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status and must plan for the financial implications of such a change, to finance extended disaster recovery, or where the government is saving up for a major capital expense in the future and temporarily needs higher reserves (a sinking fund of sorts) until the planned expenditure is paid out. However, absent such circumstances, if the reserve is too high it can cause questions about whether the local government's taxes and fees are too high, or that the governing body is not fully deploying citizens' financial resources for their intended governmental purposes. A "best practice" General Fund restricted reserve policy is any funding level substantively above the 60-day GFOA recommended threshold, unless special circumstances warrant something different. What are such circumstances? Changes made by the Illinois General Assembly that negatively impact the city's budget usually happen with sufficient advanced warning to allow the city to plan accordingly. But economic downturns can impact the city's budget rapidly. Natural disasters and other community emergencies can happen overnight. The Federal government's current energy and fiscal policies are causing increased economic uncertainty nationally, and war in Europe could spread beyond Ukraine—which would add greater economic uncertainty and instability internationally. The future remains uncertain. Whatever the next disruption or downturn, I recommend that the City Council strive for a General Fund reserve level that enables the city to get to the next annual budget review and planning cycle without significant financial stress or radical retrenchment. Here are 3 options: 1) Leave the existing reserve policy in place (60 days) but continue closely monitoring monthly balances in a fashion that matches the council's view of the amount of reserve that is appropriate given current volatility levels and the potential for economic distress. 2) As requested by a majority of council members in May, amend the policy by increasing the restricted reserve from 60 days to 90 days (3 months, or 25% of General Fund expenditures, less capital; language is attached). 3) Maintain the equivalent of 60 days reserve in a separate account(not in the General Fund) making it truly a "rainy day fund". Funds could not be withdrawn without a majority vote of the council. The remaining fund balance would be unrestricted in the General Fund, allowed it to fluctuate as normal cash flow requirements dictate, but over time work to increase this amount to 60 days (see language attached). A variation on this option would be 45 days in the "rainy day fund" and 45 days in the General Fund. "Unrestricted reserves" are portions of the accumulated year-over-year fund balance that exceed the "restricted reserve." Generally, unrestricted reserves are assigned to governmental outlays and public purposes during the annual budget review and adoption process. A separate "rainy day fund" would be restricted. The effect of a policy decision made by the City Council regarding its reserves is that whatever fund balance exceeds the amount of the General Fund restricted reserve(s) will be allocated into next year's budget for lawful governmental expenditures and included in the spending plan that eventually becomes the City Manager's Recommended Budget for FY 2023 and following.