Salaries vs Services: Which Line Item Would You Cut First?

Home Forums Budgeting Salaries vs Services: Which Line Item Would You Cut First?

This topic contains 12 replies, has 10 voices, and was last updated by  Sterling Whitehead 8 years, 6 months ago.

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  • #101677

    Ari Herzog
    Member

    The typical local government department budget includes line items for salaries and for services.

    Salaried employees are usually privy, contractually or other, to a COLA or union increase; and many receive stipends for personal vehicle mileage, clothing, equipment, or education. If one routinely receives pay increases and suddenly does not, one may resign.

    On the flip side in the department, employees don’t typically resign if services or cut or if supplies can’t be bought.

    Reading a story about the Memphis City Council deliberating the reduction of police salaries, I am particularly tickled by the many comments… and how diverse their arguments appear. Some people think every municipal employee should receive a pay cut. Others think pay is holy and services be cut.

    Where do you stand? All things equal, would you cut a person’s salary or a department’s service option if you could only cut one?

  • #101701

    Sterling Whitehead
    Participant

    A pay cut for a year or two — after that, I’d cut services. You’ll eventually lose too much talent. Without the talent, services are worthless.

  • #101699

    Arvind Nigam
    Participant

    From management point of view, services are easily negotiable and you’d always find a bunch of experts sitting in some part of the world ready to do the dirt at much lower costs. Whereas lowering salaries, calls for understanding from employee-base which often is hard to come by due to dynamics of work culture and other attributes of office life.

    IMHO the salary line would more-often than not be cut before the services line.

    Arvind, CEO
    http://bubbleideas.com

  • #101697

    Henry Brown
    Participant

    If you cut salaries it is a given that services will be cut. And Suspect that this is probably fairly true THROUGHOUT the entire chain WITH EXCEPTIONS.

    Cut the salary of the “front line” worker and the attitude will rather rapidly become why should I do this today when tomorrow will be just fine. Cut the salary of the first line supervisor and is he/she going to give the same effort to ensure that the service is provided in a timely effort? Cut the salary of the manager and see how much effort is made to insure maximum Return On Investment vs. how much effort is made to find another job.

    I have 2 friends who have “enjoyed” mandatory furloughs, each of them have told me that though they won’t quit, especially in this economy, they have certainly lost a significant amount of their motivation to go the extra mile for their governmental entity.

    Cutting services first has much more direct impact on the stakeholders, IF allowed to continue in spite of the political pressure, will lead to a reduced salary expense for the government.

  • #101695

    Kristy Dalton
    Participant

    I heard someone once say “government is not an employment agency”. Government exists to provide services to the public, who pay for it with taxes. It employs people to the extent it needs to in order to manage the services it provides. They are necessarily related.

    I’m not sure it should be a question of salary vs. services, but a balance of the services you must offer and the staff required to manage those services. The City of Reno has had two rounds of layoffs, and is in the process of literally restructuring the organization (departments strategically re-organizing or eliminated). We hope that we will be a leaner and stronger organization when the dust settles. I think the key is to go back to the basics. What core services is your government there to provide? Once you determine what you need to offer, and get public input on what citizens think is important, then you can honestly look at the staff resources required to maintain those functions.

  • #101693

    Brian Connolly, MPA
    Participant

    I attended a luncheon sponsored by a local bank and had the opportunity to sit at the table with their President/CEO. We discussed salary growth in our community and he commented: your organization should decide what the proper salary range is for a given role and then not adjust it unless there is dramatic change in the economy or responsibilities. Do that by conducting surveys and studies, but don’t let these tools drive your decision making.

    Good points. If I feel a secretary position should earn $27K-$40K per year, then new hires should know what their max salary is for the position they are accepting. The pay scale has a beginning and an end. But saying “freeze their pay” harms the people and the organization. Talk salary growth in the context of position realignment, position necessity, responsibilities and skills. Incorporate the needs of the organization into the discussion. Focus on the affect of the growth and how to mitigate it or control it rather than making an across the board decision.

    As a finance person, I’m suspicious when I hear the words salary surveys, negotiated agreements, employee tenure, mission creep, incumbent value and local politics (in general). Each of these, separately or combined, can have a devastating effect on salary expenses. Be leery of them!
    I pose that you have to examine each service delivery area and decide what is crucial to the mission and what is not, what can be maintained and what should not. Merely cutting or freezing demonstrates a lack of creative problem solving skills. I always ask, “Is there a better way?”. If I hear “No”, then I know someone didn;t do their homework.

