Executive Exchange

SHORT SIGHTEDNESS CAN CAUSE BUDGETCIDE

by

Gerald R. HinzmanDirector

Sixth Judicial District Departmentof Correctional Services

Cedar Rapids, Iowa

Introduction Managing Perception and Providing Accurate Information

What is budgetcide? It is cutting your own throat duringdifficult budgetary times. Probation administrators need tothink through the implications of their reactions to tough fiscaltimes and develop strategies that maintain their value and be-lief structures and strategies that position them well for thefuture when fiscal times are better.

Budgetcide is doing the wrong things for the immediate orshort term gain without thinking about the long term implica-tions. One of the most costly lessons to be learned is that" doingnothing is doing something." If you fail to develop a good planto pull you through tough times then that omission is doingsomething. It is something that leaves you at the mercy of otherplanners and you can lose control of your environment.

With that in mind, it is important to get an understanding ofwhat is going on in your political environment. Is this just hardfiscal times or is it also a planned attempt to roll back thedepartment's budget and permanently cut staff? It could beboth, so you could get caught up in helping downsize youragency permanently while you believe that you are proposingshort term fixes. In that regard you may not want to reveal allyour cost cutting strategies or revenue growth strategies. Oftenthe reward for being innovative is to have someone that con-trols your purse strings decide that more fat can be trimmedfrom your budget because you have found other means to man-age.

Ask for Flexibility

Always ask for flexibility in managing your own budget. Ifyou are handed a budget reduction number and told to elimi-nate a certain number of positions that will be lost forever, youare in a very difficult situation. Always ask for the flexibility tobe allowed to use your experience and administrative skills tomanage the budget. It is always better to manage a reductionof a certain dollar amount or a percentage of the budget. Thiswill allow you to employ your own strategies and give youmore options and flexibility. Remember:

1. Layoffs and furloughs are better than permanent staffreductions.

Managing vacancies is better than furloughs and lay-offs.

The opportunity to develop new revenue streams couldeaseyour problem. It could allow you to keep neededstaff.

The flexibility to manage your own budget gives youthe opportunity to craft solutions or take the reduc-tions where you can best absorb them.

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Another aspect very important to remember is that of percep-tion. The first issue is what your own staff perceive is importantto you? If you have been telling staff that assessments,responsivity, and clinical supervision are very important but letthem drop during a fiscal crisis, they will easily conclude thatthey are not important or critical. They will all just seem likethose "here today and gone tomorrow" programs staff prefernot to be burdened with. If you are running programs that areimportant to you and they are the right thing to do, then youmust stand by them.

Another aspect of perception is that of legislative or fiscalbureau oversight. They will watch very closely to see what isreally important to you and what you prioritize as important toyou. They will remember these in future budget cycles. One ofthe hard lessons all administrators learn over the years is that ofpromises that the promise maker does not have the ability todeliver. It's like the police detective that promises the criminalhe can go home after giving a statement only to come back andblame the lieutenant for over-riding him. The same can happenwith budgets. The world is full of unkept promises.

Always manage alarming information effectively and alwaysprovide consistent, accurate, and straightforward information.Do not provide inaccurate informatio1'l to your staff or staffconfidence in management's ability to manage will be eroded.It is frequently the case that those making decisions at otherlevels of fiscal management provide you with unintentionalmisinformation and then correct it again. It is always best to siton the information for a day or two until the dust settles. Whenyou are sure it is accurate it can be disseminated to staff. It iscritical that staff do not perceive a vacillating administratorwhen their jobs may be on the line.

Take Positive Steps

All of the previous comments of what to be on the look out forare good starting points for avoiding budgetcide, only turnthem into positive action steps. So avoid getting trapped intopolitical downsizing. Do not disclose your own strategies tomanage internally, including raising fees, etc. If you show themat the beginning of the fiscal year they will take them as budgetoffsets now. If you hold them close to the vest to manage yourbudget situation during the year, you will later look like a goodfiscal manager. Be mindful of what you want others to perceiveas critical programming for your department. If you don'tthink it critical now, they probably won't later.

