Cabarrus Cheap Seats

This is probably one of the most subtle, yet important differences in the two articles. What happens with money outside of the budget. If you noticed, the FY 2006 budget is balanced to the penny. This never happens in reality. Actually, municipal governments are sometimes left with a little more than they anticipated. This happened last year. There are basically two things you can do with the money, spend it now or spend it later. Let’s look over the opposing views.

Point - Bob Carruth:

Two good things did come out of the budget hearing Â? in light of the use of fund balance over the past few years, which put the county in financial jeopardy, The board adopted a policy, which included the following: 1) In the future, recurring expenses would only be covered by recurring revenue, such as property & sales taxes; 2) the countyÂ?s undesignated fund balance would not be allowed to fall below 15%; and 3) funds collected by the county above the 15% fund balance, would be placed into a capital reserve fund, which would be used to defray the cost of new school and other public construction, thereby reducing the amount of money the county needs to borrow.

Counter Point - Coy Privette:

Carruth raises questions about the wisdom of using the fund balance. When is it permissible to use the fund balance or savings account? The standard accounting guideline is:Fund balance represents the excess of current assets over current liabilities. For accounting purposes fund balance is calculated as of year-end and is based on the difference between actual revenues and expenditures for the fiscal year. If revenues exceed expenditures, fund balance is positive. Fund balance may be carried forward and appropriated to finance expenditures in the next fiscal year.

What’s the difference? Bob’s plan says “If we bring in more money than we spend this year, let’s save it for construction costs”. Coy’s plan says “If we bring in more money than we spend this year, let’s spend it next year”.

While this may not seem like a big deal - it is. In the late 90s, this county was building up a fund balance that could have met the school construction needs for a few years out. In 1996, the voters had approved a school bond and urged local leaders to find a way to deal with the growth issues without borrowing money. The solution they came up with was politically unacceptable; but what followed was worse. These funds were reappropriated using Coy’s use-the-fund-balance-next-year philosophy and the 14 schools he speaks of were largely built with borrowed money.

The new policy takes those extra funds and places them into a fund - away from next year’s spending. This measure, along with actually balancing the budget, and dealing with the growth issues facing this county are the first steps in a plan to bring the county’s capital spending back to sanity. If the board had adopted this philosophy in the late 90s, there may not have been a need for a bond at all. Also, on average, are taxes would be lower. However, because of the myopic leadership over the past five years, the county has a heavy debt burden and no other viable alternative to borrowing when it comes to capital improvement.

Coy Privette, along with Robert Freeman, and the entire county commission agreed to this new policy of looking ahead when it comes to funding. However, in Coy Privette’s article, he’s already challenging that practice and preaching “borrow and spend”. Is this a flip-flop? I don’t think it’s that simple. I believe he changed his mind over the course of a week; because looking ahead 15 years in the future is quite a challenge - looking ahead 16 months to the next election might serve him a little better.