The operating budget funds a municipality's day-to-day operations including employee salaries and benefits, supplies and materials, utilities, contracted services, and routine maintenance. Unlike capital budgets for long-term infrastructure investments, operating budgets cover recurring annual expenses that keep services running. Provincial legislation typically requires municipalities to pass balanced operating budgets where revenues equal expenditures. Operating budgets are funded primarily through property taxes, user fees, and transfers from other governments. The operating budget is distinct from capital budgets and reserve funds, though transfers between them occur for purposes like funding depreciation or building reserves for future needs.