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Board briefed on fiscal outlook

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Board briefed on fiscal outlook

The Florida Bar had a deficit in its 2015-16 budget and expects one in its 2016-17 budget but still has more than adequate reserves, according to Budget Committee Chair Paul SanGiovanni.

But that fiscal picture could change in a few years and the board might have to consider raising annual membership fees in the 2020-21 fiscal year.

SanGiovanni, at the Board of Governors July meeting, took a few minutes to explain the Bar’s financial outlook for the next few years.

Under Bar policies, the Bar aims to have a reserve that equals between 33 and 64 percent of its annual operating budget. Right now, the Bar is at the upper end of that range, SanGiovanni said, despite last year’s deficit.

He explained that the surpluses and deficits in any year’s budget can be misleading. For example, he noted the deficit for the 2015-16 fiscal year was $3.48 million; however, about half of that deficit was “paper” losses because of declines in values in stocks, bonds, and other securities held in the Bar’s investment portfolio. (Aside from the value of the underlying instruments, the Bar’s investment portfolio earned $570,000 last year.) Likewise, in 2013-14, the Bar had a surplus of $3.48 million but more than two-thirds of that amount was “paper” profits because of an increase in value of Bar investments.

Accounting rules require the Bar to note the value of those investments in its annual budget reckonings, but there are no actual gains or losses until the Bar sells the securities, SanGiovanni said.

“The income and loss is really not as volatile as it may appear to be, especially when you put in the market value adjustments,” he said.

“We have a standing board policy. . . that provides that we not have less than 33 percent in our reserves and not have more than 64 percent of our operating budget for the annual budget in our reserves,” SanGiovanni added. “Where we are now is right at the top of that window.. . . The point is we’re going to have three years to think about things before we get to where we have a problem.

“We have plenty of reserves; we have plenty of time to think about what we’re going to do.. . . We start to get into an issue in [the] 2020-21 [budget] actually to get to a fund balance below the minimum.”

He said the Budget Committee is already looking at alternatives and Bar programs and expenses to prepare for that time. SanGiovanni noted that the last increase in annual membership fees was 15 years ago and the Bar’s operating costs, as well as the cost of living, have risen considerably since that time.

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