[Question re-posted for Nadia from article comment]

I know there is a $500 minimum of funds that should be rolled-over from year to year, but is there a maximum allowed? In others words do most PTOs spend pretty much what they make that year unless they're earmarking it for something big like a playscape?

There is no minimum and there is no set maximum.
The IRS may/will flag your 990 if your rollover is more than half of your budget for the year for 3 years in a row.

we rolled over 20,000 this year. It seems extreme to me, as we havent earmarked it for anything.

We rolled over about $20k last year; about half of that is earmarked for playground maintenance.

I think you'll find that most parent groups tend to advocate spending what's raised in a year to the benefit of the students who raised it, rather than saving it and rolling it over with no plan. Exceptions to this are:
* A reasonable amount of start up funds for the next year (but after year 1, this evens out and doesn't really take away from your annual funds because you started your year with X funds and try to end your funds with a similar amount.
* Funds being saved for a multi-year project. The most common is playground.
* Funds to cover any expenses that will hit over the summer. For example, you may order your next year's t-shirt to be produced during the summer so it's ready for sale at the start of school. Obviously you need to set aside funds to pay those expenses.

Our elementary group tended to carry over $1500-$2000. Our middle school group, which had much fewer funds and almost no expenses, probably only carried forward $200.

Our group has the rule of thumb, what we raise this year we roll over for next year. Of course when it's a good year everyone is excited and when it wasn't, well, we really use our budget to the max.

Very small buget, our best year we carried over $5000.