The general fund balance, a measure of the city’s solvency, has teetered in the $20 million range over the past decade but last week apparently dipped to $18.2 million, after two years of using it to balance the budget and cover the sheriff’s office shortfall.
The fund, often characterized by how long it could maintain government operations and meet obligations after a catastrophic loss or large unforeseen expense, could now sustain the government for about six weeks, Finance Director Donna Williams estimated.
The amount a city should keep in its fund balance isn’t “carved in stone,” she said, but anything over a month is considered outside the “shoestring” range.
“The broad recommendation is 30 to 90 days,” she said. “Internally, we aim for 60 to 90 days.”
The current balance does not mean Augusta has $18.2 million sitting in a bank account – rather, it’s the difference between all assets and liabilities in a governmental fund.
The amount is a critical component of the city’s audited annual financial report and is used heavily by rating services to gauge the credit worthiness of city bonds. For the same reason, city officials only provide estimates of the fund until the annual report is completed, six months after the fiscal year ends.
The average cost to operate Augusta’s government is about $392,000 a day.
The general fund is used to cover most ordinary government operations, from recreation and maintenance to the sheriff’s office. Not included are those departments that occupy separate enterprise funds and are expected to sustain themselves, such as Augusta Regional Airport, waste management, water and sewer and Augusta Municipal Golf Course.
Rather than cut the budget, raise taxes or otherwise increase revenues, commissioners have taken from reserves every year since at least 2008, when the available fund balance stood at $28 million, to balance the budget, a requirement under Georgia law.
Commissioners dipped into reserves in 2009, 2010 and 2012, but cost savings elsewhere replenished what they took out.
Williams said the sheriff’s office won’t be the only department not to meet budget and expects “there will be some use” of the fund this year.
Unforeseen and foreseen expenses can take a toll on the general fund balance. A new state tax exemption for energy used in manufacturing, for instance, will cut $10 million from the operating budget by the time of its fourth year of implementation in 2016, according to city estimates. A commission effort Tuesday to replace the lost energy revenue through a new excise tax, and use the money to cover the sheriff’s shortfall, only had three supporting votes.
The estimated cost of cleanup from last month’s ice storm has risen to $16.1 million, though the city expects the Federal Emergency Management Agency to reimburse Augusta for the cost, as long as the debris hauled and work done meet heavily audited guidelines.
Barring significant service cuts, a tax increase or a dramatic shift upward in the tax digest, Augusta’s general fund balance could continue to dwindle until current liabilities exceed expenditures.
Commissioner Wayne Guilfoyle, who heads the commission’s Finance Committee, said the shrinking reserves are cause for concern.
“It’s always concerned me for the past three years and three months,” Guilfoyle said.
However, few commissioners attended scheduled budget meetings last year, most bucked efforts to trim budgets and the body as a whole declined to approve former City Administrator Fred Russell’s suggestions for cutting costs or raising revenue.
“I warned them we were spending money we don’t have,” said Guilfoyle, a flooring contractor. “I know how not to spend money I don’t have.”