DeKalb’s latest annual audit, completed earlier this month, shows the city added $4 million to its ending General Fund balance for fiscal year 2024.
It’s a multiyear trend, and $4 million is the least amount added during this period. Since 2020, DeKalb has seen $23.7 million in annual operating surpluses, an average of $5.9 million per year. The city is now sitting on an excess fund balance of $36 million, which matches 68% of projected 2025 expenditures — very much beyond the city’s required reserve of 25%.
Yet this week, City of DeKalb passed an ordinance enacting a 1% tax on groceries and prescriptions, to begin next year when a state version is discontinued. The city asserts that it must retain some $800,000* annually that it currently collects in these taxes or city services will suffer.
Of course, the enormous fast-growing hoard belies the argument on its face.
Despite passage of the tax, do credit Alderman Mike Verbic (Sixth Ward) for bringing up the $36 million during council consideration. I don’t think most people know. But it’s eminently reasonable to consider whether a reserve equal to 68% of projected expenditures signals over-taxation more generally, and discussion should continue as we head into budget season.
Here’s what The Civic Federation has to say on this topic:
In our view, if a government has a fund balance ratio higher than 50%, it should consider shifting toward longer term asset holdings, retiring debt or adjusting the income streams feeding the funds to bring income in line with current spending requirements.
So there you have it — guidelines. To my mind, our city council should opt for capping the reserve, and the main reason is transparency. With the minimum reserve policy already set at 25%, the council faithfully checks in annually to ensure this is achieved. Whether they would fix a maximum at that same 25%, or cap it at 30% or 50% or whatever, with a codified policy the electeds would essentially be assigning themselves a budget box to check with a built-in reminder to consider additional responsive action.
And the action? Well, let’s preface this with the fact that the city has exploded its pension liabilities by creating 28 new first responder positions over the past three years. (DeKalb’s required contributions to the police and fire pensions this year total $10.4 million, or about 20% of general revenues.) So far, the city’s strategy has been to agitate at the state level for relief, while trying to save for the time when general revenues can no longer meet expenses.
Saving is a noble objective for sure. However, recently the city has begun to nickel and dime the reserve, for example by bestowing an unscheduled, extra round of grants to social service agencies. This is a failure of discipline. So besides setting a cap, council should declare a set of priorities in advance for spending the amounts that exceed the cap.
May we also think big in exploring how investments of surpluses could help protect our future. How much could we reduce obligations down the road by making extra contributions to the pension funds now? And speaking of roads, what if we approached our lagging street improvement program in the same ambitious way?
The timing couldn’t be better for thinking about upgrades to spending policies. Budget meetings for the 2026 fiscal year begin in August.
*The actual grocery tax collected annually, which Mayor Barnes mistakenly told the Daily Chronicle is $1 million, probably doesn’t even meet the city staff-reported estimate of $800,000, either. The 2023 collection was $727,817; and the Chronicle reported the Sycamore city manager as saying Sycamore’s 2024 collection was $719,726, which he described as “near what DeKalb got.” It’s difficult to take what this administration says at face value in these matters.