Last month, Senior Economist Mark McMullen shared a macro view of the recession. This month, Chief Bill Metcalf of the North County Fire Protection District near San Diego zeros in on the recession's impact on fire departments. Metcalf is the' treasurer.
What is the most important or profound effect the recession has had on fire departments?
For the first time in a long time fire departments are having to think about doing the same or more with less resources. Most places in this country have been in a sustained period of economic growth for five or 10 years, if not longer than that in some communities. There's a whole generation of fire service leaders who have only led in good times. And there's a whole generation of fire service members that have only been in the fire service in good times. There's not a lot of experience for leading the fire service in times of recession.
What should those leaders do who are facing their first recession?
Don't wait to plan how your department might deal with shrinking finances until the crisis is staring you in the face. Don't wait until the city manager is knocking at your door with his hand out wanting 10% or 15%. You need to be thinking about it even if you are doing OK today. As the economist say, we are looking at another year, if not more than that, of a down economy. It will happen at some point and you need to be preparing for it now. You need to have a Plan A and a Plan B. The second is that a key to being prepared is that you have to understand your business and the economics of your business better than anyone else. There are an awful lot of fire chiefs out there that don't understand the economics of their operation because they have a city budget office that handles it. If we are going to come up with good solutions and strategies to continue to provide services in lean economic times, we as fire chiefs need to understand where does our revenue come from and what are our revenue options and what are our expenses — how much does each piece of our operation cost. Without that understanding, we have almost no hope of coming up with strategies to lead through these difficult times.
How important is it for chiefs to communicate that to elected leaders, provided that understanding exists?
That's vital. Our elected leaders would prefer that we lead in these economic times and we help them find solutions. The elected leadership in our communities don't understand our business. They look to us to help them find the answers, and to do it from a partnership approach rather than be adversarial. When we are not able to provide them with constructive solutions or alternatives for dealing with their financial problems, that's where you see local officials come out with across the board budget cuts, just blanket cutting rather than making thoughtful, strategic changes in finances. Our only defense is to have our plan in place and be ready to educate electeds about what the alternatives are and the implications of those alternatives. Too often we tend to take a “sky is falling” approach where we say, “if you do X, then people will die.” That scratches the itch of getting you a newspaper headline, but it is probably not very helpful in helping your bosses deal with the financial situation that they are in.
Is there any indication as to how much the recession will reduce the firefighter and EMS work force nationwide?
Not yet. There was probably a period of time when folks thought we could weather it without it affecting the size of the work force. That time is gone. In almost every state, people are talking about reductions in force, either through attrition or through layoffs. In some cases it is only certain segments of the public safety community. I'm confident that we are going to see reductions, and in some cases significant reductions, in the fire and EMS work force and the only question is, how big will it be. That is going to depend largely on how long this downturn persists. Lots of folks are doing everything they can to avoid going there. We've seen what is going on in Atlanta; it wasn't Atlanta's first choice to reduce work force. But as the problem deepened and became clear that it is going to last longer, it left them with no choice. Communities around here (California), have some reserves and can use those to help bridge short-term short falls in revenue. But as the problem persists, those reserve funds go away. This is a people business and most of our budges are people costs. And if you have to take big whacks out of the budget, then people are the only place you can get it.
Will there be a vacuum of talent when the recession ends?
At the very least we will wind up with a work force gap. Instead of having a bubble, we're going to have a work force dip where we're going to see for 1-3 years very few new hires coming on to departments. You'll have the junior folks and the senior folks and a big gap in the middle. We're going to go through a period of time where how people look at public employment is going to change. Where it used to be that when you signed on with the fire department you would be guaranteed your 30 years and a pension. That sure bet isn't going to be as sure. People are going to be looking at us differently. That might shrink the number of people who are interested in coming to work. We get a lot of folks who come to the fire service who really don't care about that kind of stuff, they just want to fight fire. For that portion that is interested in the career, it is going to cause them to stop and think because the certainty of the career won't be what it once was. Of course, that's true in the work force in general today.
Where will the reductions be the worst?
The upper Midwest has been in the economic downturn longer than most of us and there is less cushion there to play with. That's an area that was already feeling the squeeze and will continue to have to deal with some pretty lean times. In general, the big cities around the country are facing bigger problems than are the smaller municipalities. They have huge departments and their costs are so big and in many cases they are very dependent upon the economy. We see it in Atlanta, the changes at FDNY, Baltimore, San Diego and San Francisco.
How much reduction can happen before a department's response capabilities are compromised?
The response capabilities will be compromised when the first guy gets sent home, if we've designed response systems that are efficient. That's a generic answer. The bigger issue will be when you start closing stations. That trips the switch in people's minds. From the public's perspective, you can deal with fewer firefighters, but they don't really get in a panic until you start closing fire stations. That goes back to being prepared to articulate what the implications are. It has been a long time since we have had to justify what our staffing levels are on engines and ladders. It has been a long time since we've had to educate our public about why our fire stations are where they are. If it winds up that we have to close a fire station or lay people off, there are very few chiefs in this country that can quantify what those implications are going to be. One of the things we've been guilty of in this industry for a long time, is that we will make do with what ever you give us. And our first reaction when we get fewer resources is to do all that we can to provide the same level of service as we were before. One of the strategies that we would be well-served to adopt today is to be brutally honest with the people we work for and the people of our communities. People get this mindset that they can just whack things out of the fire department budget and it won't have an effect. We need to be honest with ourselves and honest with our communities that when you take money away, there is a decrease in service.
