City right to spend down savings

Government leaders should act with fiscal responsibility.

And fiscal responsibility includes building up a budgetary cushion to be able to respond to emergencies and cover bills without having to borrow money and repay with interest.

But governments, whose money belongs to and whose spending should serve the people, should not hoard cash.

That’s why it pleased us to read News staff writer Steve Schulwitz’s recent report that the Alpena Municipal Council planned to spend down some of its hefty savings on needed purchases and projects.

While no law dictates how much money governments should have in the bank (as long as they have enough to balance their budgets), government accounting experts say a healthy cash savings account should have enough in it to cover about two to three months’ worth of expenses, or about 25% of the annual budget. That provides enough of a cushion to make payroll and pay bills between tax collections and to respond to sudden unplanned expenses.

Alpena has enough money in the bank to cover 46% of expenses.

The city’s own policy says its savings should equal at least 10% and no more than 20% of annual expenses.

The city plans to spend down some of that over-savings by buying a couple of fire trucks and perhaps other projects.

We often find ourselves praising the city for its financial management. The Government Finance Officers Association of the United States and Canada has honored the city for financial excellence in its comprehensive reporting, and we have commended the city for transparency in its spending.

Now, we find ourselves offering kudos again as the city puts its money to work for Alpenans instead of sitting around in a bank.

The city made the right decision.


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