You should be able to do what you want by just using more variables in your template:

<select name="s_dept" onchange="sub_form('dept')">
       <option>Choose Dept</option>            
       <TMPL_LOOP DEPT_LOOP>
       <option value="<TMPL_VAR ID>"><TMPL_VAR NAME></option>
       </TMPL_LOOP>
</select>
[download]

(Naturally you have to make sure both ID and NAME are in the hash that you push onto DEPT_LOOP.)

You could also use a TMPL_IF conditional to control display of the second menu. If the second menu array is there, it will show, but if it's empty, the conditional will fail.