Most financial experts say an individual should have three to six months worth of savings to cover themselves if they lose their job or face a catastrophic circumstance.

Local governments usually follow similar advice by building a budget reserve in their General Fund to cover two to three months of operating expenses — such as making payroll, paying bills and maintaining vehicles — in case of a severe weather incident or other event that may hinder receiving tax revenues.

But unlike a number of other communities surveyed by the Hamilton JournalNews, the city of Hamilton has a policy of having no less than a 5 percent budget reserve in its General Fund budget, which is about 11 percent less than what is recommended by the Government Finance Officers Association.

John Fishbein, of the Chicago-based GFOA, said the organization’s best practices recommends a 16 percent to 17 percent budget reserve — or about two months of operating funds.

In its best practices for appropriate levels for fund balances, the GFOA noted that credit rating agencies monitor levels of a government’s fund balance to evaluate creditworthiness and favor increased levels of fund balances. However, they also note that there is “opposing pressures from unions, taxpayers and citizens’ groups which may view high levels of fund balance as ‘excessive.’ ”

“We’re working on having a sustainable budget with reserves that is structurally sound,” Hamilton Mayor Pat Moeller said. “We’d like to have a healthier reserve. It’s the right thing to do.”

Hamilton received an unexpected estate tax disbursement of $7 million when it was budgeting to receive $1 million for its 2012 budget, according to City Manager Joshua Smith. That one-time windfall boosted Hamilton’s current fund balance to 23 percent. Had the city not received the windfall, it would have an 8.8 percent fund balance, which is just more than one month’s operating expenses.

In 2010, Hamilton’s fund balance was at 7.8 percent.

He said Hamilton is looking at a budget deficit of $5.7 million next year, which will also eat into that budget reserve. Smith said city officials are projecting a 4 percent fund balance at the end of 2013 and that Hamilton will be out of cash in 2014.

The budget reserves in other cities and counties are higher than what Hamilton maintains.

In Fairfield, Finance Director Mary Hopton said her council requires a minimum budget reserve of 20 percent.

“We have to be able to sustain ourselves for three months in case of a catastrophe or to make payroll and pay bills,” she said. “Anything less than (20 percent) would be too close for me.”

Middletown officials have an annual goal of maintaining a minimum fund balance of 15 percent. By the end of 2012, city officials say it will be just more than 20 percent. That city had a General Fund budget of nearly $23.1 million.

Franklin Finance Director Sandra Morgan said the city keeps a fund balance of 10 percent to 20 percent of its General Fund appropriations. That comes out to about $1.2 million.

“A recommended policy is to have a minimum reserve of three months in the event of catastrophe and also as a way to safeguard the budget overall,” she said. “If it’s under 10 percent, you may run into financial trouble.”