Montgomery County Department of Administration--Finance Office
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Financial Activities: Audit / Year-End Budget / Grants Contracts / Vendors Equipment / Inventory Financial System Local Government Payroll Privacy / ID Theft Purchasing / Payments Receipts / Banking Travel / Vehicles Whatchamacallit / Various Quick Reference: Finance Office Homepage *OFFICE Central* Memorandums Schedules / Deadlines Staff / Position Directory		*OFFICE Central* Budget / Grants Category Budget-Balancing Tactics INTRODUCTION During many national financial crises or economic downturns, the local economy suffers and dampens the County's financial condition. Whis these events take place, the County often experiences decreases in revenues from sales, sales taxes, and other sources. A decrease in expected revenues could create serious budgetary problems. To cope with serious budgetary problems, the County departmental managers and higher authorities should consider employing various cost-cutting and/or revenue-enhancing options to balance the budget. Many of these options are described herein. Cost-cutting tactics include hiring freezes, delayed facility maintenance, service cutbacks, purchasing and travel restrictions, equipment delays and cutbacks, reductions in number of employees, furloughs, retirement incentives, and many others. Revenue-enhancing tactics include fee increases, asset sales, leasing government assets to outside parties, and many others. In addition to the options presented herein, think and consider other options not specifically described. When the County faces a serious fiscal challenge, each one of us needs to adjust our expectations and operations accordingly. The crisis presents a valid opportunity to constructively shape changes when declining resources invalidate the option to continue operating as normal. However, understand that sharply curtailing government spending (especially related to capital projects and asset purchases) could be harmful to the local and regional economy. Consider confronting taxpayers about the need to increase taxes, fee payers concerning higher fees, the recipients of high-cost services regarding downsizing or scaling back, the recipients of low-priority services regarding the possibility of discontinuation, and employees about changes in service delivery strategies, assignments, pension reform, health benefits, and/or compensation plans. Avoid eliminating vacant positions only; such action could place stress on the program due to understaffing. Also, as much as possible, avoid reducing all programs by an equal percentage or amount; instead, take more away from lower-priority services. County management encourages your cooperation; County management needs your insight to identify ways to strengthen the County by using ideas and support from within the County government and its citizens. COST-CUTTING Tactics that are especially prominent during an economic downturn include hiring freezes, suspension of pay increases, delayed capital projects or other asset purchases, layoffs and elimination of vacant positions, implementing targeted reductions in other expenditures, increasing fees for services, and using more reserves than originally intended. Some useful and common measures of targeted reductions in expenditures include delayed facility maintenance, canceling or renegotiating contracts, using employees instead of contractors, using contractors instead of employees, reassigning employees temporarily or permanently to other programs or departments, conserving water and/or energy consumption, restricting travel and training, lengthening cycles for equipment replacement, eliminating some professional memberships, reducing amounts given to outside agencies, and restricting new purchases. Stop Hiring = leave vacant positions unfilled. This measure could be targeted either selectively or to all departments/programs. A "selective hiring freeze" may require authorization from the County Manager, Commissioners, or other boards or may be defined so as not to affect positions considered critical. Oftentimes, positions of public safety are considered critical, for example. Through this measure, the County realizes immediate savings. If the crisis worsens, such positions could later be either eliminated or filled by employees being re-assigned from another department/program. Delay Capital Projects = postpone or cancel facility improvements, expansions, renovations, repairs, and/or maintenance. When cash flow concerns County officials, delays in construction or repair projects may offer short-term help. Examples of such projects include roof replacements, parking lot paving, and major painting jobs. These actions cause little obvious impact on services. However, delays may cause small repairs to become larger jobs as infrastructure continues to age and deteriorate. Reduce Budgets Uniformly = reduce operating budget of each department/program by targeted percentage. This measure could be targeted either selectively or to all departments. When applied to all departments uniformly, this action could overburden certain services, such as popular services or services designed to provide more assistance during economic distress. When targeted selectively, some departments may be spared or may receive smaller cuts. Or, some departments may be targeted for greater cuts than certain other departments. Oftentimes, police, fire, and rescue may be selected to receive smaller cuts in budget. Prioritize Budget Cuts = reduce operating budget of each department/program by targeted percentage based on established priorities. With this measure, oftentimes, departments/programs are categorized into tiers based on importance. Certain essential departments/programs are protected from large reductions or may even receive increases to budget while other less-essential departments/programs must trim the budget. High-priority