Pair of commissioners say county should have policy on how much money to keep in savings accounts, emergency funds
photo by: Rochelle Valverde
A majority of Douglas County commissioners this past week said the county should create a policy to guide it as it accumulates tens of millions of dollars in its savings and rainy day funds.
Commissioners Shannon Portillo and Patrick Kelly both said they thought the county ought to formally craft a policy that would set guidelines for how much money the county can accumulate in such emergency accounts, how it can be spent and other details.
“I definitely think the county should have a policy, and we are working on developing that,” Portillo said.
The discussion of a policy comes as the Journal-World recently reported that the county is budgeting to grow its fund balances — a rough equivalent of a savings account — by $10 million in 2023, despite the expectation that many property owners in the county will see their property tax bills increase by 10% or more. The article also reported that the fund balances have grown by nearly $30 million since 2019, and that the county does not have a policy in place governing the growth or use of fund balances.
Conceivably, if the county decided to have lower fund balances, that could free up money in the county’s budget to provide property tax relief.
Kelly, the longest tenured commissioner, said he had been comfortable moving ahead with decisions to grow those fund balance accounts without a policy in place because he trusts the recommendation of County Administrator Sarah Plinsky. She has said that cash reserves of three months worth of expenses are a good guideline for counties to follow.
However, Kelly told the Journal-World Friday that he supports creating a fund balance policy now.
“It would be good to look at a policy and then hear what other commissioners have to say about a fund balance policy,” Kelly said.
Portillo said having a policy prior to the county embarking on an effort to significantly increase its fund balance would have been useful.
“I think we should have created a policy earlier, but the priority was to increase those fund balances early on,” Portillo said.
Attempts to arrange an interview with the third county commissioner, Chair Shannon Reid, were not successful. It should be noted Portillo likely won’t play any role in creating a fund balance policy for the county. She is resigning her seat on the commission to take a leadership position at Arizona State University.
Plinsky, the county administrator, previously has told the Journal-World she supports the creation of a fund balance policy. She said the unexpected work in administering pandemic relief funds from the federal government had delayed staff’s efforts to create a policy for the commission to consider.
A policy likely would set guidelines for the amount of funds the county should accumulate. Plinsky has said three months worth of annual expenses is a common guideline for counties. The Government Finance Officers Association recommends a minimum of two months, but said there are situations where a larger balance would be warranted.
The county, at times, has had far less than that three-month amount in some of its operating funds. According to county budget documents, the county’s general operating fund had a fund balance of 8.6% in 2019, which equates to about a month’s worth of expenses. Plinsky and commissioners said those levels of reserves were concerning.
However, a fund balance policy also likely would create definitions about how to calculate fund balance percentages, which can be important. When the county calculates fund balance percentages for its budget sheets, it does not simply take the amount of unspent money in the fund — the fund balance — and divide it by the budgeted expenses for the fund. Instead, it takes the amount of unspent money and divides it by the sum of the budgeted expenses and the unspent money. That equation presents a fund balance percentage that is lower than it would be otherwise.
Further, the fund balance numbers used in the budgets are estimates. When the Journal-World used audited financial numbers from 2021, those figures showed the county had a 25.4% combined fund balance in its major operating funds.
The county has added to those balances since, though expenses also have increased. When asked whether he thought there was a chance the county already had achieved the desired 25% fund balance even though budget documents don’t yet show that to be the case, Kelly said that was a possibility but it would require more study.
Portillo said the county should have a discussion about what the right amount should be, saying 25% is a possibility but so might be a lower number. The county received a AAA bond rating, the highest given by financial rating agencies, without having a 25% operating fund balance.
“That is,” Portillo said, “a big part of why we are having that conversation of what we want our fund balance policy to look like … We may not need fund balances as high as we currently have to keep that rating.”