FY 25 Harford County Government Proposed Operating Budget

D. Fund Balance

The Committee reviewed the County's practice of maintaining an assigned fund balance of

approximately five percent of the annualGeneral Operating Fund Budget. This reserve holds funds that

could be used by the County to fund revenue shortfalls or other emergencies.This fund balance is

considered critical in maintaining an acceptable level of financial strength.

Fiscally strong municipalities/counties are expected to maintain reserves in excess of the five

percent reserve in order to maintain strong investment grade public debt ratings. These additional

reserves can be in the form of restricted, assigned, and/or unassigned. It is important for the County to

communicate with the rating agencies periodically to understand their current thoughts on the level of

reserves. The Committee is aware of the County Executive’s practice of maintaining a minimum of

$20.0 million in unassigned fund balance in addition to the 5% reserve. The Committee endorses

maintaining this practice for a number of reasons:

First, the five percent assigned balance, and additional reserves, helps to ensure healthy County

operations and services during recessionary conditions or due to unexpected shortfalls in revenue.

Recent years have proven to be difficult times in which to manage CountyGovernment. The wisdom of

conservatively managing expenditures and planning for the possibility of economic downturns, or other

uncontrollable and unexpected economic forces in recent years, has allowed for steady and consistent

operation.

Second, the fund balance contributes to Harford County's enviable bond ratings, which are

especially important in lowering the County’s borrowing costs. In rating the County's creditworthiness,

the rating agencies will review the fund balance when assigning their debtratings. They will view a

county with strong reserves more favorably.

Finally, the Committee was made aware that the rating agencies advised that the County’s total

fund balance, based on its current revenues, should be approximately $150.0 million. The Committee

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