EMS budget planning primer for new paramedic chiefs
Climbing the ranks of EMS often fails to prepare new chiefs to discuss financial issues with local elected and appointed officials
By Dianne Wright
Local government budget processes may seem daunting at first, especially for new leaders whose focus has just recently shifted from EMS operations and patient care. Whether you recently took over as chief or just started your EMS career, learning more about local budget processes is critical to being an advocate for EMS in your community and advancing your career. These three simple steps will help you get started.
1. Track trends through budget documents
Cities, counties and fire/EMS districts develop annual budget documents. A budget book will range from a few pages for a small fire/EMS district to a comprehensive document that covers all services and agencies in a large city or county.
As a starting point, review the glossary of terms used throughout the budgeting process. Then read the budget book narrative, which will identify area economic trends, service challenges and changes, and may include performance information by agency. Doing this will provide you with an understanding of how your agency fits into the larger picture and how its funding compares to budgets for other services provided in the community.
Don’t just read the most recent budget; a review of the last several years will serve you well. You will impress the chief financial officer and other officials if you have identified and understand major revenue and expenditure trends during the last three years.
For example, it is instructive to discover:
- Which costs have increased (most typically salaries and benefits, including health insurance),
- Which have decreased (for example, per gallon fuel costs),
- And by how much.
Other key financial indicators important to be familiar with include:
- Has revenue from patient transports increased or decreased?
- Is there a clue as to why, perhaps, in the discussion of community economic trends or in your internal data?
- Has the number of transports changed, or maybe the payer mix or collection rate?
A second, more detailed document you may wish to review is the local government’s Comprehensive Annual Financial Report or CAFR, which includes audited financial statements for the entire governmental entity. CAFRs are published five to six months after the end of the prior fiscal year to allow time for independent auditors to complete their analyses.
Along with numerous financial reports, the CAFR will also provide a narrative about significant changes or findings regarding financial governance and include management’s plan to address them. These can be important clues to the overall financial health of the governmental entity.
2. Understand how your fire/EMS agency is funded
Your review of the budget book may tell you something about your agency’s primary funding source – but knowing how to describe those sources in terms the CFO will understand is critical. Revenues that fund local government EMS organizations, including fire departments, are typically a mix of those described below.
- Dedicated funding sources – This is a taxing source dedicated and restricted for use by your agency. The agency’s official title will typically include the words “special district” or “tax district.” The method of calculating the revenues can vary, but the key is that the agency’s revenues and expenditures are segregated and accounted for separately from those of other city or county agencies.
- General fund – A local government general fund is comprised of a number of revenue sources including property taxes, sales taxes, state shared revenues, and fees for various services. The general fund supports a broad number of departments that may include police, fire, finance, animal services, jails, social services, roads, public works and many others. If your agency is funded primarily from the general fund, then it competes in each budget cycle with all of the other local government services. Expenditures are likely reported for your agency, but for fire-based EMS, the expenditures specific to EMS may not be segregated from expenditures strictly for fire-service related expenditures. This is particularly true for cross-trained fire/EMS personnel expenditures.
- Fees for services – These revenues include transport fees, membership fees, treat and no transport fees;, and for fire departments, this may also include fire plan reviews or fire inspection fees. Fees of this type are identified and reported as separate line items. In some public fire and EMS services, the revenues collected go into the city or county’s general fund and are not directly available for use by the agency. Other departments have special revenue funds, which allow the agency to collect those fees directly but mean any late or uncollected fees may present cash flow problems for the department.
Agencies also receive grant funding for specific purposes and often utilize bonds, lease financing or tax increment financing for large one-time purchases, such as buildings, vehicle purchases or major infrastructure improvements. These revenues are not considered part of an agency’s day-to-day operating dollars.
The most common funding scheme for EMS and fire-based EMS agencies is a mix of revenue from billing for ambulance transport supplemented by appropriations from the government general fund. The supplement is needed when expenditures exceed the service fee revenues and the general fund is frequently used to balance the budget.
Depending on the primary funding sources, your agency will be organized in financial reports as:
- A special revenue fund – special districts with dedicated, restricted revenues,
- A department of the general fund – a mix of service fees supplemented by the general fund to maintain a balanced budget, or
- An enterprise fund – a business-like agency that anticipates sufficient service fee revenues to cover all expenses and maintain a reasonable cash flow balance).
Special revenue funds and enterprise funds operate much like your personal bank account in that any excess revenues, after all expenses are paid, will remain in that agency’s account. Agencies in the general fund do not automatically retain any unspent budgeted funds.
3. Know which services you pay for and which you don’t
Your EMS agency may or may not be charged directly for administrative services provided by the larger governmental entity. Charges are typically from other municipal departments, such as information technology, finance, human resources or legal counsel.
While the EMS agency may fund specific positions for some of these services, an in-depth review may reveal that the city or county entity provides additional services, such as:
- Retirement services,
- Legal review,
- Health insurance plan administration,
- Vendor payments,
- Labor negotiations,
- Accounting/audit services,
- 911 dispatch,
- Governance via an elected body, and
- A number of other administrative functions required for the operation of an organization.
Understanding what costs are allocated to your EMS agency is important in determining the total cost of EMS.
By taking the time to understand your city or county’s budget processes and reviewing budget documents to identify trends and challenges, you can better understand your own agency’s financial status within the context of the broader municipal government. You’ll also be better equipped to discuss your agency’s finances with local officials and answer their questions during the next budget cycle.
About the author
Dianne Wright is a senior consultant for Fitch & Associates. Since 1998, Dianne has provided financial analyses for both fire and EMS agencies of all sizes and complexities. She was the key financial consultant for the incorporation of several south Florida municipalities, and served as the financial and administrative project manager for the first six years of the South Florida Urban Area Initiative (UASI) grant. Her career began as a budget analyst in Miami-Dade County, where for 10 years she served as assistant director of the Miami-Dade Fire Rescue Department.
This article, originally published on Oct. 17, 2012, has been updated.