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Fiscal First AidFiscal First Aid

When afflicted with financial distress, public managers first need to stabilize the ailing government. “Fiscal first aid” techniques can be used to stop the bleeding and provide immediate relief. Cases of more severe distress may not be completely resolved by fiscal first aid, but fiscal first aid can provide a short-term respite and time to develop more permanent treatments. In less severe cases of financial distress, fiscal first aid alone may be sufficient. This Web resource presents fiscal first aid techniques in four categories:

 

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    Primary Treatments are those that are recommended as the first line of defense and should be considered as a first option. In many cases, the go-to treatments not only provide immediate help but also improve the long-term prognosis.
  •   Treatments to Use with Caution may be called for if the go-to techniques are not sufficient.  However, the side effects of these treatments could potentially worsen financial condition if used improperly.
  •   Treatments to Use with Extreme Caution might help the near term financial situation, but could ultimately work against financial sustainability. For example, a treatment might damage the government’s reputation, thereby reducing the public’s support local taxes
  •   Treatments Not Advised are ones that can get you in trouble.  

 

 

First Diagnose!

As a first step, figure out what the main causes of the problem are. Accurate diagnosis is essential for selecting the right treatment and getting the patient’s (your government’s) support for the treatment regimen. When diagnosing, it is advisable to emphasize factors internal to the organization such as structure, culture, and communications. While external causes, such as a poor economy or state/federal mandates, may be at least partially to blame for fiscal distress, fixating on these largely uncontrollable items saps confidence that a good solution can be found.  Of course, presenting a diagnosis where the patient is partly to blame for his or her condition requires a delicate bedside manner.

 

Fiscal First Aid Techniques
Revenue Human Resources and Benefits
Audit revenue sources Evaluate overtime use
Improve billing and collections procedures Address health care costs & workers' compensation claims patterns
Explore fees for services Re-examine labor structures
Propose taxes with a strong nexus Assess organization structure
Conduct a tax lien sale Integrate human resources and financial systems
  Investigate risk management
Capital and Debt  
Improve capital project management Financial Planning and Analysis

Refinance Debt for Lower Interest Rates

Evaluate financial condition & get benchmark data
Start comprehensive capital project planning
Inventory programs and ascertain their costs
Management Practices Audit certain recurring expenditures
Make managers manage Divest of loss-generating enterprises
Enhance purchasing practices Seek state, federal, and/or regional assistance
Pursue inter-organizational cooperation Identify sources of liquidity
Revisit control system  
Centralize financial management and human resources activities  
Develop cash flow analysis
 
Establish a culture of frugality 
Recognize opportunities within crisis 
Manage perceptions 
Be willing to spend money to save money 

Network with peer agencies and individuals

 
Pool Department Resources 
 
Revenue Human Resources and Benefits
Sell assets Offer early retirement program
Obtain better returns on idle cash Increase part-time labor
  Institute hiring/wage freezes
  Reduce hours worked and pay
 Increase Employee Contributions to for Pensions or OPEBs
Capital and Debt Financial Planning and Analysis
Use short-term debt to pay for vehicles Revisit interfund transfer policies
Defer and/or cancel capital projects Use Fund Balance to Soften the Landing
Use debt to fund pay-go capital projects Management Practices
Restructure Debt
Small and/or Temporary Across-the-Board Budget Cuts  
  Close facilities (or reduce hours of operation)
  Outsource
Revenue Human Resources and Benefits
Levy a broad tax increase Make across-the-board wage cuts
Create special taxing districts Defer compensation
Capital and Debt Management Practices
  Make large or sustained across-the-board budget cuts
Treatments Not Advised
Revenue Human Resources and Benefits
  Underfund accrued liabilities like pensions
Capital and Debt Management Practices
Shift operational costs into capital budgets Use accounting manipulation

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For more information about this GFOA Web resource, contact Shayne Kavanagh, Senior Manager, GFOA Research and Consulting Center.

 

 

 
 
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