Our oldest colleagues have weathered seven recessions since December 1969. Six of the seven recessions lasted about 10.8 months. The most recent, called by some “The Great Recession,” went from December 2007 through June 2009.1
In the first six recessions, the economy would spring back within a year. Municipal budgets would return to their post-recession levels of revenue two years after the recession ended. The rate of recovery after the Great Recession has not been as robust as earlier events.
The U.S. Bureau of Labor Statistics noted in a 2012 report that: “many of the statistics that describe the U.S. economy have yet to return to their pre-recession values.”2
This delayed recovery has decimated EMS agency budgets, starting in Fiscal Year 2009 (July 2008 – June 2009). Agencies are completing five years of hiring freezes, reduced salaries/benefits, delayed vehicle/equipment replacement and deferred repairs. Some agencies have exhausted their reserves and are facing unprecedented reorganizations.
What happened to the revenue?
Three sources of local government funding, representing two-thirds of the revenue stream are:
- Property Taxes
- Personal Income Taxes
- General Sales/Gross receipts
When the Great Recession started, there were thousands of people that lost their jobs. No income means no income taxes. Out-of-work people buy far fewer things, resulting in decreased sales tax revenue.
Henry Farber makes this point in a 2011 National Bureau of Economic Research working paper on job losses: “It is clear that the dynamics of unemployment in the Great Recession are fundamentally different from unemployment dynamics in earlier recessions.”
Farber notes fewer than half who lost their job in the 2007–2009 recession had a job in 2010. Those who obtained new full-time jobs were making 21.8% less money.3
The unemployed and under-employed defaulted on mortgages. Their much reduced spending resulted in the closing of retail and service businesses. An abandoned house and an empty storefront generate no local government revenue.
The other third of the local revenue stream comes from state and federal payments. 33 to 42% of state revenue comes from federal payments.9 The amount of federal revenue passing through the state to the local municipalities is a trickle of what it was five years ago.4
EMS providers have been furloughed and watched benefits evaporate. Some lost their jobs. Many middle manager positions were eliminated, with the tasks pushed up or down the chain of command. Vehicles are working well past their replacement point and equipment is shopworn.
The legacy revenue model is broke.
Bankruptcy as a municipal management tactic
Governing magazine lists 33 local governments that filed for bankruptcy.California is prominent in this list, with Vallejo as the first to file in 2008. Stockton has been the largest city, and San Bernardino the most recent. Municipalities that successfully file for bankruptcy can dissolve existing labor agreements and walk away from retirement program obligations – eliminating the two largest budgetary obligations.
The feature article for the March 2013 Governing magazine reviewed the impact from the earliest bankruptcies and indicated that this may be a valuable management tool.6
Some states passed regulations to make drastic changes in municipal operations without declaring bankruptcy. Michigan imposes emergency managers on cities and counties.7
Reduced revenue streams and increased demand for services
While municipalities have frozen or reduced resources to EMS, the workload continues to increase as more people call 9-1-1 and use emergency departments as their primary health care providers.
David Walker, immediate past head of the Government Accountability Office made this observation:
“Ultimately the government will need to spend less than projected and tax more than it historically has. That means that, over time, it will do less than people are expecting and tax more than people are accustomed to. In my view, our fiscal challenge is primarily a spending problem and needs to be addressed accordingly.”9
How to fix a “spending” problem – redeploy assets for new revenue sources
An unintended consequence of the EMS Scope of Practice is the expanded role paramedics can assume in mobile health care. The implementation of the Patient Protection and Affordable Care Act in January 2014 provides significant opportunities for mobile healthcare providers.
Affiliating with an Accountable Care Organization (ACO) provides incentive for reducing return visits to the hospital and opportunities for a street-oriented caregiver to generate new sources of revenue while being part of a team committed to high quality medical care.10
EMS crews will schedule follow-up field visits with recently discharged patients. When at the patient’s home the crew will review the patient discharge instructions, make sure the prescriptions are filled and access the home for obvious injury hazards. The ACO is motivated to avoid circumstances when the patient has to return to the hospital, and will pay the ems organization to perform this service.
This is the start of a dramatic shift in opportunities and compensation for EMS providers.
REFERENCES
Business Cycle Dating Committee. (April 23, 2012) U.S. Business Cycle Expansions and Contractions. In National Bureau of Economic Research. Retrieved May 20, 2013, from www.nber.org/cycles/US_Business_Cycle_Expansions_and_Contractions_20120423.pdf .
Bureau of Labor Statistics. (February 2012). The Recession of 2007–2009. In U.S. Bureau of Labor Statistics. Retrieved May 20, 2013, from www.bls.gov/spotlight/2012/recession/pdf/recession_bls_spotlight.pdf .
Farber, Henry. (September 2011). Job loss in the great recession: Historical perspective from the displaced workers survey, 1984–2010. (NBER Working Paper No. 17040). National Bureau of Economic Research. Retrieved December 2, 2012 from http://www.nber.org/papers/w17040
Gormley, William T. and Steven J. Balla. (2012) Bureaucracy and Democracy: Accountability and Performance. 3rd edition. Washington DC: CQ Press.
Governing Magazine. “Bankrupt Cities, Municipalities List and Map” webpage accessed June 1, 2013 from http://www.governing.com/gov-data/municipal-cities-counties-bankruptcies-and-defaults.html
Farmer, Liz. (2013 March) The ‘B’ Word: Is Municipal Bankruptcy’s Stigma Fading? There’s a growing sense among some leaders that municipal bankruptcy -- unthinkable just a few years ago -- may be a valuable tool. Governing magazine. Accessed June 1, 2013 from here
Lewis, Chris (2013 May 9) Does Michigan’s Emergency-Manager Law Disenfranchise Black Citizens?: A state law provides for takeover of cities with troubled finances. It just happens that the worst-hit places are also the poorest and blackest. The Atlantic. Accessed June 01, 2013 from here
Public Financial Management. (2011 October) “State Programs for Municipal Financial Recovery. An Overview.” Philadelphia, PA: Public Financial Management. Accessed June 01, 2013 from here
Patton, Zack (2012 July) “David Walker’s Plan to Fix America: After stepping down as head of the Government Accountability Office, David Walker started drawing the nation’s roadmap to fiscal sustainability that’s also applicable to states and cities.” Governing. Accessed June 01, 2013 from here
Zavadsky, Matt (2012 June 28) “Cultivating Stakeholder Relationships Part 1: Healthcare Partners” EMS World. Accessed June 01, 2013 from here