What are some strategies to manage budget cuts that can helpyou maintain operations that are consistent with the values andbeliefs on your department? Several suggested strategies follow:

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1. 2. Can you make apaper move to show these positions tobe funded by some other income besides general funddollars? Locally generated revenues such as grants,contracts from other agencies to fund positions, andnew revenues from increased fees are some options.Practice first in - first out. If a vacant position hasbeen vacant the longest that is the one that you reacti-vate. Leave the just vacated position open. That wayyou can keep all FTEson the books for a longer periodof time.

As you practice the above suggestion, reclassify allpositions to "mission critical" positions as you fill them(i.e.: reclassify a volunteer coordinator to a probationofficer). This accomplishes two things. First it will notbe as tempting for someone reviewing your budget towant to eliminate "mission critical" positions. Sec-ondly an agency with vacant mission critical positionswill get refunded quicker than one with vacant posi-tions that are not "mission critical." Here is a likelyscenario; a volunteer coordinator has been vacant 11months. Think first in - first out and reclassify thisposition (identification number and all) to a probationofficer and fill the position to replace a probation of-ficer position just vacated. The probation officer posi-tion just vacated (identification number and all) is yournew "mission critical" vacancy.

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Increase revenues by raising costs for services or in-creasing fees. There are probably many things that younever charged for that you could. This list includesfees for community service, fees for pretrial or presen-tence investigation services, charging a fee for certaincourse offerings, charging for drug testing, charging afee to sex offenders for enhanced treatment or supervi-sion, etc.Decrease cost of treatment contracts. This can be ac-

complished a number of ways. You could use the samecontract money to keep staff employed and assign themto work with this offender group. Often the treatmentagencies can also bite the bullet and are willing to cuttheir contract amounts (even by half) to continue avalued working relationship. You can do a combina-tion of these two strategies by using contractual ar-rangements.Manage the vacancy factor, but be careful you do notlose critical positions.Delay large purchases, especially capital items such asvehicles.

If you have the ability, use any yearend savings to buycontract services, VA supplies, etc., for next year; thishelps offset next year's budget.If you have the ability to pay any of next years costnow, do so rather than revert the money at the end ofthe fiscal year. This would include rent payments,contracts for equipment such as computers, or anyother type of sinking fund. This will provide a cushionfor next fiscal year.

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It is worth stating again that anything you can do to offsetyour fiscal liability after your budget has been set will allowyou to maintain operations that are consistent with the valuesand beliefs of your department, and will avoid or minimize theneed to furlough, layoff, or terminate staff.

Make Good Personnel Decisions

That brings us to another key point. Do everything in yourpower to retain the hard working staff that have done their bestto help weather the storm. If you ever had a thought of beingremembered as an effective leader, this is your big chance. Letstaff know that letting them go is not a choice you want to make.The only personal antidotal comment I will make in this articleis that I have never (through all the worst of times over thirtyyears) furloughed, laid off, or terminated staff because of abudget crisis. I believe they are the best resource we have. Youcan help manage this by keeping vacant positions open andthus impact on the budget.

Subsequently, one of the issues that requires attention is howyou do manage vacant positions and position the departmentfor recovery? To just allow vacant positions to sit without man-aging them would be a serious mistake when there are goodstrategies to do otherwise. It is a good strategy to allow vacan-cies through attrition but consider these tips:

1. Know how long you are allowed to keep them vacantbefore someone thinks they are not needed and wantsto eliminate them all together. If the answer is sixmonths or a year and you lose them, plan accordingly.

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Out-of-the-Box Options

In positioning your agency for recovery, be aware of optionsyou may have for freeing current or future revenues. For ex-ample, if you have been paying on the purchase of large capitalitems (especially buildings or property), it might be a good timeto take advantage of lower interest rates and refinance:

1. That should lower your monthly / yearly payments andallow you to budget the same amount to meet othershortfalls.

By refinancing you may extend the life of the purchaseagreement. That may be a benefit. It is possible that ifthe balance was paid during difficult fiscal times thedollars that were dedicated to the payment would bereduced in a subsequent budget. If the same were truein healthy fiscal times you quite likely would be al-lowed to keep that money for new capital projects ordevelop new treatment options.Any like expense that has the potential to end during afiscal crisis will be seen as easy decisions as to where toget budget cuts.

