Budget breakdown: The real cost of operating a fire department
All chiefs must be able to explain the how and why of our budget to our members, citizens, union reps and elected officials
This article originally appeared in the IAFC iCHIEFs summer 2021 issue. Read the full issue here.
By Steve Pegram
Many communities are still feeling the impact of the pandemic and changes to their local economies and how that affects fire and EMS budgets. One thing is for sure, fire and EMS agencies are competing for budget money more now than ever. Volunteer communities are struggling with the rising cost of equipment and a reduction in available first responders to handle the calls. Suburban communities served by volunteer and/or combination departments are also struggling with the growing cost of doing business, especially as more and more communities look to hire part-time and even full-time personnel to supplement or increase staffing. Career departments continue to struggle with the rising cost of personnel, pensions and benefits, all while politically, in many communities, the budget priorities seem to be moving away from public safety.
Like many of us are told when we meet with a personal financial planner, it's time fire and EMS chiefs diversify. The pandemic has shown us that once-reliable sources of funding for fire and EMS were no longer as reliable or robust as some thought. Some communities decimated by the housing market crash of the late 2000s saw increasing property values and property tax revenue during the pandemic. However, many communities who had moved away from property taxes as a primary source of funding to an income and/or earning tax model for funding saw numbers plummeted in their communities where there was a reliance on tourism, travel and other industries closed for months in 2020. In addition, communities struggled with population changes, call volume, and revenue as businesses were shuttered and working from home became the new norm.
It is critical now more than ever that, as a fire chief, I can explain the "how" and "why" of our budget, not just to our bosses, the elected officials who vote to approve the budget, but to ALL the stakeholders who share in the responsibility for the budget and who the budget process effects.
One of the biggest groups affected by the budget process, but often don't know or understand anything about it, is our employees. In many firehouses across the country, we can find conversations riddled with frustration over how and why a department is funded or how the money is being spent. I have found that being as open and transparent in the budget process with all stakeholders, including our employees, and yes, even the union, can help eliminate these issues.
In Goshen, we hold an annual department meeting to explain the budget and work through all the numbers. This process has helped but not eliminated the complaints of why or why not certain things are done and/or provided or purchased by our community. Here is how the process works: At the beginning of the budget process, I create a spreadsheet of all the projected revenue for the next fiscal year; for us, that vast majority is from property taxes with supplemental funding from EMS billing and grants. Then we go through all the associated costs we have in the fire department, and slowly, the available resources (money) diminishes before their eyes.
When working through the budget, I start with the "knowns," the fixed cost that is not at all discretionary, like your budget at home. There are some bills you have to pay and often pay first, like your mortgage or a car payment.
As we work through the budget process, it becomes quickly apparent that there isn't as much money available as it may seem. For example, in Goshen, we have a mortgage payment on one of our fire stations. That's a fixed payment we have to make annually and is plugged in first; 4% of the "budget" just disappeared. Once that is plugged in, we move on to other debit services like lease-purchase payments for vehicles. Quickly another 7% of our budget is already gone, and we haven't paid a single employee or purchased the first Band-Aid.
Next, fixed costs like property/casualty insurance, 911 dispatch fees, auditor cost consume another 5% of our budget, leaving 85% left, which looks and sounds like a lot of money until we start plugging in payroll costs. Our department is a combination department with a mix of full-time, part-time and volunteer personnel. I provide our employees a breakdown of the actual cost of an employee. Often employees know what their salary and overtime are but rarely do they fully know or understand each employee's total cost on the overall budget. Once salaries, healthcare, pension and other related personnel cost are entered into the budget, another 78.5% of our available resources are gone leaving 6.5% of our revenue to operate a fire department.
This is when many of our employees realize how little discretionary funds we as a department have at our disposal. The remaining 6.5% covers all the expenses for utilities (phone/internet/gas/electric), fuel, office supplies, uniforms, turnout gear, trash removal, repairs and maintenance, tools and equipment, EMS supplies, and training.
At the end of the process, a department with an overall budget of $3.5 million has less than $225,000 to truly "operate" once debit services and payroll costs are accounted for.
I have found this process useful for our chief officers who are not yet directly in charge of the budget but will be in the future. It helps justify to company officers who are often frustrated that their request for a new tool has been denied. Finally, it shows the firefighters, EMTs and paramedics where the money is being spent, and explains why their training might be denied simply because there is no money left in the budget.
We have also allowed the department membership input on how the final 2-3% of our budget is spent. Some years, more money is allocated for training, and other years we may make a big equipment purchase, but rarely can we do both. That's a reality of many departments and one that we as fire and EMS leadership must share with our employees, elected officials, coworkers and community, so we can make better decisions and understand the true cost to serve and protect our communities.
About the Author
Steve Pegram is the fire chief and township administrator in Goshen, Ohio. He has been a member of the IAFC since 1991. In 2020, Chief Pegram was appointed the chairperson of the COVID-19 Economic Taskforce for the IAFC. In addition, Chief Pegram serves on the IAFC Program Planning Committee and was appointed by the IAFC Board of Directors to serve on the Board of Global Public Safety Solutions (GPSS).