Auditor raises questions with counties' unreserved fund balances

By KURT NESBITT

Journal Staff Writer

NEW ULM -- Despite the fact that it shows Brown County in a good financial position, County Administrator Chuck Enter still has some misgivings about State Auditor Pat Awada's recent report on the financial health of Minnesota's counties.

So does Nicollet County Commissioner Leo Bauer. Both say Awada's report has innaccuracies and presents a misleading impression of county finances.

"I don't know where she got her figures," Bauer said from his home in Gaylord Tuesday night.

County governments in Minnesota increased spending by 5.1 percent between 2000 and 2001 and held fund balances averaging 44.6 percent of their annual spending at the end of 2001, said the report.

Those balances are part of a long-standing debate about whether cities and counties are overtaxing or planning for the future. The funds are kept as cash reserves and are often used for back-up funds or for future capital investments.

It is those reserves that some say Gov. Tim Pawlenty targeted when he released his budget recommendations nearly one month ago. The recommendations call for a 20 percent cut in state aid to counties and reductions, eliminations and changes to several grant programs that help fund some county programs.

The annual report -- a financial snapshot taken when many counties beef up their available budgets until property tax and state aid payments arrive -- shows that budget reserves as a percentage of current spending in Minnesota counties increased 9.2 percent in 2001.

It also shows that 50 of the state's 87 counties had unreserved fund balances of between 50 and 100 percent of total spending. Awada characterized that amount as "moderately high to high" in her report.

It notes that income for counties went up overall by $4.31 billion in 2001 over 2000 -- a 6 percent rise. Spending rose $4.36 billion -- or 5.1 percent -- over 2000.

In the area, Redwood County had the highest fund balance in between 2000 and 2001 with a fund balance of 84.5 percent. Sibley County had the second-highest of all in the area with a fund balance 69.1 percent. The report characterized both counties' levels as "high".

The report called the same fund balances in Cottonwood, Brown and Renville counties "moderately high". Cottonwood County had the highest fund reserve balance in 2000 and 2001, comprising 63.5 percent of all spending.

Brown County follows with a 59.5 percent balance and Renville is the lowest in the category with a 56.8 percent reserve fund balance.

Awada ranked Nicollet and Watonwan counties as having "acceptable" undesignated fund reserve balances. The report said Nicollet County's balance was 46.1 percent and said Watonwan County's balance was 45.3 percent.

Enter said he takes issue with the fact that Awada's office included state money for closing landfills as part of the county's fund balances. He said the money is mostly controlled by the Minnesota Pollution Control Agency and that Brown County actually has little to say about how the money is spent.

"It shows we're in a good financial position and we need to stay that way," said Enter.

Likewise, Bauer said Sibley County had a half-million dollar grant that passed though county coffers at the time the information was gathered. He said the grant was later given to Arlington Community Hospital but "could've been there at one time."

At 176 percent of spending, Blue Earth County was the only one reporting a fund balance of more than 150 percent, which Awada's office considers "extremely high." County officals there said they plan to use the money for a new jail and that the interest from the fund helps keep property taxes stable.

Awada released a statement, where she said counties under the acceptable range "are in danger of not having sufficient cash flow to meet expenses, perhaps forcing them to borrow from other funds. Citizens in counties with fund balances in excess of 50 percent should ask their county commissioners why the balances are so high."

She also recently told the House Taxes Committee that high unreserved cash balances should raise flags about how wisely cities and counties are using their money.

Policy analyst Curt Yoakum of the Association of Minnesota Counties said concerns about unreserved fund balances are a "red herring" about the financial health of counties. He said counties are preparing for higher costs and responsibilities put on them by the state on issues like human services and corrections.

The Associated Press contributed to this report.