Dewey committee recommends modifying town fund balance policy

The Dewey Beach Finance Committee recommended to town council Nov. 3, a change to the town’s fund balance policy.

The policy, adopted in May 2021, ties the town’s Rainy Day Fund and Unassigned Fund balances to percentages of the operating budget. It requires the Rainy Day and Unassigned balances to equal 50% and 15%, respectively, of the current-year operating budget, a challenge because the budget fluctuates throughout the year.

“We’re always budgeting for a moving target,” said committee Chair Iris Curtis.

Since these balance requirements need to be met at the start of a new fiscal year, any increase in the budget from the previous fiscal year means excess funds need to be available from the previous year to satisfy the current-year requirements. For example, the FY 2026 Rainy Day requirement is about $2.9 million, more than $200,000 higher than the FY 2025 requirement. To meet that, the town needed $200,000 in surplus from the previous year.

“Each year, we’ve been fortunate to have enough excess funds in the current year’s budget to meet the next year’s requirements, but that may not always be the case,” Commissioner Gary Persinger said.

To allow for more predictable budgeting moving forward, the committee recommended to change the policy so that the fund balance requirements are based on percentages of the previous fiscal year’s operating budget, rather than the current year’s.

So, for example, for FY 2027, the Rainy Day Fund and Unassigned Fund balances would need to equal 50% and 15%, respectively, of the FY 2026 operating budget, rather than that of FY 2027.

The change would require the town to build into its budget process monthly or other regular contributions to its Rainy Day Fund throughout the fiscal year to ensure the fund balance still meets the 50% requirement at the end of the year. The Unassigned Fund balance would be allowed to increase gradually over the course of the year so that at the end of the year it would equal 15% of that year’s operating expenditures.

“This proposed change would alleviate any uncertainty about availability of surplus funds,” Persinger wrote in a proposal.

Town council will review the committee’s recommendation at one of its upcoming meetings.