How much has equipment purchase fallen off in 2008 and what will 2009 hold?
In general in 2008, people are slowing down; 2008 has been the transition year, it has been the year where the budget light bulb has flickered on. The first reaction is to slow things down. People who had money budgeted to make purchases this year are taking a second look at them. We won't see the true impact until 2009. That's where we're going to see the biggest impact on local government budgets. When the budgets were built for 2008, things were looking much rosier. The budgets for 2009 are being built based on a pretty dismal outlook. We're going to see capital expenditures for apparatus, big-ticket items are going to shrink. Departments are going to reduce expeditures for equipment replacement, hand tools, everything is going to slow down. In most places, organizations are going to protect their people before they worry about hardware. We are going to see purchasing shrink dramatically throughout 2009 and into 2010.
Will the recession affect firefighter safety?
Yes, it will, but I don't think it has to because that is a choice on our part. It will no doubt have a negative effect on firefighter safety if we reduce people, equipment and resources and we continue to try to do the same things that we did before. When a command officer standing in front of a burning building, if he's going to try to do the same thing with 12 or 14 people that he used to do with 20, then somebody is going to get hurt and bad things are going to happen. If we don't have the resources, or as many people coming on a first response, or if they are coming from farther away because you've browned-out stations, we can't do the same thing and we need to adjust our tactics. It is going to depend on if we are able to adjust our firefighting tactics to deal with different level of manpower and equipment.
How does training play into this?
There's going to be no greater need for additional training for how are we going to do things in this new world with less resources. But at the same time, we're not going to have the money to spend on training. Very often the training budget is the first thing that gets whacked when the across the board cuts come down, there's no more travel and no more training. There's the real possibility that there will be less resources devoted to training at exactly the time when we need it most.
What do you expect will happen with some of the industry's larger trade shows in 2009?
I think we'll see less attendees. the IAFC just did the labor-management conference with the IAFF and six weeks ago we had barely 100 people registered and we were getting ready to pull the plug. Instead we wound up with almost 600 people in attendance. We have two conflicting situations out there. One, is that people are going to have less money available to travel. At the same time, people are never going to feel a bigger need to get out there and get educated. That's what we saw at the LMI conference. At the end of the day, we are going to see fewer attendees, people are just not going to be able to travel. And, people are going to be more selective and conscious of value for their registration dollars. It is going to be incumbent upon all of us that do tradeshows to make sure that we are delivering value, and that's educational programming and access to vendors. Exhibitors are looking at shrinking revenue because sales are slowing down. They are not going to be able to afford to leave the market entirely, but we are going to see a reduced presence, reduced square footage, smaller displays, fewer people sent to the shows to work the booths. We'll see the whole thing shrink, is going to be the bottom line.
What areas of the budget should chiefs look to cut first to best preserve a department's capabilities?
In my own budget I can look for one simple magic bullet, like the big-ticket items. Or, I can do the hard work and go through each program, each area, each division and really get into the nickels and dimes and find the equivalent amount of savings by doing it a little bit at a time. Too often, because we don't think about it until the city manager is knocking on the door, we are left to struggle to come up with a big chunk of money in a short period of time. That's where you do thinks like say, ‘OK, training is out the door.’ If we are looking at our budgets with an eye toward where could we reduce or adjust and having those plans in our back pocket, when folks show up at the door, there is a certain amount of reduction that can be done without doing wholesale program cuts. In my case we look at everything from what we are spending on office supplies, fuel, maintenance, and looking at discretionary overtime not operational overtime. Do we have people doing administrative projects on their day off and pay them overtime or do we have them do it on their days on duty? In almost every department there are those kinds of things that can be teased out of a budget if you've got the time to do it. None of those work if you've got to come up with an answer for the big guy by tomorrow at 4 p.m.
Any advice for the volunteer companies?
I've had a few conversations lately with volunteer chiefs. Some of theme are reporting that their donations are down and a couple in the D.C. area said that bingo has never been better. The challenge for volunteer chiefs is they're dependent on people's generosity to support their operations. Very few volunteer organizations get government support. Most often people give to charitable groups out of what they have left in their pockets at the end of the month. As unemployment climbs and as the recession spreads, there are a lot less folks with spare change in their pockets. At the same time, their budgets don't have that big section in there that is salaries and benefits. Their budgets tend to be directly related to things like paying for fuel, keeping the lights on, and maintaining equipment. They've got fewer options when it comes to looking at cutting expenses. Very often the volunteer organizations don't have the sophisticated financial help that many of us who work in larger municipal organizations do. I've got a couple of budget people that live, eat and breathe that stuff.
It is human nature that most of us in tough economic times go to cutting costs. But, make absolutely sure, that while you are messing around with what things cost, that you are maximizing your potential revenue. What's your EMS billing situation? What's your collection rate; how much of every dollar that you are billing are you actually collecting? Is there anything that can be done to improve that? Are you losing a lot of claims because you're folks aren't filling out the forms correctly? A lot of insurance companies allow fire departments to recover cost by billing for the response of fire apparatus to incidents whether it is a highway crash or fire. Have you applied for FIRE Act grants? Are you talking to local charitable organizations that maybe you've never had to have a relationship with in the past.