The story in the Chronicle yesterday about California paying its community colleges in IOU's got me thinking about reserves, and the conflicting roles they play. In good years, some cc's are able to salt away some money and put it into reserves. (It's also commonly called a “rainy day fund.”) The idea is that public funding is notoriously and viciously cyclical, so having a pile of stray money can minimize the damage you have to endure in down cycles. Given how much of our budget is fixed cost, there's a real logic to this. But reserves are a tricky business.