and successful programs are often protected whereas non-essential programs receive greater reductions than other programs that are neither high-priority nor low-priority. For example, departments/programs that may be considered less essential are recreation, libraries, and/or community development. Restrict Chair/Commission Budget = often acts as a substantive and symbolic option. This measure often involves a number of the other measures specified, such as restricting travel and/or training and using technology. Review Work Rules/Policies = eliminate inefficient work practices such as long breaks and less-than-diligent efforts. Encourage Volunteerism = rely on volunteers to enhance services. Firefighters and rescue labor commonly serve as volunteer workers. Temporary help may best be served by volunteers in certain situations. For example, beautification projects and lawn mowing services may be served by volunteer workers. Other departments/programs that may work closely with non-profit organizations may also be good situations for volunteer workers to gain experience. Modify the Budget Process = restructure the budget process in whole or in part. Change levels of involvement by actively pursuing assistance from citizens in the community through brainstorming sessions, internet voting, etc. Establish reward programs for implemented ideas for reducing expenditures and enhancing revenues. Establish priorities for spending and encourage departments to find ways to address the priorities within a specified cost criterion. Limit Support to Outside Groups = reduce direct outlays to other agencies. Reduce or eliminate allocations to community groups, such as social service agencies, chambers of commerce, and recreational organizations. Discontinue indirect programs (such as collection of goods) to support other agencies. Conserve Energy and Water = find ways to conserve energy and water and use energy and water more efficiently. While conservation steps are elaborate and expensive, some steps are simple and not very expensive to implement. Use compact flourescent lighting instead of incandescent lighting. Turn off lights when not needed. Consider using automated lighting fixtures where motion causes lights to turn on and lack of motion causes lights to turn off automatically. Reduce temperatures in buildings or sections of a building during non-operating hours. Use light-emitting diode (LED) traffic lights and induction street lighting. Consider using other sources of energy, such as geothermal and solar energy. Install low-flow valves in water pipes. Install water-saving devices in toilets and urinals. Re-insulate hot water pipes. Develop a water reuse system for landscaping and other similar purposes. Modify landscaping designs to feature more plantings that require less water. Develop no-idling or limited-idling policies for County vehicles. Instead of vehicle patrols, use bike patrols and/or walking patrols where available. Redesign vehicle routes for improved efficiency. Purchase fuel-efficient vehicles. Restrict Purchases = either suspend or limit non-essential purchases and intensify scrutiny of new purchases. Typically, this method is directed toward purchases of a minimum amount, not all purchases. Also, consider extending the length of time to use uniforms before replacement. Rethink Equipment Needs = reassess policies on equipment use, the size of equipment inventory, and the size, type, and energy-consumption characteristics of equipment. This method will probably result in decreased numbers of vehicles in the County fleet; the County could contract the use of vehicles during business hours with a third-party car-sharing service. When purchasing equipment replacements, seek types with higher fuel-efficiencies and types with fewer needs for maintenance and repairs. Review whether all equipment is really needed, whether equipment is being used only for County business, and whether more favorable prices could be secured. Consider restricting the use of take-home vehicles. Consider using equipment for a longer time period. The County may consider suspending expenditures for equipment replacement. Consider the use of bicycles and encourage employees to walk short distances. Reduce Memberships in Professional Organizations = elect to NOT renew certain memberships. Restrict Travel and/or Training = curtail non-essential travel and/or training. Consider restricting out-of-state travel and/or training and some in-state travel and/or training. Allow only travel and/or training that is considered absolutely necessary, including travel and/or training essential to job performance and travel and/or training required for licensing or certification. Collaborate/Coordinate Functions with Other Governments = explore the cost-saving possibilities of intergovernmental collaboration. A common example of this measure is combined purchasing to achieve better pricing through quantity discounts and purchasing power. Other consolidations of selected services/functions may take place to avoid duplication of services or to improve economies of scale; however, savings are not always realized. Other shared services/functions could include law enforcement, fire, rescue, public works, emergency dispatch, wireless communications network, property tax assessments and collections, health insurance, employee training, recreation, economic development, planning, inspections, etc. Use Technology Remedies = improve service quality, effectiveness, and/or efficiency through technology. Perhaps develop integrated data warehouses to store needed information electronically, to eliminate duplicated work, and help detect fraud and abuse. Examine the possibility of restructuring network and technology plans, such as high-speed network and cellphone services. Rely on electronic mail addresses instead of postal mail addresses to send correspondence. Cancel Contracts = eliminate non-essential