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Board discusses new insurance reserve and year‑end funding strategy amid rising cyber risks
Summary
Finance staff recommended establishing a board‑authorized insurance reserve to hedge uninsured losses, settlements and cyber risks, and presented a year‑end reserve funding sequence that maintains core reserves and considers up to 5% funding for the new reserve.
District finance staff presented a two‑part fiscal briefing June 4: first, a proposal to establish a new board‑authorized insurance reserve to cover uninsured claims, settlements above policy limits and cyber‑incident exposures; second, a year‑end fund balance and reserve funding strategy for board consideration.
Business official Mr. Brennan explained that cyber‑attack frequency has increased and insurance markets are unstable; the district carries cyber coverage up to $1 million but staff recommended a reserve that could be tapped for losses that exceed insurance or for uninsured expenses such as legal fees and system remediation. He said the reserve would be established by board resolution and can be funded up to 5% of the district budget per year under general municipal law, with the board able to set a lower internal target.
Board members discussed whether to approve a first read at the next meeting and the timeline for funding (after fiscal‑year close and auditors’ adjustments). Mr. Brennan recommended funding strategic reserves first (unassigned fund balance, tax certiorari, TRS/ERS) and using remaining year‑end balances to seed the insurance reserve; an example funding level suggested in the memo was approximately $500,000 as an initial target (first‑year consideration) though the board discussed scaling decisions and the need for actuarial or exposure analysis for very large balances.
The finance presentation also reviewed audited reserve balances, capital reserves tied to Promise 2027 projects, and the district’s ERS/TRS contribution reserves. Board members asked procedural questions about establishing and using reserves (board resolution required to spend), the ability to move monies between reserves by resolution, and the appropriate timing for final funding decisions (July or August after books are closed). Several board members signaled support to move the insurance reserve to a first read at the next meeting.
