Iowa City Schools · General Fund Liquidity · Unofficial community analysis

Why a 60–90 day cash reserve matters

The General Fund's cash balance swings by about 60 days of cash within every year — not because the district gains or loses money, but because property taxes and state aid arrive in a few big lumps while payroll goes out evenly. A reserve target has to be sized to the seasonal low point, not the average. That is why a healthy target is 60–90 days, even though the year-round average looks higher. This page reflects the forward-looking picture under Iowa's new school-funding law (SF 2201), signed February 2026.

~60 days
Peak-to-trough swing in cash within a single year (Nov peak → March trough)
60 days
Minimum to keep the winter trough above the payroll floor
90 days
Prudent — absorbs a bad-variance year and a revenue shock

The problem: cash is highly seasonal

Local property taxes land in just two months (October & April), and under SF 2201 state aid now arrives in four quarterly payments instead of monthly — while payroll never pauses. So cash swings sharply between inflows. The red line is ICCSD's own FY27 projected path under the new law: an early quarterly aid payment keeps the fund from cratering, so the old summer crisis is gone — Aug–Sep hold ~16–22 days instead of going negative as in FY26 — but the low now lands in late winter, with March grazing ~10 days (one mid-month payroll). Lift the whole curve to a 60- or 90-day reserve and that winter trough clears the floor with real margin.

0255075100125 ~15-day floor (one mid-month payroll) March ~10 days: winter trough Summer holds ~16–22 days — no FY26-style crash quarterly aid month JulAugSepOctNovDecJanFebMarAprMayJun ICCSD FY27 projected under SF 2201 (~34-day avg) 60-day policy 90-day policy
Days of General Fund cash by month (cash ÷ ~$610K/day). Shape from ICCSD's FY27 projection under SF 2201 (PFM Exhibit 2a). PFM models the quarterly payments landing Aug/Nov/Feb/May; the statute reads “beginning July 15,” which would shift the inflow months (and the peaks) about a month earlier — but not the March trough. The policy lines shift the same shape to a 60- and 90-day annual average.
Why the average is the wrong number. A district could average a comfortable-sounding 34 days and still skate to ~10 days — one payroll from trouble — every late winter. What matters is the trough, the single lowest point, relative to the cash you must keep on hand to make payroll. The reserve exists to carry the trough, not the average.
What SF 2201 changed — the season, not the target. Moving state aid from monthly to quarterly (beginning July 15) refills the fund at the start of the year, so the old late-summer trough that forced ICCSD to borrow every August is gone. But the dry stretch simply moves to late winter (Dec–March), between quarterly payments — and because four big payments are lumpier than nine small ones, the within-year swing actually grows. The summer crunch eased, but the 60–90 day target holds — arguably reinforced. The seasonality reshapes; it does not shrink. (Calendar note: PFM modeled the quarters as Aug/Nov/Feb/May; the statute says “July 15,” which would shift each trough about a month earlier and help summer even more.)

Why 60–90 days, specifically

The target is built from three pieces:

  • Operating floor (~20 days) — cash you can never dip below, because payroll is paid mid-month before late-month receipts arrive.
  • Seasonal dip (~24 days) — how far the winter trough sits below the annual average, baked in by the payment calendar.
  • Volatility / shock buffer (~16 → 46 days) — margin for a year where revenues come in light or costs run heavy. A modest buffer gets you to 60; covering a real shock (enrollment drop, delayed aid) takes you toward 90.

A second, independent check agrees: modeled month by month under SF 2201, the demanding months (right after a quarterly payment, which must self-fund the run down to the next trough) require 60–74 days for 95–99% confidence of never running dry. A single reserve policy must satisfy the most demanding month — so the floor lands at ~60, the prudent level near ~90.

ICCSD today~20–35 GFOA ≈ 2 months ~20~24~1660~20~24~4690 60 days minimum 90 days prudent Floor Seasonal dip Volatility buffer

What each month needs

Required days of cash for a 95% chance of not running dry over the following 12 months (component-based volatility model, FY27 quarterly-aid flows). The months right after a quarterly payment need the most cushion, because the whole drawdown to the next trough is still ahead of them; the pre-payment lows (Jul, Sep, Jan, Mar) need little, because the next big inflow is imminent.

02040608060–90 day policy zone15Jul37Aug18Sep52Oct74Nov48Dec18Jan34Feb15Mar40Apr59May31Jun Days of cash a balance must clear for a 95% chance of not running dry over the next 12 months (tick = 99%).

Bottom line for ICCSD

The district currently steers to roughly 20–35 days — below even the minimum. Under the old monthly-aid law that meant borrowing every late summer (the $10M interfund loan, the anticipatory warrants). SF 2201 ends that specific summer crunch, but it shifts the squeeze to late winter — ICCSD's own FY27 projection still skates to ~10 days in March. Moving the floor toward 60 days, and the goal toward 90, would let the General Fund self-fund its full seasonal cycle, retire the recurring short-term borrowing and its interest cost, and rebuild the margin that rating agencies look for.

Unofficial community analysis — not produced by ICCSD, PFM Financial Advisors, or the Financial Oversight Committee. Forward-looking under SF 2201 (signed Feb 2026); the seasonal shape is ICCSD's FY27 projection (PFM Exhibit 2a), with the required-days model using component-based volatility on the FY27 quarterly-aid flows. FY27 is a transition year: the first quarterly aid payment is largely consumed by repaying FY26's emergency interfund loan plus payroll, which is why it does not show as a spike. Figures are provisional and not current — the FY24/FY25 audits are still outstanding, public fund-balance figures do not fully reconcile (cash-in-bank vs. cash+investments vs. cash-basis roll-forward differ by several million dollars), and PFM/the district hold more recent actuals than these public materials. The exact quarterly-payment calendar (PFM modeled Aug/Nov/Feb/May; the statute says July 15) will revise the peaks — not the March trough or the case for sizing reserves to it. Days of cash = General Fund cash ÷ ~$610,000/day. A separate, not-yet-law risk — the proposed SAVE diversion (SSB 3034) — could raise GF cash demand via the district's loans to the SAVE fund.