Fund Balance
The accumulated surplus (or deficit) in a government fund — essentially a city's savings account. A healthy fund balance provides a cushion against revenue shortfalls.
How It Works
Fund balance is the difference between a fund's assets and liabilities. The Government Finance Officers Association (GFOA) recommends cities maintain an unrestricted general fund balance of at least two months of operating expenditures (roughly 16%). Cities with low fund balances are vulnerable to economic shocks and may face credit rating downgrades. During the Great Recession, many cities depleted their reserves, taking years to rebuild.
Related Terms
- General Fund — The primary operating fund for a city government, covering most day-to-day services like police, fire, parks, and administration.
- Rainy Day Fund — A reserve fund set aside specifically for emergencies, revenue shortfalls, or unexpected expenses — separate from the general fund balance.
- Structural Deficit — A persistent gap where a city's recurring expenses exceed its recurring revenue — meaning the budget is fundamentally unbalanced even in a normal economy.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.