Which of the following is true regarding the funding of employee severance liabilities?

The option indicating that employee severance liabilities may be funded through a special emergency appropriation is correct because such appropriations are designed to address unexpected or urgent financial needs that arise, including employee severance costs. In municipal budgeting, special emergency appropriations can provide the flexibility required to allocate funds for unforeseen expenses without having to rely solely on regular revenues or existing reserves.

Special emergency appropriations allow municipalities to respond promptly to liabilities that were not anticipated during the regular budget process, which can include costs associated with severance for employees, ensuring that obligations are met in a timely manner. This approach helps maintain operational stability and allows governments to manage workforce changes effectively.

Other options present different ideas about funding but do not accurately reflect the nuances of managing unexpected liabilities like severance pay. Regular revenue streams may not always suffice, reserves may not be mandated to hold half, and the prohibition on special appropriations does not apply in cases of emergency funding needs.