BY PHIL CUSTODIO
Clarkston News Editor
Local governments are required by law to collect at least as much as they spend.
Whatever extra they collect, more than $11 million in the Clarkston area, they keep in their fund balances, also known as fund equity or rainy-day fund.
For Clarkston Community Schools, maintaining a fund balance avoids hundreds of thousands in interest payments every year.
‘It impacts the ability of the district to avoid borrowing,? said Superintendent Dr. Al Roberts. ‘Money should be used in the classroom, not spent on interest to banks.?
The Board of Education’s goal is to keep 10 percent of the budget in reserve. Budget for school year 2010 calls for $86.9 million in spending and a fund balance of $6.3 million, about 7.2 percent.
‘Carrying a reasonable fund equity is prudent financial management,? Roberts said.
The City of the Village of Clarkston has a $786,898 budget and a fund balance of $123,555, which is 15.7 percent of the budget.
Independence Township has a fund balance of $2.5 million, 8.6 percent of its $29.02 million budget.
Springfield Township’s $2.7 million fund balance is 52 percent of its $5.2 million b udget.
The fund balance provides a cushion to deal with unanticipated costs, said Treasurer Curt Carson, Independence Township.
“It gives us room in case of emergencies,” Carson said.
Fund balances rises and falls depending on economic cycles, he said.
“When the market was going well, the township used the fund balance for things like building and water and sewer projects,” he said. “Now that returns are not so good, my number one responsibility is to protect the principal on all funds.”
It’s also used when costs increase, said Clarkston City Manager Dennis Ritter.
“The budget is a fluid document,” Ritter said. “Electricity and fuel costs, investment interest earnings, state revenue sharing, all fluctuate throughout the year.”
A substantial fund balance is also useful when applying for a bond, he said.
“They look at our budget history and like to see a growing fund balance,” he said.
Catherine Mullhaupt, Michigan Township Association director of member information services representing more than 1,200 townships statewide, said every municipality has its own circumstances.
‘Fund equity balances are all over 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 firetruck or a new township hall.?
Terry Stanton, public information officer for Michigan Department of Treasury, said the state provides no specific fund-balance requirement.
‘While the state does not set or mandate parameters for a fund balance, the amount is used in the fiscal scoring process,? said Stanton.
However, it uses fund-balance information when calculating local municipalities’ fiscal health, he said.
“It’s just one factor,” he said. “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 an indicator of fiscal stress.?
Other factors include changes to population, tax revenues, government spending, and long-term debt.
School district fund balances are also used to cover payroll and operations every September and October.
Based on student population, $7,552 per student, districts receive state funding every month except for September.
‘School starts in September, which means we must make payroll,? said Stephen Hyer, Clarkston Board of Education president. ‘That’s why we have money in the bank ? that’s why the fund equity is absolutely vital.?
Borrowing to cover September costs would mean about $230,000 in interest, Hyer said.
According to Bruce C. Beamer, executive director of business services, the district spends 2.1 percent of its budget in September, about $1.8 million, and 10.1 percent in October, about $8.7 million.
If state revenue estimates are too high, it can adjust its budget during the year, possibly resulting in less money for schools. Fund equity provides a buffer, Hyer said.
The fund balance is also an emergency reserve fund for schools, Roberts said.
‘We need emergency money set aside in case major repairs are needed,? he said.
Clarkston Schools? fund balance fluctuates during the year and from year to year. In the past 10 years, its low point was $3 million in 2001, up to $17.5 million in 2006. At the end of the 2009 school year, it was at $10.6 million.
David Fleet contributed to this report.

$11.6 million in fund balances:
Clarkston Schools
Budget = $86.9 million
Fund balance = $6.3 million
7.2%
Springfield Township
Budget = $5.2 million
Fund balance = $2.7 million
52%
Independence Township
Budget = $29.02 million
Fund balance = $2.5 million
8.6%
Clarkston
Budget = $786,898
Fund balance = $123,555
15.7%