By Pauline Hovey
Facing an unusually high reserve fund of 26 percent (as measured against operating budget), the Greene County Board of Supervisors held a workshop last Tuesday hoping to put fund policies in place that would ensure the county remains fiscally sound. Supervisors found themselves wrestling with what percentage of the budget should be established as a set policy for the reserve fund. This is an enviable position for any county, but is especially significant for Greene, which has completely turned itself around over the last several years, going from deficit spending to meet payroll to its current above-average amount in reserves.
“It’s only been in the last year or so that an honest reserve fund has been there,” said Carl Schmitt (at-large), “and we’ve come far enough in improving our county’s financial condition that it’s time for us to consider what we want to do as a norm.”
Supervisors could not agree, however, on whether that amount should be 10%, 15%, or some other amount. “If we do all agree on what would nominally be an acceptable amount to have in reserve, it will give us a base amount to plan to have in the budget for when an emergency arises, like what just happened in Louisa,” Schmitt said, “which is literally what the reserve fund is for.”
In our research, the Free Enterprise Forum has not found a hard and fast rule regarding fund balance direction. Anecdotally, we are aware of localities with 8% and higher fund balance as a goal.
The Government Finance Officers Association (GFOA) has made fund balance discussions a part of their Best Practices:
The GFOA recommends that governments establish a formal policy on the level of unrestricted fund balance that should be maintained in the general fund. Such a guideline should be set by the appropriate policy body and should provide both a temporal framework and specific plans for increasing or decreasing the level of unrestricted fund balance, if it is inconsistent with that policy.
In establishing a policy governing the level of unrestricted fund balance in the general fund, a government should consider a variety of factors, including:
- The predictability of its revenues and the volatility of its expenditures (i.e., higher levels of unrestricted fund balance may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile);
- Its perceived exposure to significant one-time outlays (e.g., disasters, immediate capital needs, state budget cuts);
- The potential drain upon general fund resources from other funds as well as the availability of resources in other funds (i.e., deficits in other funds may require that a higher level of unrestricted fund balance be maintained in the general fund, just as, the availability of resources in other funds may reduce the amount of unrestricted fund balance needed in the general fund);7
- Liquidity (i.e., a disparity between when financial resources actually become available to make payments and the average maturity of related liabilities may require that a higher level of resources be maintained); and
- Commitments and assignments (i.e., governments may wish to maintain higher levels of unrestricted fund balance to compensate for any portion of unrestricted fund balance already committed or assigned by the government for a specific purpose).
More good economic news for the county: the Piedmont Virginia Community College satellite campus is on track to open in Stanardsville in the fall of 2012. In his report to the board, Dr. Frank Friedman, President of PVCC, reported they have raised $375,000 of the $750,000 needed to upgrade the space located above the library on Main Street. Encouraged by the amount of private contributions from businesses and individuals and “the great excitement behind this project,” Friedman said he will propose to his board that they hire an architect and get started.
PVCC has experienced “explosive growth” and “even faster growth in Greene County enrollment,” Friedman noted. Considering careers currently in demand in the local area, Friedman hopes to add more technical/work force-related concentrations to the curriculum at the Stanardsville campus, including a nursing lab, information technology program, and an “intelligence community/analyst” program with the goal of enabling graduates to find employment at the National Ground Intelligence Center as well as other up-and-coming employers. “We want to be a community partner,” he said.
In his annual report to the supervisors, David Blount, the Thomas Jefferson Planning District legislative liaison, provided a review of their draft 2012 Legislative Program, noting he expects the governor to be “cautious” concerning education costs, law enforcement, and environmental issues. As the state decreases aid to localities, supervisors are concerned, and rightfully so since the costs will most likely be passed on, as Supervisor Jim Frydl (Ruckersville) expressed. “We need to make sure if the state does “devolve” the maintenance of roads, they don’t pass on the cost to taxpayers.”
Frydl was referring to the “Devolution Statute,” which the Commonwealth’s General Assembly enacted in 2001 to provide boards of supervisors with the ability to assume responsibility for any portion of the state secondary system of highways within that county’s boundaries. The Thomas Jefferson Planning District has been looking into the issue of devolution and has “urged the state to maintain its responsibility for road maintenance and construction, and not shift that responsibility to localities.”
A recent study commissioned by the Virginia Department of Transportation on the state’s secondary road system titled Policy Options for Secondary Road Construction and Management in the Commonwealth of Virginia addresses such issues as devolution and their impact on counties. Not surprisingly, the studied identified that “many counties have limited capacity to assume secondary maintenance responsibilities.”
Steve Catalano (at-large) expressed concern about state government shedding responsibilities by putting maintenance of secondary roads on the localities. “The state’s accountability to us as an elected board and to our citizens has not been good in the last five years,” he said. Catalano has been known to voice concern about his frustration with unfunded state mandates and the increased financial responsibility of smaller counties like Greene.
Pauline Hovey is the Greene County Field Officer for the Free Enterprise Forum a privately funded public policy organization. If you find this report helpful, please consider supporting the Free Enterprise Forum. To learn more visit www.freeenterpriseforum.org