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It would be hard for anyone to disagree with saving the tax-payers money so your chances of getting approval to refinanceshould be very good. Conversely, the worse case scenario is tohave your last payment this year and those who control yourpurse strings decide that money would make a good start onnext year's budget cuts.

Create or Work with a Non-Profit Foundation

Another option I would offer is to create your own privatenon-profit foundation if your state allows you to do so. Public

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Executive Exchange

6. In reference to No.1 above, some options are too hardfor policy makers to cope with. For example, closingresidential facilities may have too much of an impacton public safety or prison overcrowding. If you candemonstrate that is the only way to meet your cuts orthe best recourse to take, you may be spared some cuts.Always think of how you best position your depart-ment to recover in the next year or two. There will bebetter days ahead. Those who can demonstrate themost critical needs will get priority funding.Manage the flow of information to staff so that onlyaccurate information gets to them. Misinformationcan have a devastating impact on morale. It can erodeconfidence in management.Watch the unintended messages you send to commu-nity partners. If you have asked them to reduce con-tracts during this critical time be frugal in other mat-ters as well. Ask staff to be mindful of what they say.If you are managing through critical times by increas-ing revenues expect to see future budget offsets be-cause of that or be able to demonstrate way it is only aneffective interim step.

schools and community colleges have done this for years. Thisis generally easier in states where probation is not under thecourts but can also be done even there with special legislation.

1. The possibilities to seek other grant opportunities aregreater. You can have your own public/private part-nership.You can contract with the foundation to provide ser-vices at lower costs than some current providers.The foundation may provide your department withgrants. You can develop new revenue streams andventures that realize revenues.

Your own employees who can't volunteer or work ad-ditional part-time hours for the department because ofFLSA can do so for a private foundation.You can also rehire just retired public workers immedi-ately.

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Subsequently, the foundation can operate programs likebatterers education, cognitive programming, cultural specificprograms, etc., at a lower cost than other non-profits becausethey have a lower or no profit margin with the best qualifiedpersonnel. If you are wondering if I practice what I preach here,the answer is the Community Corrections Improvement Asso-ciation is eleven years old now.

In many communities there are already in place "communityfoundations" linked by a national association of communityfoundations. Short of starting your own foundation you maywant to approach your local community foundation to see ifthere is any chance their foundation would help support yourneeds. Yet another option is finding another friendly non-profitthat would be supportive of assisting with your needs. In someinstances, several non-profits that normally serve offenders andtheir families have created umbrella partnerships with publicagencies such as probation or community colleges to create"Partners in Accountability." It becomes a great vehicle to de-velop a publici private venture to deliver holistic or wrap-around services.

Political Realities of Budgeting

This has been just a quick study in some strategies to manageyour department's budget during difficult fiscal times. As weall know there is more nitty-gritty to this and not enough timeto write about it all. In conclusion it is best to understand the

politics of managing the budget and the following tips:

1. Do not make managing the budget look too easy. Ifyou can cut certain areas of the budget, make it hurt. Ifyou can raise additional revenues, make it difficult.Do not reveal all your strategies at the onset. Keepyour cards close to the vest. If you present these op-tions too soon they may just offset additional budgetcuts.

Avoid the appearance of fluff. Do not keep positionsthat are not "mission critical" if other departments arebare bones.

Protect your staff. Manage vacancies effectively (firstin - first out) and keep them as "mission criticaL"Maintain the values and beliefs of your departmentwhen the chips are down.

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Conclusion

By the way, I do have other strategies but would never writethem down where someone who might control my budget wouldsee them. If you have a need, call me!

An earlier version of this article appeared in a monograph published in2002 by the National Institute of Corrections.

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