    I wouldn’t simply freeze pay or cut services. At least, not after discussing and studying how to better manage public financial resources. We owe the public that. Which is done first? In my plans, they have equal weight.

  • #101691

    Ari Herzog
    Member

    Of course, everything has to be examined and everything is relative to everything else. But doesn’t it strike you odd when firefighters see their collective pay level-funded when the fire chief sees a COLA increase?

  • #101689

    Brian Connolly, MPA
    Participant

    As a leader I feel everyone comes to the table to share the pain and the pleasure. It sends the right message to the community. But, you know and I know, and most likely people reading this also know, it doesn’t work that way. Should someone who is not in a union bear the “pain” now when there is no gaurantee that the “pleasure” will be distributed evenly when good times return? Early in my career, I stood alongside union co-workers (eventhough I was not in the union) and shared in the oain of level funded salaries. Why? Because it was the right thing to do. Yet, when their raises were restored my raise would go ignored. So, to your question do I think it is odd, I ask you do you think it odd to unfairly burden the non-unionized worker in the same fashion as union worker?

  • #101687

    Mike Herrmann
    Participant

    I have a bit of a different school of thought here that I don’t see reflected below which is based a little on supply and demand but more on the actual flow of dollars into tax coffers.

    Generally speaking government salaries lag private sector, and government funding drops slower and recovers slower in/after a recession than private salaries do. Therefore governments are left trying to balance budgets post-recession when private sector companies are beginning to recover and expand. It makes sense- the recovery dollars won’t hit the government tax coffers until a year or two after the recovery has started.

    That being said: government salaries are a consistent throughout the ebbs and flows of the economy. We never push to increase salaries when times are good, and I think its short sighted to cut dollars when times are bad. Unless you want to lose resources. Think about it: when will you restore that salary? Will the public ever really allow it?

    Scaling back services, and even reducing staff, makes sense in the short term.

  • #101685

    Brian Connolly, MPA
    Participant

    CFO.com article …. private sector approach you might find interesting. http://ow.ly/1SBbx

  • #101683

    Tricia
    Participant

    Salaries. I think people complain about government enough as it is, and if you cut services, they’re likely to complain more. Here in Az., we’re on year 4 without a pay increase. In fact, the end of this month, we will now find ourselves having our pay reduced by 5% for all state workers, including furlough days (the legislators who voted this in exempted themselves from this, of course!).

  • #101681

    Pam Broviak
    Participant

    Here are my observations from watching the fallout all over from cities dealing with budget issues:
    Henry is right – cutting salaries will result in a decline of services. It is just human nature.
    Kristy is right on target – the successful communities have been the ones that have assessed their goals and objectives and focused on services supporting their mission. Through the years so many extra and non-core services are added – many times due to elected officials not wanting to say no to one person. Finally we are at a point when people are starting to ask, “why are we doing that?”
    Mike expresses a common thought among govt workers – Those working in public or private make that choice understanding the risks and benefits. We don’t begrudge private when they are hauling in big bonuses so why should they yell & scream about us getting a 2% raise in lean times? (When times are good that raise might go up to a whole 3%.)

    The easiest choice initially is actually to hold off on capital projects – it does risk hurting the maintenance and operations but is an obvious place to start cutting. The next best thing a city can do is take this time to assess all operations and staffing levels keeping in mind Kristy’s idea of trying to only deliver services that meet the agency’s objectives. But this usually increases challenges for staff who are left as they go through major transitions. Cutting their salaries on top of all that only further hurts the agencies.

  • #101679

    Paul Day
    Participant

    You’re a public servant. You’re there to serve the public, not the staff. Don’t cut services unless services are not working… Raise taxes if you have to, but think about creating revenue-generating products.

    Reward employees who are saving you money, innovating, building your assets. Chances are, most of your employees are not doing any of those things.

    Regarding the notion that cutting salaries will lead to cut services, I think this is rubbish. I’m on furlough right now, it’s not affecting my motivation. I think though there should be a way out of the furlough for individual effort. For example, rewarding employees for great ideas that save the city money or generate revenue. I think that could be a motivator.

    I will likely post about this on my blog, Conversion-Driven Government, in a few days.

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