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AAC F A M I L Y & F R I E N D S • Leaders have to be willing to make tough decisions. There

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are counties today in Arkansas that are at the point of col- lapse because tough decisions have been delayed too long. Te decisions should have been made several years ago to avert the current financial crisis. You can bellyache all day about what should have been done four years ago, but it wasn’t. So those of you in office now have to make the decision. It needs to be made forthwith. But make sure you are making a well-reasoned financial decision for your county. Don’t make a rash decision or a decision based on personalities. You were elected to make good and right decisions for all residents of your county.

In an attempt to close budget gaps for the 2016 budget year, many Arkansas counties will have to consider job cuts, service re- ductions, property or other tax increases, fee and/or fine increases allowed by law — or a combination of these measures. Establish- ing a successful financial course for any county in these challeng- ing times requires all of those things I mentioned — discipline, creative solutions and tough but fair decisions. While every budget has a number of “at- risk” items, any budget adopted in a time of eco- nomic insecurity should not include optimistic revenue projections. A flush revenue forecast may make it easier to make a budget — but, will probably prove to be impossible to maintain. When you have one or two sources of revenue that provide a large per-

cash flow until they refrain from relying on carryover fund balances and other one-shot money sources for ongoing budget expenses.


centage of any budget, such as a sales tax, be extremely cautious. You cannot afford to be overly optimistic. A budget is only as good as the revenue forecast on which it is built. Hope for the best — plan for the worst. One of the worst budget habits that counties have developed — and the State of Arkansas has started doing it, too — is the reliance on one-time money for on-going expenses. It may buy a little time, but it is not the solution. Using one-time money to fund initiatives that result in recurring costs is a slippery slope that will lead to a structurally unbalanced budget. Unrestricted, unappropriated carry-over fund balances seem to be screaming, “Use me. Use me. I’m the easy answer to your problems.” Tat’s exactly what they are — the easy answer. But they are not a good answer. Te problem with using a carryover fund balance or any other one-time money source to finance recurring expenses is that it’s a temporary fix to a permanent problem. Te deficit being plugged will continue to exist long after the once available funds have been depleted. Appropriating a carryover fund balance for ongoing operating expenses should be looked at as the deferment of a tax increase or a service reduction. A county that year after year develops a budget calling for the


use of carryover fund balances and other one-shot revenues is a county that has repeatedly failed to address the recurring struc- tural imbalance in its annual budget. At the end of the rope the result is a county that has depleted its reserves and now has to replace those revenue sources or cut services to balance the bud- get. Dependence on surplus dollars to cover operating costs will be short-lived at best. It will cripple a county financially, and we have many financially crippled counties in Arkansas. I realize that it is difficult to imagine making a county budget without relying on the assistance of surplus dollars. It may be next to impossible to cut it out completely all at once for the vast majority of Arkansas counties that have historically used carryover fund balances to make the following year’s budget. But it can be done. Tat’s where the discipline, creative problem solving and tough decision making come in. Counties of Arkan- sas will not become structurally balanced financially and have continuous positive cash flow until they refrain from relying on carryover fund balances and other one-shot money sources for ongoing budget expenses. If a county must rely

ounties of Arkansas will not be- come structurally balanced finan- cially and have continuous positive

partially on the assistance of surplus dollars, it needs to be a managed use — a part of a county’s multi-year budget plan. A multi-year plan will help a county im- prove its fiscal management. While one cannot ignore the external factors that force the issue of appropriating at least part of the carryover fund balances, there are a few things that can be done to mitigate the adverse ef- fects of such a decision.

• Use one-shot money on one-shot expenses. Use it for

infrastructure or capital items that won’t have to be replaced for a number of years. 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?

• Don’t use all of the available resources at once. Use the minimum that can be afforded after strategically reducing, cut- ting, and consolidating wherever possible.

• Keep a record of a multiple year trend of the available car-

ryover fund balances. At most, the appropriation thereof should not exceed the county’s trend. And absolutely never appropriate the full 90 percent allowed by law of a carryover fund balance. [Yes, the 90 percent Rule applies to carry-over balances — AG Opinion No. 1986-51.] It is the building of a carryover fund balance that can and should become your county’s reserve for emergency situations. And those emergency situations do arise.

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