In the fire service, as in any other type of business, decisions on spending are made in accordance with a cost-benefit analysis. Those activities that are perceived as necessary, or required by law, will be funded at a higher level than those that seem to fall into the “nice-to-have” category. You need to remember this when you are putting together your budget for department operations. Trust me when I say it can be a battle of epic proportions.
Providing people
A number of criteria are used when making decisions concerning fiscal priorities. Primary among these is the cost of providing the people and resources to perform a given service, such as fire protection. In any career department, the percentage of budgeted expenses for people usually exceeds 90 percent.
In a volunteer setting, there are still expenses related to people other than salaries, such as insurance, pension fund contributions and workers’ compensation, but the savings are usually substantial. A growing trend in suburban or commuter communities is the use of a career daytime force, supplemented by volunteers as available, and an all-volunteer response during the evening and nighttime hours.
This type of operation delivers a reasonable around-the-clock fire department response, usually at a cost that lies somewhere between the costs of a full-time career department and one that is all volunteer. The decision to create a combination fire department must be firmly rooted in a thorough cost-benefit analysis of what the fire service considers to be an essential public service. However, the public may perceive a community’s fire protection needs in a different way. The public may place the fire department into the same category as they would an insurance policy—nice to have, but only valuable in a limited set of circumstances.
Productivity issues
Another concern frequently raised when discussing fire protection services is productivity. The fire service keeps claiming that productivity cannot be measured, and public administrators keep demanding that it be measured. The truth, as usual, lies somewhere between these two extremes. The classic public perception of the fire service is one of a group of “ne’er do wells” who work for the fire department because they are too lazy to get a real job. This does not show the true nature of a fire department’s work. However, if the members of a fire department do not choose to become proactive to show the public what is really being done, the stereotype will remain.
It has been said that there is no fire department that is doing everything that it actually could for its community. This is quite true. While the number of buildings that have not burned because of a fire department’s effort at inspections and code enforcement can never be documented, there are other areas that can be documented. One method involves emphasizing the value of property saves instead of property loss. Rather than declaring a large loss on an expensive home, report a tremendous dollar savings on the same expensive home.
Emphasis on such measures as public education classes delivered and community relations programs presented, as well as type and number of inspections conducted, can create a public perception of the fire department as a caring group of people who are dedicated to making their community a safer place.
This perception of caring service delivery is a display of productivity for the citizens who receive that service. An enlightened citizenry usually conveys their fire protection concerns to their elected representatives. Fire departments can profit from the perception (and reality) of any department productivity improvements. A number of fire departments even circulate informational publications to keep their citizens apprised of fire department events and operations.
Matters of capital
How much does your program cost? It has been said that the cost of capital is frequently a major concern in the choice of programs to be funded at the local level. If the funds are available from current revenues in the budget, then cost of capital does not come into play. But if the money has to be borrowed for some large-scale, long-term project, then the selection of funding mechanisms becomes important.
A method often selected for funding large-scale capital projects is the issuance of governmental bonds. In these cases, the jurisdiction depends upon its good name and credit rating to borrow money, with the incentive to loan being the payment of interest. These bonds are issued for periods of time that can vary from 5 to 40 years, depending on the magnitude of the project and state of the economy. Rates paid will vary according to the perception of risk that the jurisdiction issuing the bonds creates.
The perception of whether monies will be fully and faithfully repaid is an important factor in determining the rate of interest that must be offered to gain financial commitments. Various rating firms determine the reliability of a jurisdiction’s statement that principal and interest will be paid. The higher the risk, the higher the amount that must be paid to attract investment.
An added inducement is provided by the fact that the income from bonds such as these are usually exempt from the various levels of government taxation.
Borrowing from banks at the best available rate is also a possibility. Many smaller, independent fire organizations have established a relationship with their local financial community. Since these groups are known, they may come in for the preferential loan rates and terms saved for prime customers. The same holds true for certain separate fire protection districts. It is best to ascertain how the laws of a particular state can affect the financial operations of your fire department.
Setting money aside each year for a future project is a method approved by many states. By determining that a new fire pumper or station may be needed at some future point, funds can be set aside each year until the necessary amount is available. And these purchase arrangements can make large-scale purchases available without significant upfront costs.
Please note that no one is tied to any single type of borrowing. In fact, it is probably wiser to diversify the manner in which a fire department’s debt is financed. The guiding principle is that borrowing must be done at the lowest cost possible.
Remember that your local government is often held hostage by things beyond your control. Primary among the factors that can impact local fiscal matters is the overall state of the national economy. In those times of full employment, when the public perceives that all is well, more money is available for growth in existing programs and new activities can be undertaken.
During the late 1970s, interest rates rose, public confidence in government fell and the perception and reality of the people was that the economy was weak. During this time, measures such as Proposition 13 in California and Proposition 2-1/2 in Massachusetts gained favor. Fire department management in those states is still battling to overcome the effects of efforts to stem the growth of government.
Through the 1980s, the public’s perception of the national economy changed. While pockets of depression may persist in certain regions of the country, the overall feeling was one of growth and improved opportunity.
It is crucial to stress that the local response to financial problems is colored by the economic necessities and demographic realities of a particular area. While the fire service in many affluent suburbs is growing, many urban areas, both large and small, have been forced to retrench, based upon declining tax bases.
This point indicates the role that population distribution plays in financial decisions. In the years since World War II, the shift has been from the urban city to the suburban town. The flow of resources has moved with the people. The fire administrator must view the total community and its economic status when weighing fire protection alternatives.
Popular causes and ethic biases identified by the public as important to the community in general will develop their own environment for implementation. Areas of concern—such as drug traffic, law enforcement in high-crime areas, hazardous waste management and other issues that have an effect on a community’s quality of life—take on an existence of their own. Money will suddenly become available that no one ever knew existed. Be aware of this, because the fire department might be a target for reductions needed to provide the necessary funds.
Squeaky wheels
Let me offer a final note on the public as a factor in the local fire financial environment. It is axiomatic of public policy that government is a forum before which the people and their representatives present their case for support and protection. An aroused public can do a great deal to help or hurt the fire administrator who is in search of more dollars. This theory is based upon the old saying that, “the squeaky wheel gets the grease.” This is an assumption that I worked to perfect during my master’s degree studies at Rutgers University. It sure did help me in my dealing with the City of Newark, NJ, and its fire department.
When people perceive a need for the fire department, they will support it; the opposite is equally true. If a fire department is doing quite well on its own, that is fine. But if a major battle must be fought to gain a higher level of fire protection, by all means look to the public as a strong environmental variable.
The modern fire service administrator does not operate in a vacuum. If a fire department is to operate in a business-like fashion, it is essential that those charged with the responsibility for its management and administration have an understanding of the overall financial environment in which they operate.
Change with the times
Times are changing, and it is the wise fire administrator who changes with them. Ignorance of the total fire-funding environment can only set the stage for future organizational failures.
