With the nation’s economy in turmoil, local municipalities and school districts may be relying on a stash of cash for such trying times like these.
The fund equity is the excess of a district or municipality’s assets above its liabilities (what the district owns minus what it owes). While cash is an asset, it’s only one of many of an institution’s assets ? others include: accounts receivable, prepaid expenses, supplies, equipment and buildings.
A glance at area accounts indicates a broad spectrum of fund balances from as low as 10 percent to as high as 80 percent’but such a range of tax dollars in local coffers is not uncommon.
Catherine Mullhaupt, Michigan Township Association director of member information services, representing more than 1,200 townships statewide said every municipality has their own circumstances.
‘Fund equity balances are all over the map,? she said. ‘The amount depends on the comfort level of the board. The fund balance is not like a savings account’there are large balances to zero. It depends on the community and what they are saving up for like a fire truck or a new township hall. Some keep a stash in there until taxes are collected’rather than borrowing the money to get by.?
Terry Stanton, public information officer for the Michigan Department of Treasury, said that no required percentage of fund equity is provided by the state.
‘While the state does not set or mandate parameters for a fund balance, the amount is used in the fiscal scoring process’it’s one of nine points that are monitored,? said Stanton.
‘With the scoring process we are able to identify the fiscal health of Michigan’s local units’fund equity, it’s just one factor. These local units are funded through property taxes’the expenses are increasing statewide and the revenues are not. We do look at fund equities as ‘the? indicator of fiscal stress.?
Michael D. LaFaive, director of the Mackinac Center for Public Policy, a nonpartisan research and educational institute of fiscal policy initiatives, said fund balances can be analyzed two different ways.
‘If the community or school district is saving for a new roof or fire truck and paying cash for it, they should be applauded,? said LaFaive.
‘However, it also invites the bureaucracy to spend resources available. It’s the proverbial kid in a candy store’if the cash is there, some will spend it.?