services performed by contractors. Terminating a contract may be much easier than terminating employees. Renegotiate Contracts = secure more favorable terms and/or lower costs. This measure should be targeted selectively. Select essential contracts. Outsource = hire contractors in lieu of employees to perform certain services. This option may serve various benefits; the most common benefits are the prospect of saving money and the hope to gain improvement in quality. In different organizations, many functions have been contracted such as janitorial services, lawn maintenance, technology support, printing services, engineering, and solid waste collection. Consider hiring a collection agency to collect delinquent debts. Many other functions have also been contracted. Contract In = hire employees in lieu of contractors to perform certain services. When contract services are poorly managed and costly, the County should consider cancelling the contract and hire employees to perform the same work. Layoff Employees/Eliminate Positions = eliminate jobs in departments/programs most affected by the economic downturn. Usually, vacant positions are the first ones to be eliminated. Depending on the severity of the budget crisis, employees may also be affected. Also, consider incentivizing early retirement. Consider consolidating departments/programs to decrease number of managers needed and perhaps use staff more efficiently. Consider temporarily de-funding a position during the slow economy; this action leaves the position intact. Then, as the economy improves, the funding can be made available through the budgeting process to hire someone into the position without creating a new position. Reassign Employees to Other Departments/Programs = transfer employees among departments. To avoid layoffs and/or improve efficiencies, employees may be moved from departments/programs that are being downsized to departments/programs that are thriving and/or have vacancies. Workload in certain departments/programs suffers during economic downturns while workload in other departments/programs may increase substantially. For example, building inspectors may be used as code enforcers or to perform maintenance work, administrative assistants may be shared among multiple departments/programs, deputy registers may be moved to social services, etc. Reduce Services and/or Hours of Service = cut back on service frequency, quantity, or quality. Common reduction in services may involve closing library branches or other community centers. Typical reductions in hours of service may occur in animal shelters, garbage collection, health clinics, libraries, parks and recreation, senior centers, transportation routes, and even fire/rescue buildings. Consider opening government facilities later and/or closing earlier on some or all days of the week. And, consider temporarily closing certain facilities or activities, such as a suspension of street sweeping and temporarily closing a recreation center. Also, consider closing some facilities for one or two more days each week. And, consider using every other streetlight instead of every streetlight, for example. Consider utilizing/re-arranging existing space in County-owned facilities and canceling leases on leased space. Move activities to a less expensive venue. Scale back on special events, where possible. Reduce frequency of cleaning services, trash-pickup, mowing services, and bookmobile services. Revise Staffing Protocol/Target = increase average workload of staff. Discontinue "over-hire" programs that are incorporated to provide sufficient help to cover staff absences. Use civilians instead of sworn law enforcement officers for some investigative work. Reduce number of firefighters per fire truck. Shift "community policing" officers into regular patrol. Initiate Use of Furloughs = reduction in pay via forcing employees to take certain days off without pay. This measure is typically targeted to all departments/programs, yet sometimes public safety employees are given an exception. This option allows the County to avoid layoffs or minimize layoffs and still reduce expenditures to save money. This measure is flexible in application. For example, the option can either be targeted to specific days (such as scheduled holidays) or give flexibility to employees to choose the days, perhaps within limits to avoid reductions in service, or even a combination of some specified days and some unspecified days. The number of days is also a variable that needs to be defined. The number of days may be varied at salary levels, with lower-paid employees receiving fewer furlough days and higher-paid employees receiving more furlough days. Furlough days may accompany a cost-of-living pay increase for all employees that, in effect, negates or minimizes the immediate impact of the pay increase. Reduce Work Hours = reduce hours worked per week and associated pay. This measure could be targeted either selectively or to all departments/programs. Suspend Pay Increases = temporarily eliminate pay increases. Freeze salaries/wages at current levels upon a specified date. Reduce/Restructure Compensation = opposite of cost-of-living increases. Implement a specific percentage reduction in employees' salaries in either selected or in all departments/programs. Replace merit increases and/or standard rate increases with one-time bonuses or additional paid leave time. Consider eliminating longevity pay, merit increases, and/or standard rate increases. Suspend other types of supplemental pay. Suspend compensation of members of selected boards or other groups. Revisit Overtime Practices = increase or decrease use of overtime. Consider using extra overtime to cope with position vacancies to avoid hiring replacements. Consider restricting or eliminating paid overtime to limit expenditures, use compensatory time instead. This measure could be targeted either selectively or to all