Board leans toward 10% reserve target as finance staff propose raising minimum fund balance

North Clackamas' finance leaders on Dec. 11 urged the board to update its ending fund balance policy to reflect contemporary best practices and to guard against future financial volatility.

"Our general fund ending fund balance serves as our liquid financial reserves," Executive Director of Finance Matthew McCarra told the board, explaining that staff calculate the metric as a percentage of total resources and that the district has maintained balances above 15% in recent years. McCarra said the proposed draft policy would replace the term "revenues" with "resources" and raise the written minimum from 5% to 8%, aligning with the Oregon School Boards Association model policy.

McCarra said reserves help mitigate higher anticipated PERS (public employee retirement) costs, revenue fluctuations from state and federal sources, enrollment declines tied to demographic trends, and bond-rating risks. "Two months of operating expenses would represent approximately 16% of our annual resources," he said, citing Government Finance Officers Association benchmarks, and said 8% was closer to OSBA guidance.

Directors pushed staff for a higher threshold. "I think even 8% is too low," Director McVay said, arguing for a 15-16% target to provide more cushion. Director Wachter favored beginning the policy conversation at 10% with a notification trigger at 8%. Director Kemp said he would "tend more towards the conservative side" and would be comfortable at 10%.

Board members and staff discussed trade-offs between a higher written policy minimum and budget flexibility, and staff said the district has historically held balances above the proposed amounts but expects long-term pressures that warrant conservative planning.

Chair summarized an emerging direction: staff will return with edits reflecting the board's interest in a 10% policy minimum and an 8% notification threshold so the board can consider formal action at a future meeting.