-based projections. 

2. Revenue Decisions Made Within the Budget Context

New revenue sources and general revenue increases should be proposed within the budget process and be backed by a clearly articulated reasoning. It is not possible to properly evaluate a revenue proposal outside the context of the budget, where the new revenue source’s contribution to budgetary balance and expenditure context can be evaluated and the government can make a thorough case for why the revenue source is necessary. Additionally, the case made by the government proposing the tax increase should include an explanation of how the funds will be spent.

3. Diversified Revenue Base

Governments should strive to develop a diverse revenue base and avoid heavy reliance on one or a few revenue sources, particularly property taxes. A diverse revenue base is better able to support service levels through the economic cycle and as wider changes in the regional or national economy impact taxpayers. Certain sources of revenue are more volatile, increasing significantly during economic growth and falling during economic contraction. Ideally, other revenue sources plus a robust budgetary reserve could help bolster government spending during an economic downturn when services are more needed but certain revenue sources decline. While the property tax is a reliable source of revenue, it is also a very visible one. Additionally, given changes to the property tax system required by recent rulings at the United States Supreme Court that will result in changes to the property tax collection system that could impact the property tax’s reliability.

4. Revenue Increases Linked to Fiscal Strategy

Reasonable increases to general revenues should only be considered if linked to the following actions:

  • Management reforms
  • Cost containment strategies
  • Reduction of long-term liabilities
  • A combination of the above.
5. Appropriate Use of One-Time Revenues

Non-recurring or one-time resources should be spent on non-recurring expenditures or on building budgetary reserves. The Civic Federation often voices concerns when governments use one-time or nonrecurring revenue sources for ongoing expenses. There are a number of reasons this can be problematic. By definition such revenue sources will not be available in the future so if the government utilizes nonrecurring revenues for operations, they are ensuring future fiscal challenges. The practice allows governments to run structural deficits and postpone making inevitable difficult choices. The Government Finance Officers Association (GFOA) recommends that financial policies discourage the use of one-time revenues for ongoing expenditures. The best practice is that the policies be adopted by the jurisdiction’s governing board and summarized in the budget document.

6. Use of Fees for Voluntary Services

Fees for services are preferable to general tax increases to fund functions that involve the voluntary use of goods and services. While some government services are applied across a jurisdiction and therefore properly funded by general taxes, such as policing, certain government services are accessed by choice and benefit a subset of residents, like attending a community college, a park district class, or using a forest preserve district campground. Such services are good candidates to be funded by user fees, therefore freeing up general revenues like property tax and sales taxes to other uses.

Common pitfalls

These reflect recurring issues identified through Civic Federation budget analysis:

  • Using overly optimistic revenue projections to “balance” budgets
  • Failing to disclose forecasting assumptions
  • Proposing revenue increases outside the budget process
  • Overreliance on a single revenue source (especially property taxes)
  • Using one-time revenues to fund ongoing operations
  • Implementing tax increases without linking them to reforms or long-term strategy
  • Ignoring volatility and long-term sustainability of revenue sources

Examples and Applications 

The following reports and analyses illustrate how these revenue principles have been applied, evaluated, or challenged in practice across Chicago-area governments.

Realistic and Transparent Revenue Projections 

Revenue Decisions Made Within the Budget Context

Diversified Revenue Base

Revenue Increases Linked to Fiscal Strategy

The following links show the Civic Federation supporting a tax increase either within the context above or if proposed within such a context.

The following link is an example of the Civic Federation taking a position against a tax increase because it was not linked to reforms and cost management.

Appropriate Use of One-Time Revenues

Use of Fees for Voluntary Services

External Sources 

National Advisory Council on State and Local Budgeting. Recommended Budget Practices: A Framework for Improved State and Local Government Budgeting.

  • Prepare Revenue Projections, pp. 44-46.
  • Develop Policy on Revenue Diversification, p. 25
  • Develop Policy on Use of One-time Revenues, p. 21 

Government Finance Officers Association (GFOA) – general guidance referenced in narrative

Related practices (tags)

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