The Arlington Sun Gazette's Scott McCaffrey reported yesterday on the varying views of whether Arlington County has too much cash on hand. Here's the lede from McCaffrey's article:
"There is one point on which everyone involved in this story agrees: The Arlington County government has significantly more cash in its coffers at any one time than it did a decade ago.
"Is that extra cushion a mark of good fiscal stewardship, or of a bureaucracy addicted to squirreling away cash? That’s where the viewpoints divide.
“Year after year, the number of pots [where cash is held] increases, the money in each of the pots increases,” said county Treasurer Frank O’Leary, no fan of the rising cash balances.
“It’s mystifying,” said O’Leary, who fears all that surplus cash does little good for taxpayers or those who rely on county services. And by keeping a huge reserve, he contends, “it’s causing us to pay more taxes than we should.”
"Despite tough economic times, the past decade has seen a huge spike: In April 2004, cash on hand stood at $69.35 million; in April 2013, it was $289.1 million, an increase of nearly 317 percent. Over the past 10 Aprils, the total on hand was higher than a year before nine times.
"(April is a good comparative month, because it is the point in the county government’s fiscal year when the least amount of cash is on hand. October is the high point, due to an influx of real estate and personal-property tax revenues. The total amount on hand in October 2012 was $574.2 million, the highest in history, according to an accounting from the treasurer’s office.)"
McCaffrey goes on to quote the County Manager, Budget director Richard Stephenson, and Treasuer officials as well as your humble scribe and the inimitable Wayne Kubicki, "who may know more about the county’s budget process than anyone outside the government," according to McCaffrey and others familiar with Arlington County's budget. According to Kubicki:
" . . . over the past decade, when the resident population is higher by 8 percent, annual county operating expenses are up 50 percent, total bonded debt is up 61 percent and tax-supported debt service is up 67 percent.
“With this debt and budget growth, you’d expect our cash on hand to be higher – and there are a lot of ‘moving parts’ [that make up the total],” Kubicki said.
McCaffrey then quoted Kubicki further:
"Isolating the individual components of our cash on hand at a single point during the fiscal year would be difficult and possibly misleading, due to the timing of specific tax receipts and disbursements,” Kubicki said. “What I’d like to see from county staff is an analysis by year, from year-end fiscal 2004 to fiscal 2012, showing the components of fiscal year-end cash for each. Such an analysis would serve to better tell us what the treasurer’s chart does – or doesn’t – mean.”
The cash balances in the chart below, which appears in the Sun Gazette article, compute to a 2004 per capita amount of approximately $327 while the 2012 per capita amount is about $1,319.
Yes, there has been a 300% growth in per capita cash on hand, but that still doesn't say whether the county's cash on hand is too much, too little, or about right. Unfortunately, in a scan of the county's FY 2012 Comprehensive Annual Financial Report (CAFR) and the notes to the financial statements, I was unable to find any mention of a policy regarding appropriate cash or fund balances. Such a policy would define the financial resources that should be set aside for contingencies, how much should be allocated to the rainy day, or budget stabilization, fund when such unreserved fund balances should be used, and the appropriate size of such a fund. And it goes without saying, the county inspector general or the independent auditors should comment on the County Manager's compliance with the policy. (More information about establishing a cash or fund balance policy can be found in this September 1990 Research Bulletin published by the Government Finance Officers Association.)
If I subsequently learn that Arlington County does indeed have a cash or fund balance policy, including any analysis in the CAFR, I will update this growls appropriately.
Kudos to Mr. McCaffrey for, in my humble opinion, reporting the most significant local government news story of the past year. If there is a more outstanding example of local government news reporting, I will be happy to consider it.