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Te use of fund balances has become a dangerous crutch as counties also become increasingly reliant on the more volatile sales tax revenue. While one cannot ignore the external factors that force the issue of appropriat- ing carry-over fund balances, there are a few things that can be done to mitigate the adverse effects of such a decision. Some of which include:


n Use one-shot money on one-shot expenses. Don’t use one-time


money for on-going operations. What source of revenue will you have to fund that operation in the next budget cycle?


nDon’t use all of the available resources at once. Use the minimum that can be afforded after strategically reducing, cutting, and consoli- dating wherever possible.


n Keep a record of a 10-year trend of the available carry-over fund balances. At the very least, the appropriation thereof should not exceed the county’s trend. Never appropriate the full 90 percent allowed by law of a fund balance. [Yes, the 90-percent Rule applies to carry-over balances – AG Opinion No. 1986-51] It is the building of a carry-over fund balance that can become your county’s reserve for emergency situations. And those emergency situations do arise.


County budgeting is an intricate process – a laborious process….but a necessary process. Since working as a county government consultant, I have worked with some counties that have had extreme cash flow prob- lems. Many times those problems were caused by incorrect revenue pro- jections. In the most severe cases it was because of incorrect projections of carry-over cash balances. Tey used those cash balances to make their budget – but did not make adjustments to the budget after discovering that the projections were inaccurate. If the carry-over balances are going to be used at all in making the budget make sure that the projection for this source of revenue is very conservative. Te counties with the best cash flow, of course, are the very few that


do not use the carry-over cash balances to make their budget for the following year. Tey use it as a “surplus” or “reserve” that they fall back on to make additional appropriations during the course of the year for capital expenditures, infrastructure expenses, and other emergency-type expenditures. Arkansas law [Arkansas Code §14-21-106] actually ascribes the term


“surplus” to any moneys left remaining unexpended and unappropri- ated in any county fund from any previous year. Tis law says the county court, the county judge in his/her judicial capacity, may enter a court order to add the surplus to the respective funds of which the surplus remains unexpended and use it as revenue for the current fiscal year. So, it is actually the County Judge that gets to decide whether or not to use the surplus or carry-over from any fund in making the current year budget. Te pressure to use these funds has been so prevalent through the years that counties just began to assume that the carry-over balance was expected to be included as current year anticipated revenue. Tis is simply another case of “common practice” taking the place of “law.” Using the carry-over fund balances recklessly does not buy a county


exculpation. It does not exonerate or absolve your sin of bad finance management and budgeting. It buys a little time! If a county will still be in the same or possibly a worse situation once the clock has run out, using the fund balance will prove moot. Deferring the inevitable impact of over reliance on fund balances is synonymous with mortgaging the fu- ture. Counties should deal with current problems with current resources. Tis means saying “no” to frivolous expenses, unnecessary projects and unsustainable tax or other revenue reductions – and saying “yes” to avail- able revenue sources such as fees and fines allowed by law; sales taxes and even the dreaded property tax for those counties that have not maximized their general and road millage. [Te property tax is the most reliable and constant source of revenue in good times and bad.] And remember, the law clearly defines those things that a county must fund and those things they may fund – but are not required to [A.C.A. 14-14-802]. A county must prioritize! Don’t try to fund more than you have finances for. A woman proudly told her friend, “I’m responsible for making my husband a millionaire.” Well, what was he before he married you?” the friend asked. “A billionaire.” County officials don’t need to be caught in that type of scenario – taking a county backwards financially. You need to learn and perform. Tere are many new and relatively new county officials in the State of Arkansas – so I know there is a lot to be learned. Tat’s part of your job. As Henry Doherty said, “Get over the idea that only children should spend their time in study. Be a student so long as you still have something to learn, and this will mean all your life.” Tat belief is especially applicable to county officials because there is so much to learn and many laws change every time the legislature meets. So, even if you knew it all….you wouldn’t know it all very long. No one denies that in these difficult economic times, keeping our counties running efficiently, effectively and financially sound is a painful process, requiring shared sacrifice and pain. Elected officials, business, labor and the residents who pay taxes and use county services, must all be parties to the solution. Making tough choices will keep counties from putting the “unbalance” in “fund balance.” Making tough choices is what county and district officials do. Remember, as an elected official you swore to uphold the law and perform the duties of your office. You did not have to swear or affirm to “please everyone.” County officials are elected to perform first – then please, if possible. And really, budgeting – like most other things – boils down to common sense – “the knack of seeing things as they are, and doing things as they ought to be done.” Of course, that takes gumption! Fund balances only buy a little time, not solutions.


COUNTY LINES, FALL 2013 21


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