This is the projection for the level of cash reserves we will have to work with in creating the FY2010 budget.

As of January 2009, we had approximately $1,000,000 in our Undesignated Fund Balance (which is sometimes called "Free Cash"). In order to make it through to the end of Fiscal Year 2009, we know that we have to transfer $152,000 of that to Veterans' Benefits, and we have committed an additional $62,000 of that to Capital Improvements in FY2009. This leaves the balance in the Undesignated Fund Balance at $787,000.

In addition, we know we will have overtime costs in the DPW's Snow and Ice budget. We project we will need an additional $350,000 to cover our snow and ice spending. (The city did not purchase snow insurance this year, a calculated risk. As it turns out, we would not have reached the snowfall threshold to recoup any money this year, the snowstorm of March 2 notwithstanding.)

We also expect to have additional Overtime costs in the Fire Department due to unanticipated staff illnesses. We must set aside an additional $125,000 to cover those costs.

Finally, in order to plan conservatively, there is some uncertainty about whether we will need additional Veterans Benefits before the end of the Fiscal Year, and will set aside another $125,000 to cover that possibility.

This leaves us with $187,688 in our Undesignated Fund Balance. Typically, this fund is replenished at the end of the Fiscal Year with tailings from each department (any budgeted amount that was not spent by that department in the course of the year). This year, when the Governor cut 10% of Northampton's local aid in the current year, the Mayor asked Department Heads to freeze any hiring and spending that was possible to freeze instead of making mid-year budget cuts here. We hope to cover that cut with what would have been this year's tailings. Unfortunately, this means we can not expect the Undesignated Fund Balance to help us close the gap in 2010.

In FY Mayor Higgins created the city's first Stabilization Fund and Capital Reserve Account. By the end of December 2008, accounting for interest earned, the Stabilization Fund held $254,117 and the Capital Reserve Account held $1,338,228.

The Stabilization Fund may be used to shore up the FY2010 budget, and in fact, the Stabilization Fund has contributed to the General Fund budget in the years that Local Aid from the Commonwealth has fallen below 2002 levels.