SALISBURY – Officials in Wicomico County this week took a second look at a more comprehensive fund balance policy.
On Tuesday, Director of Administration Wayne Strausburg came before the Wicomico County Council to revisit a discussion on a new fund balance policy.
Last year, county staff came before the council to present a new policy that would better maintain the county’s fund balance. At the time, the new policy recommended maintaining an unassigned fund balance between 12% and 17% of the annual operating budget and a “rainy day” fund at 5% of the annual operating budget.
“We had proposed last year a 17% targeted fund balance for uncommitted funds and continuing 5% for the rainy day fund …,” Strausburg told the council this week. “Frankly, when we sent that over last year, the 17% I was very comfortable with. I will tell you today that I probably think that’s a little light.”
In light of new funding challenges – including the impacts of a looming $15 hourly minimum wage, the implementation of Kirwan Commission recommendations and a possible recession, among other things – Strausburg said he and Council Administrator Laura Hurley thought it was appropriate to revisit the fund balance policy with the council.
“I really feel we should move something forward, where we codify a more robust fund balance policy,” he said. “I think if we don’t do that we are going to regret it.”
Strausburg told the council it costs $11 million each month to sustain county operations. He said the county has roughly $40 million in both the unassigned fund balance and rainy day fund, an equivalent of nearly four months of operating costs.
“If you were earning $55,000 a year and had three months in your savings account and lost your job, that would be fairly catastrophic,” he said. “So when people say we have too heavy of a fund balance, I think they aren’t looking at the perspective of three months operating [costs] for the county.”
After a recent review of some of the issues facing Wicomico County, Strausburg said he suggested the county now maintain an unassigned fund balance between 15% and 20% and a rainy day fund of 5%.
Strausburg added that a new fund balance policy was met with positive feedback from three credit rating agencies in New York.
Councilman Joe Holloway, however, said the county is often criticized by those who think the fund balance is too high.
“What they need to be educated on is the reason they get all of these projects built – all these new schools and renovations – is because we do have a good fund balance,” he said, “and that looks good in New York when we go to borrow money.”
Councilman Bill McCain, however, said he believed maintaining an unassigned fund balance between 12% and 17% was sufficient.
“We’re already, as a county, the biggest fund balance as a percentage of recurring revenue …,” he said. “We’re still way ahead of our peers.”
Yet, Strausburg argued a new fund balance policy would prepare the county for future funding challenges. He noted, for example, that local income tax receipts continue to level off, and the county’s real property tax base has yet to return to pre-recession levels.
“Right now, excess fund balance is anything over 5% of recurring general revenue and that’s too low a threshold,” he said.
Officials agreed to continue the discussion later this fall, after the county receives the unaudited results from the fiscal year 2018 budget.
“We have plenty of time to figure this out for next year’s fiscal budget …,” Council President John Cannon said. “We’ll revisit this.”
