Fulton Township in Fountain County is awash in cash.

The township had a balance of $256,000 at the end of 2017. That’s more than nine times its 2018 budget, enough money to continue operating the township with no additional revenue for 108 months.

Though now debating whether to join a fire territory, township officials have no solid plans for spending the surplus. There are no parks to create, no fire stations to build. 

“I don’t know what I would do with it,” Fulton Township Trustee Kandy Peach admitted.

The township’s surplus is a far cry from the two- or three-month best-practice cushion urged by experts in government finance.

The Chicago-based Government Finance Officers Association, for example, recommends that, regardless of size, a general-purpose government should maintain an unrestricted budgetary fund balance of no less than two months of regular operating revenues or operating expenditures.

But many townships in Indiana have much, much more cash than that sitting unused.

Fulton Township, which has 670 residents in west central Indiana, has an annual budget of $28,050.

Peach, whose annual trustee salary is $2,700, has been trustee since 2003.

She also earns $900 as an investigator for poor relief and $3,400 for mowing cemeteries, and she pays herself $1,800 in rent for an office space in her home. All told, she receives $8,800 annually from township tax coffers.

Aside from amounts paid to her, the township disbursed just $17,209 for services to its residents last year. Meanwhile, $230,000 of taxpayer money sat unused, drawing about $200 in interest.

While Fulton Township might be an extreme case, it’s not unusual for townships in Indiana to far exceed the recommended minimum two- to three-month operating balance.

On average, Indiana townships hold a balance of 116 percent above their annual budgets. At the end of 2017, three townships had more than 10 times their annual budgets sitting unused, according to the Indiana Department of Local Government Finance.

Across the state, townships had budgets totaling $389.3 million, all certified annually by the department.

But they had a total 2017 cash balance of $453.6 million, more than 16 percent above their budgeted amounts. That’s enough for 14 months of operating revenues, as much as seven times the recommended amount.

Surplus plans

Near Corydon in southern Indiana, Harrison Township Trustee Cecil Trobaugh had saved up more than $500,000 to buy a truck for his southern Indiana volunteer fire department.

But there was a successful effort to have the county take over the fire service. Operating the department previously cost Trobaugh’s township $136,000 a year.

By summer, the county had asked for $1.6 million to help cover the salaries of 12 paid firefighters. The local tax rate would go up about 8 cents.

That switch-over left Trobaugh with a hefty surplus, one of the highest percentages in the state. Trobaugh has a plan for the surplus. He’d like to build a community center.

“If everything goes like we plan, we get to keep this money that we had for the fire department, once we get to place it over in the rainy day [fund]. We’re talking about $400,000 to $500,000. We can come up with a pretty good community building,” Trobaugh said.

Neither the DLGF nor the Indiana State Board of Accounts has legal control over township budget surpluses, and not all townships have rainy day funds. The state requires that townships pass a resolution creating such a fund and designating the purposes for the money.

Indiana statute does not provide recommended cash balances for township funds such as poor relief. Nor are the department of government finance or the board of accounts instructed by the legislature to provide recommended balances to townships, said Skii Ficklin, communications officer with the SBOA.

“What is the right number? There is no one right number,” said Mark Levin, clinical associate professor at the School of Public and Environmental Affairs at Indiana University.

Before going to IU three years ago, Levin worked in other states for 41 years as a professional city manager.

He likens a municipality’s surplus to any Hoosier saving up enough money to cover the loss of a job or a medical emergency.

“Typically in most states, cities and local governments want to have at least three months’ operating expenses in the bank. Whether there’s a shortfall in revenue, whether there is some unforetold opportunity that comes up, there are disasters that occur,” he said.

Nationally, the Pew Charitable Trusts studies state balances and rainy day funds. Generally, rainy day funds are dedicated to providing stabilization during economic downturns; reserves and balances fill budget gaps. 

Pew evaluates how many days units of government could run if the revenue stream dried up.

Indiana, for example, could operate 33.5 days based on its estimated 2018 rainy day fund of $1.8 billion. That ranks Indiana ninth on the list for the ability to operate solely from rainy-day funding. Illinois, on the other hand, wouldn’t last a day.

By budget balance alone, Indiana could run 42 days, according to Pew. The state’s townships, meanwhile, could operate for about 425 days with the cash sitting in their coffers (not including rainy day funds), according to figures from the department of government finance.

Fixing the problem

Setting a specific surplus percentage for townships might be difficult for Indiana legislators.

State Rep. Cindy Ziemke, R-Batesville, plans to introduce a bill in the 2019 session requiring trustees to submit a capital improvements plan to the state. The plan would ask townships how they intend to spend their surpluses.

“How can we free up these funds that are not being effectively used and make them be useful?” Ziemke asked. “I’m just trying to put forth ideas to make our local government far more efficient, to free up the resources to fund what we need.”

In the 2018 General Assembly, she introduced the idea in House Bill 1005, which received more headlines for a provision that would have forced townships with populations under 1,200 residents to merge with a neighboring township. Another provision in the bill would have required capital improvement plans.

Opposed by powerful lobbyists such as the Indiana Volunteer Firefighters Association, the bill never reached the floor of the Indiana House.

Ziemke’s proposal would skirt the state’s reluctance to set budget surplus limits for branches of government.

And mandated capital improvement plans could be an effective management tool, said Jamie Palmer, senior policy analyst with the Indiana University Public Policy Institute.

Palmer was project manager for the Indiana Commission on Local Government Reform, the group that in 2007 recommended the elimination of township government and transferring its functions to a county manager.

“It does make a lot of sense,” she said of Ziemke’s proposal. “In several instances, the General Assembly has said to communities that you’ve got to come up with a plan, and you’ve got to tell people what that plan is. That makes sense. Planning and transparency can never be a bad thing.”

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