Something to Talk About
I’ve had two conversations recently that bear repeating. The first conversation was a formal interview with Mark McMullen, a senior economist for Moody’s Economy.com. McMullen’s area of expertise is government finance. I first interviewed him nearly a year ago when it seemed obvious that the economy hadn’t merely stumbled but was in recession. The U.S. housing market was in bad shape, driving down home prices. It was a troubling sign for fire departments that depend on property-tax revenue.
We didn’t realize just how deep the problem ran, but we’d soon find out. The number of foreclosures on homes bought with sub-prime loans indicated that lending institutions were in for tough times. Fuel prices were at record highs and several fire departments started cost-saving measures in anticipation of budget cuts or cost overruns. Then, of course, giant financial institutions toppled, banks became squeamish about lending to each other and almost anyone else, job losses ballooned, prices started on a dangerous deflationary path, and people on Wall Street and Main Street held tight to the money they had.
Early this year, McMullen said that one warning sign that fire chiefs should look for that the economy is worsening is a sharp fall in retail sales. That’s because it would be a double gut punch of lower property taxes and lower sales taxes. That, of course, happened and many municipalities are doubled over with the wind knocked out of their budgets.
My most recent interview with McMullen appears on page 88 of FIRE CHIEF’s December issue; a longer version of the interview will be posted later this month at firechief.com. He says the economy is now worse than most experts expected. Most fire departments already feel the pinch, some through staff reductions. McMullen expects the economy to bottom out in the second half of 2009. Recovery, he says, will be slow.
Here’s what struck me: In both interviews, McMullen said that fire departments are in a better position than school districts when it comes to competing for public money. He reasons that because there are fewer children in K-12 schools, there is less demand for building new schools. That, he further reasons, should free up money for fire departments. Departments, he said, should be in position to get a bigger chunk of the pie, albeit from a smaller pie.
The second conversation I had was with a progressive fire chief of a medium-size department. His city administrator asked how much the chief could trim from his budget. He told the administrator that he could cut as much as he liked. The only thing the chief needed to know was how much risk the administrator was comfortable accepting. In other words, what number of civilian deaths from fire or other emergencies could the administrator live with?
For his part, McMullen takes measurable facts and applies reason to understand a present condition and predict future conditions (fewer children need fewer school space, freeing more money for fire departments).
But public servants’ decisions, especially spending decisions, often are based on factors outside cold analysis and logic. And beyond political pressures, there is tremendous economic pressure right now to make deep budget cuts. Recent data from the National Conference of State Legislators shows that, collectively, state governments need an extra $100 billion to break even over the next 18 to 24 months.
It may be that federal money will bail out the states and that the states will funnel that money to municipalities and counties. Even so, chiefs will face a tough battle to hang on to the money they need. At the least, it will take combining cold facts with an emotional appeal, as did the chief I spoke with, to get the attention of those holding the purse strings.
The conversation between the chief and his administrator did not end in enlightened resolution. And I suspect those two will be having that same conversation several more times in the coming months. I also suspect many other fire chiefs are having similar conversations with their administrators.
If you are a chief and have not shaped your argument against extreme budget cuts, you need to do so. If you’ve had success in the budget process, please share your strategies with others in the comment section below. (Please log in or create an account to leave a comment.)






By Rob Carnahan
By Dennis Compton

