Like many local governments, Cobb County emerged from the Great Recession with a battered balance sheet.
The cash reserves for its general fund, which pays for basic government services, had been depleted to under $40 million by the start of 2011, according to county budget documents. That’s just above the 10% of spending threshold the county’s financial policies require, and far less than rating agencies and governmental accounting experts recommend.
In response, county commissioners began stockpiling cash to prepare for the next downturn, pushing its reserves to $165 million, or 38.8% of spending, by the end of the 2020 fiscal year.
Today, the rainy day has very much arrived — the pandemic continues to disrupt the economy and the public health system, while evictions soar amid an affordable housing crisis — but the county’s rainy day fund remains flush with cash.
This week, county commissioners formally adopted a policy to keep 25% of what it spends each year in the county’s fund balance. That’s more than double what the county currently requires, but less than it has already saved. For the county’s $497 million adopted general fund budget in the current fiscal year, that would equate to about $124 million.
Bill Volckmann, the county’s finance director, told the Board of Commissioners this week that formalizing the policy will help the county maintain its top credit rating.
Expert guidance on rainy day funds varies. Moody’s suggests a reserve fund of 30% to earn its top rating, but it is just one of a number of factors that go into a rating decision. Cobb County’s website boasts that it has maintained a AAA rating 24 years in a row, even as it had a reserve fund of less than 30% for much of that period.
The Government Finance Officers Association recommends that local governments keep at least two months’ worth of spending in reserve, or 16.7%.
The reserve policy sets the stage for budget discussions this spring, when the county will balance requests for things like employee pay raises to combat staff shortages, social services and stormwater projects against its desire to maintain its large reserve fund.
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