What must happen to the full balance remaining in the appropriation at the end of a budget year?

The correct answer is that the full balance remaining in the appropriation at the end of a budget year is held as a reserve. This practice allows municipalities to maintain some financial flexibility, as the unspent funds can be earmarked for future expenses or projects that may arise in the subsequent fiscal year. Reserves can be useful for addressing unforeseen expenses or enhancing the budget for priorities that require additional funding.

Ending a year without utilizing the total allocated budget isn't uncommon, as certain projects may progress slower than anticipated or expenses may be less than estimated. By keeping the unspent funds as a reserve, the municipality can ensure they are prepared for future needs while still adhering to budgetary constraints and principles.

The requirement for the handling of the budget balance is determined by the specific financial policies and regulations of the municipality, but generally, funds are not just canceled or automatically transferred without consideration of next year's budgetary context. This approach contrasts with other options that might imply less favorable or different financial handling of unspent appropriations.