Budget Committee Hearing on Five-Year Financial Plan Update - April 12, 2023
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Budget and Appropriations Committee Hearing on Five-Year Financial Plan Update
The Budget and Appropriations Committee, chaired by Supervisor Connie Chan, met on April 12, 2023, at 10:45 AM to discuss the March update to the City and County of San Francisco's Five-Year Financial Plan. The meeting featured presentations from Anna Dunning, Budget Director from the Mayor's Office, and Michelle Alersma from the Controller's Office.
Public Comments & Testimony
- David Philpel spoke during public comment. He characterized the report as "sobering," noted the large deficit numbers, and suggested several policy ideas, including: standardizing language in charter set-asides and MOUs regarding deficit projections, a charter amendment to reorganize city agencies, examining classification creep, downgrading vacant positions, and encouraging use of Proposition F retirees. He also expressed concern about the city's dependence on volatile revenue sources and thanked the staff for their work.
Discussion Items
- Presentation of the March Update: Anna Dunning reviewed the January report, which projected a $728 million deficit over two years ($200 million in fiscal year 2023-24 and $528 million in 2024-25). The March update showed that the first-year deficit increased by $90 million to $273.8 million, while the second-year deficit decreased by $38 million to $354.4 million, for a total updated deficit of $780 million. Key assumptions remained largely unchanged: very slow or no growth in major tax revenues, loss of federal and one-time revenues (including FEMA), and cost pressures from salary and benefits. Revenue updates included modest increases in property and business taxes, but lower sales tax and transfer tax forecasts, and a significant push-out of FEMA revenue expectations due to delayed reimbursements. Expenditure changes included increased reserve deposit requirements ($50 million in year one), higher health care and retirement costs, and modest adjustments in citywide costs.
- Recession Scenario Discussion: Chair Chan asked about the recession scenario presented in the report. Michelle Alersma explained that the base case does not assume a recession. The scenario projects a $950 million revenue loss over the forecast period if a recession began in mid-2023, partially offset by lower baseline expenditures and reduced reserve deposits, and the ability to draw $380 million from economic stabilization reserves. However, the trigger for drawing those reserves requires a year-over-year decline in total revenues, which is not occurring (revenues are still growing, albeit slowly). Chair Chan clarified that even with deficits in some tax categories, overall revenue growth prevents access to those reserves.
- Pending Policy Decisions: Dunning listed major cost pressures not included in the deficit projection, including annualizing police and public works supplements, downtown ambassador programs, maintaining shelter capacity (potentially losing state grants), and various tax change proposals and pending supplementals exceeding $60 million. She emphasized that these decisions could significantly impact the budget.
- ERAF (Educational Revenue Augmentation Fund): Chair Chan asked about the potential state change to ERAF allocation, which is approximately $300 million. Dunning stated that no changes are yet proposed, but given the state's own deficit, it remains a risk. The governor's May revise may provide clarity.
Key Outcomes
- The committee voted to continue the hearing to the call of the chair. The motion was made by Chair Chan, seconded by Supervisor Walton, and passed unanimously with 5 ayes (Vice Chair Mandelman, Members Safai, Ronen, Walton, and Chair Chan). The meeting was then adjourned.
Meeting Transcript
The meeting will come to order. Welcome to the April 12th meeting of the budget and appropriation committee. I am Supervisor Connie Chan, Chair of the Committee. I'm joined by uh Vice Chair Rafael Mendelman and members uh Supervisor Shaman Walton and uh Supervisor Hillary Ronin, Asha Safai. Our clerk today is uh Brent Halipa. I would like to thank uh SFGov TV for broadcasting this meeting. Mr. Clerk, do you have any announcement? Thank you, Madam Chair. But I'll return to the chamber, just a friendly reminder for those in attendance to please make sure the sound cell cell phones and electronic devices. The Board of Supervisors and its committees are now convening hybrid meetings that allow in-person attendance and public comment while still providing remote access and public comment via telephone. The board recognizes that equitable public access is essential, and we'll be taking public comment as follows. Uh, first, uh, when public comment is called. Those attending in person will be allowed to speak first, and then uh we will take those waiting on telephone line. For those watching either channels 26, 28, 78, or 99, and SFGovTV.org. The public comment call in number streaming across the screen. That number is 415 65501. Again, that's 415 65501. Then enter the meeting ID of 2485-6420957 and press bound twice when public comment is called. Those joining us in person should line up to speak. And those on the telephone should dial star three to be added to the speaker line. If you're on your telephone, please remember to turn down your TV and all listening devices may be using. And each speaker will be allowed up to two minutes to speak unless otherwise stated. Alternatively, you may submit public comment in writing in either of the following ways. Email them to myself, the budget and appropriations committee clerk at B R ENT.jsf G-O-V dot or G. If you submit public comment via email, it will be forwarded to the supervisors and also included as part of the official file. You may also send your written comments via U.S. Postal Service to our office in City Hall. That's one, Dr. Curtin, B. Goodlit Place, Room 244, San Francisco, California, 94102. And that, Madam Chair, concludes my announcements. Thank you, Mr. Clerk. Um, I just first want to thank colleagues for your flexibility today, knowing that you know it's now uh an hour later than typically when we would meet for the budget and appropriation committee. Um, and then uh just really appreciate particularly the budget and finance committee, uh Vice Chair Mendelman and Supervisor Safay for continuing us with us this long day, um, but hopefully not too long. And since we only have one item on this agenda, I do see we have uh director uh Anna Dunning from the mayor's office, our budget director here, as long with Michelle uh Alersma from the controller's office uh for their presentation. Really appreciate you being here as well. Um let's start. Thank you. Oh, actually, Mad I should call the item. Oh, my apologies. Sorry. Please call the item. Yes, ma'am. Uh item number one is a hearing on the March update to the city and county of San Francisco's five-year financial plan. Uh members of the public who wish to uh provide public comment should call 415-655-0001. The meeting ID is 2485-642-0957. Then press button twice. And if you haven't already done so, please dial star three to lineup to speak.
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