SALISBURY – Officials in Wicomico County are looking to establish a new fund balance policy.
County staff came before the Wicomico County Council in a work session on Tuesday to present a new policy that would better maintain the county’s fund balance.
Wayne Strausburg, the county’s director of administration, pointed out that credit rating agencies and the county’s advisors recommended a more comprehensive fund balance policy.
“We believe our current policy is outdated and in need of revision…,” he said. “We recognize, however, this is a complex matter and warrants careful review. We are here today to start that process and those discussions.”
Finance Director Dawn Parks noted the Government Finance Officers Association recommended governments maintain an unassigned fund balance of no less than two months of general fund operating expenditures. She explained if the county were to maintain an unassigned fund balance between 12 percent and 17 percent of the annual operating budget, it would fulfill that recommendation.
“The 17 percent seemed to fit our circumstances more than the 12 percent,” she said. “We average about $10 million a month in recurring operating, and 17 percent keeps us within that. It’s on the high end of it.”
Parks added the new policy would also redefine the county’s “rainy day” reserve fund – established by the county council in 1996 – as a Disaster Recovery Reserve. She said the fund would be maintained at 5 percent of the county’s annual operating budget and could be used for natural or manmade disasters.
“If we have roads wash out and we have times where our fund balance can’t handle that, we have funds set aside for it,” she said.
Lastly, Parks said the new policy would include a rate stabilization reserve, which would account for any increases in health care costs.
“That is actually determined by the health care consortium,” she said. “Last year it was 14 percent and this year they are dropping it to 12 (percent). It’s based on our payments from the prior year. If we hit a time when our health care expenses are going to be more than budgeted, we have something to fall back on to help with that.”
Councilman Marc Kilmer questioned how the county’s fund balance was utilized in the past.
“During the last recession, what happened to the fund?” he said.
While he acknowledged that some money was taken from the unassigned fund balance, Strausburg said the county’s “rainy day” fund was never used.
“A majority of the response to the recession was austerity in terms of spending,” he said.
Strausburg added that the credit rating agencies were pleased with the county’s fund balance, but said a comprehensive fund balance policy would ensure those funds were never depleted.
“They have expressed the opinion that the current fund balance policy doesn’t adequately protect that fund balance …,” he said. “They like our fund balance, but they don’t want to see it burnt through.”
Kilmer pointed out that the county had added to its fund balance for several consecutive years. He questioned if county taxes should also be reexamined after a new fund balance policy is established.
“If we are continuing year after year to collect access revenue, then taxes should really start to be looked at,” he said.
Strausburg said county staff would continue to review the proposed policy and would present further findings to the council at a later date.
“It serves the county well to have this discussion …,” he said. “Our current policy is not appropriate for today’s environment.”