Forsyth County staff warn FY25 shortfall eroded reserves; propose fund‑balance policy to protect bond rating

County finance staff told the Forsyth County Board of Commissioners at a winter work session that the county’s recurring operating revenues fell short of recurring operating expenditures by $29,200,000 in fiscal year 2025, and that the shortfall was covered largely by one‑time transfers and reductions in fund balance.

“We saw operating revenues for fiscal year 25 fall short of operating expenditures by $29,200,000,” CFO Terry Goodman said, noting the gap was covered with transfers from the Pandemic Response Fund and other one‑time moves and that those sources will not remain in the general fund long term. Goodman added auditors found no new written compliance findings in the county’s 2025 Annual Comprehensive Financial Report.

The presentation laid out why the shortfall matters: fund balance — the county’s savings cushion — has declined in its capacity to cover next year’s expenditures, from about 44% in FY22 to roughly 34.2% coming out of FY25. Goodman said that while some of the county’s reserves are committed to debt‑leveling plans or restricted by statute and therefore not available for general use, the overall trend reduces the cushion rating agencies review when setting bond scores.

To address the trend, staff proposed a draft fund‑balance policy designed to align with rating‑agency metrics. Goodman recommended an unrestricted fund balance target of 35% of revenues and an unassigned reserve of 15–20% of current‑year revenues, together with annual five‑year forecasting to show how budget choices affect reserves.

Staff presented a multi‑year forecast that assumed full realization of budgeted revenues and more disciplined spending; even under optimistic assumptions, restoring ratios will require sustained operating surpluses rather than one‑time fixes. “Operating surpluses need to be generated in order for fund balance levels to be restored,” Goodman said.

Board members pressed for department‑level detail on where expenditure growth occurred, particularly on personal‑services costs, overtime and school and public‑safety spending. Staff said personal services, school allocations and debt service are the largest drivers of current expenditures and that overtime was a material issue in prior years; for FY26 staff said they had budgeted more realistic overtime numbers and are monitoring closely.

What happens next: staff will provide department‑level breakdowns and modeling for the board’s March budget workshop, and will return a formal fund‑balance policy recommendation in a future workshop.

Sources and provenance: presentation and Q&A by CFO Terry Goodman and county budget staff during the Forsyth County winter work session (opening through fund‑balance discussion).