departments/programs. Implement Four-Day Workweek = schedule employees to work four ten-hour days instead of five eight-hour days. This measure could be targeted either selectively or to all departments/programs that currently work five eight-hour days. When all employees within a certain building are chosen to take the same day off, the County benefits by having facilities closed an extra day. Another option is to allow some employees to work Mon-Thu and others to work Tue-Fri such that all employees enjoy a three-day weekend and customers can be served all five days of the workweek. Or, days off could be staggered to offer the same level of service over all business days. Reduce Employee Benefits = reduce earned leave, impose limitations on accumulated leave, etc. Scrutinize policies on vacation days, sick days, accumulation and buy-back provisions, health insurance, cost-sharing formulas, tuition reimbursement, vehicle and parking allowances, and pensions. Discontinue paying vacation leave or other forms of leave when an employee is dismissed. Consider increasing the employee's portion of costs. Convert pension plans from defined-benefit to defined-contribution. Suspend the County's contributions to pension plans. Require new employees to work more years and retire later to earn full pensions. To reduce health insurance premiums or claims, consider revising the scope of coverage, required deductibles, and/or applying revisions to only new employees after a specific date. Perhaps vision coverage, dental coverage, or other coverage can be eliminated. Suspend annual health and wellness examinations. Increase the employee's share of health or other coverages. Limit or eliminate health coverage for retirees. Incentivize Retirements = encourage retirements and spend less on replacements. Many times, a less experienced person can be hired at a lower salary to perform the retiree's former job. In certain instances, the position vacated by either the retired person or the person who was promoted into the retiree's former position may be eliminated. Large incentives may be subject to speculation and review. Consider offering cash payments, including advances on longevity pay, and continuation of insurance coverage for a limited time. Use of Other Miscellaneous Tactics = various other measures. For instance, reward departments that save costs in one year by allowing a portion of the savings to be budgeted in the following year. Use inmate labor to supplant or supplement the work of employees. REVENUE-ENHANCING Increase Taxes = increase sales taxes, property taxes, privilege license taxes, and/or other existing taxes or implement a new local income tax, special district property tax, rental tax, tax on certain types of business, and/or another tax. Increase Fees = increase recreation fees, rental fees, service fees, and/or other existing fees or implement a new fee for current services or for new services. Consider increasing or implementing privilege business license fees, refuse collection, recycling, animal adoptions, parking fees, etc. Consider implementing an accident response fee to help offset the cost of cleaning up crash scenes by collecting from at-fault drivers. Perhaps add a local cigarette fee to help recover costs of cleaning up cigarette butts, if permitted, for example. Consider charging fees or rent for use of public facilities. Consider charging towns for law enforcement services or other services provided. Consider adding a convenience fee for use of credit/debit cards. House more state or federal prisoners, for example. Reduce Fee Subsidies = reduce or eliminate discounted and exempted fee rates to certain persons or groups. Increase Collection of Taxes/Fees = increase efforts to collect current taxes, fees, and receivables. For example, conduct more audits of local businesses from which taxes or fees are derived based on business revenues, increase aggressiveness in the issuance of certain fines for non-compliance, and/or add cameras in public areas to improve crime detection. Consider adding new methods of payment, such as online methods and/or accepting payments from visitors by credit cards and debit cards. When possible, withhold services until collection is complete. Revise Investment Strategies = For example, refinance or restructure debt payment obligations to find more favorable rates and/or payment amounts. Shorten or lengthen investment purchases to take advantage of expected changes in interest rates in the near future. Sell or Lease Assets = sell or lease unused land, buildings, and/or other assets. The City of Chicago has privatized parking meters and a toll road and has considered privatizing its airport and water system. Consider charging a lease payment for regular use of public buildings and parking lots. Apply for New Federa/State/Other Grants. Many grants exist for capital improvement projects, economic development, parks and recreation, public safety, health, and social services. Increase Receipts from Utilities. For example, move funds from healthy enterprise funds to the general fund. Rely upon Reserves. The sole use of reserves as a budget-balancing tool often merely delays the inevitable reductions in expenditures and/or increases in revenues. Also, the use of reserves may increase if the situation worsens in future years. This information was excerpted from a publication of the School of Government. Financial Activities: Audit / Year-End Budget / Grants Contracts / Vendors Equipment / Inventory Financial System Local Government Payroll Privacy / ID Theft Purchasing / Payments Receipts / Banking Travel / Vehicles Whatchamacallit / Various / Other Quick Reference: Finance Office Homepage *OFFICE Central* Memorandums Schedules / Deadlines Staff / Position Directory Send Comments / Feedback / Questions via E-Mail Go to the County Internet Homepage

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last updated January 31, 2020