State law limits the amount of undesignated money counties may have in their yearend general fund, but that doesn't mean the state's 66 counties take a lockstep approach to the handling of surplus cash.
Some carefully designate money to various departmental budgets and other purposes while others let the cash accumulate in their general fund. From there, they either pay out the money or roll it into the following year.
Some counties, like Davison, have sizable general fund cushions, while others operate with much less.
"It varies pretty much from county to county," said state Auditor General Martin Guindon. "Some are over the 40 (percent mark) while some are well under."
To the plus side county revenue is relatively stable since revenues come from property taxes. Cities, on the other hand, are apt to feel economic swings more acutely since they are sales tax-dependent.
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According to state law, the total unreserved balance of a county's general fund may not exceed 40 percent of budget appropriations for the next fiscal year. In past years, the high cash flow from yearend tax receipts have at times pushed Davison County's fund over the 40 percent mark, triggering a violation write-up from the Department of Legislative Audit.
Last month, in the final action of 2008, Davison County commissioners transferred $500,000 in undesignated general fund money to the highway budget, leaving a surplus of roughly $2.8 million, or nearly 38 percent. That is close to the 40 percent maximum recommended by the state.
Moving the money, which was done in a special meeting, avoided an audit red flag since reserves would have totaled about 43 percent without the move.
According to the "County General Fund Surplus Analysis" posted on the Department of Legislative Audit Web site, counties in The Daily Republic readership area had the following undesignated general fund balances as of Sept. 30:
n Aurora County: $356,290, or 23.15 percent of the 2009 budget of $1,538,852.
- Brule County: $466,895, or 20.56 percent of $2,271,173.
- Charles Mix County: $1,866,520, or 50.55 percent of $3,692,223.
- Davison County: $2,740,539, or 37.1 percent of $7,389,638.
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- Douglas County: $223,535, or 17.2 percent of $1,298,912.
- Gregory County: Minus-$263,358, or minus-9.03 percent of $2,915,402.
- Hanson County: $427,641, or 21.8 percent of $1,960,462.
- Hutchinson County: $891,617, or 30.6 percent of $2,909,959.
- Jerauld County: $237,624, or 20.29 percent of $1,171,201.
- Lyman County: $342,451, or 21.6 percent of $1,579,140.
- Sanborn County: $670,581, or 37.5 percent of $1,786,630.
- Tripp County: $756,547, or 20.8 percent $3,633,942.
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Bon Homme, Buffalo and Miner counties did not have reports available on the Web site.
Counties are required to report their general fund balances in March and September, which typically are low cash-flow periods prior to the collection of taxes, said Guindon.
Most counties have to make significant transfers to their road funds, he explained. If those transfers are made prior to the report filing, the general fund might show a low or negative surplus balance. If the transfers are made after the filing, the posted surplus could be high.
The former was the case with Gregory County, which posted negative surplus numbers, said Auditor Jim Waterbury.
"We transferred $250,000 to our highway budget just before we reported in September," he said.
That money helped pay for some unanticipated road expenses, he said.
How much budget surplus is enough?
Dick Ziegler, a member of the Davison County Commission and chairman of the panel in 2008, said he feels comfortable with a general fund surplus of 35 percent, which is close to the current surplus of about 37 percent.
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Ziegler said the county has typically levied the maximum tax allowed by law. The county could lower reserves by lowering the tax levy, but road repairs and capital projects, such as a possible youth facility, still must be paid for. The county, he said, must also re-examine county worker pay in relation to labor market realities.
"But for an emergency factor, we need to be at 35 percent surplus, which is where we are now," he said.
Commissioner David Weitala is skeptical any money from proposed higher state fees -- up for discussion in the 2009 legislative session -- will filter down to the county level. He also believes the sinking economy will cause Davison County to tap its reserves more heavily in 2009. All scenarios point to lower future surpluses, he said.
Jerry Fischer, the 2009 Davison County Commission chairman, said he's not ruling out the development of a capital accumulation account that will allow the county to set money aside for specified future projects.
"There are always options to look at," said Fischer.
Again, if funds are designated to such an account, future surpluses will drop.
There's no foreseeable end to a need for highway money, said Ziegler, since trucks are becoming heavier and county roads are getting older and more brittle. But it's also clear that not all extra dollars can go to road projects.
The Davison County general fund balance at the end of 2008 was about $3.3 million, before the $500,000 highway fund transfer, said Auditor Susan Kiepke, an amount that also included October tax receipts.
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"We're in pretty good shape, but it's obvious the commissioners don't have all the money they need to fix our roads," Kiepke said.
Kiepke agreed with Ziegler that a surplus of 30 to 35 percent is a prudent hedge against unforeseen emergencies.
Prior to this year the amount of undesignated money in Davison County's general fund has gone up every September. In 2004 there was a 22 percent surplus and in 2005, 31 percent. No report was filed in 2006, but the percentage in 2007 was 41.7 percent.
Other counties run a leaner general fund and show less undesignated cash.
In September, Minnehaha County showed an undesignated balance of just $32,285, or .07 percent of its 2009 budget of $44.2 million. Minnehaha Auditor Sue Roust said the law requires budgeting with the assumption that only 95 percent of revenues will be collected.
"Historically, we know we collect closer to 98.5 percent," she said.
The budget figures posted with the Department of Legislative Audit, in other words, aren't as tight as they may seem at first glance. The missing percentage points account for nearly $6.3 million in revenues, she said.
Even so, said Roust, her county has taken an aggressive stance in spending down reserves by programming them into the next year's budget. Hence, the low figure for undesignated cash.
