A key measure of a city's fiscal health is the size of the fund balance relative to the total annual budget. Fund balance is needed for cushion against unexpected revenue downturns or emergencies. Also, a healthy fund balance is needed so that it is not necessary to borrow for day-to-day cash needs.

Experts recommend a general fund balance of at least 10% of the city's total general fund revenues. The State of Michigan Department of Treasury recommends a higher fund balance level: 13%.

In 2010, the City of Muskegon changed from a December 31 fiscal year end to a June 30 fiscal year. This change provided a significant one-time boost to the City's fund balance which explains why the FY 2010 fund balance appears unusually high. The City Commission has adopted financial policies that set the minimum target fund balance level for future years at 13%.