Bourbon County finance staff warns of low cash reserves, explains KMAG rules and budget timetable

County finance staff told Bourbon County commissioners Monday that the county follows Kansas municipal accounting (KMAG) and must plan the 2026 budget on a cash-basis framework while watching a shrinking cash reserve and revenue limits set in state law.

The presentation focused on KMAG accounting, statutory encumbrances and the revenue-neutral (R-and-R) constraint under Senate Bill 13, and included a timeline of budget deadlines commissioners must meet in May and June.

The presenter said, "what I wanna kind of go through first is really what type of accounting we we use. It's called KMAG, and it's different than GAAP," and explained KMAG is the set of rules Kansas local governments use for cash-basis and fund accounting. That regulatory framework, the presenter said, requires the county to book some expenses as encumbrances when the county commits to them, and to follow statutes that limit use of funds to statutory purposes.

Why it matters: the county's accounting method affects how revenues and liabilities appear in monthly reports and audits, how much the county can rely on one-time growth in assessed valuation, and how bond ratings view the county's financial strength.

Commissioners were told Bourbon County's assessed valuation and the value of one mill set the revenue math for any levy decision: "our assessed valuations, $133,000,001.79... so 1 mill is worth a hundred and $33,001.79," the presenter said. The presenter also said the county's available cash reserves have declined in recent years: "We had $1,400,000 4 years ago, and we ended last year with about 500." The presenter warned that relying on unusually large valuation increases is risky, because valuations could stabilize or fall in future years.

The presentation walked commissioners through the R-and-R concept and Senate Bill 13: under that rule, a county that collects more tax revenue solely because valuations rose may need to lower its mill levy to remain "revenue neutral" rather than retain the larger dollar total. The presenter said commissioners will likely exceed R-and-R for 2025 because of higher valuations and rising operating costs, and recommended setting aside some of the extra revenue instead of spending it all.

The presenter also stressed timing: certain revenue distributions arrive in January and June, and operating funds such as road and bridge can face cash-flow gaps between distributions. The county's audit is expected to arrive in May or June; staff said the audit results are needed to finalize some budget numbers.

Commissioners asked how the county's accounting choice affects external lenders and bond ratings. The presenter said larger jurisdictions use GAAP because lenders understand it, but for a county of Bourbon's size KMAG is typical. Greg, introduced during the session as a consultant on bond issues, told commissioners that cash reserves are a critical part of bond-rating analyses: "cash reserves is 30% of your bond rating."

Ending: Staff said they will circulate detailed budget worksheets and a timeline by June 1 and urged commissioners to review department-level requests in every meeting between now and final budget adoption. The presenter said she will prepare required budget notices and the county's budget summary that will be published as the notice of hearing.