Budget and Appropriations Committee Hearing on Six-Month Budget Status Report – March 5, 2025
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Budget and Appropriations Committee Hearing on Six-Month Budget Status Report – March 5, 2025
The San Francisco Board of Supervisors Budget and Appropriations Committee, chaired by Supervisor Connie Chan, held a hearing on the Six-Month Budget Status Report for Fiscal Year 2024–2025. The Controller’s Office presented updated revenue and expenditure projections, which showed an improved two-year projected shortfall of $840 million—a $36 million improvement from the prior forecast. Supervisors questioned the methodology behind deficit projections, the impact of federal funding uncertainties, and potential next steps to address fiscal risks.
Discussion Items
- Controller’s Presentation: Michelle Ellersmith from the Controller’s Office reported a $36 million reduction in the two‑year projected shortfall, bringing it to $840 million. The current year shows a net revenue shortfall of approximately $115 million from budget, largely offset by a $98 million departmental surplus (driven by expenditure constraints, a hiring freeze, and additional revenue at the Department of Public Health). Key revenue trends include: record property tax assessment appeals, a 5% projected decline in hotel tax (after an 11% drop in the first half), weakness in sales tax, and improvement in real property transfer tax and interest income. The report assumes no changes to budgeted federal revenue.
- Supervisor Walton: Asked how a net surplus and improved fund balance are possible when revenue is down. The Controller explained that the prior forecast did not capture departmental savings, which are now included and total $98 million. Walton also noted that the city projects 7.6% revenue growth over five years but 29% expenditure growth, requiring corrective action.
- Supervisor Ingardio: Inquired why projected deficits often do not materialize as large as forecast. The Controller clarified that the deficit reflects the cost of maintaining current service levels under existing laws and inflation assumptions; the city must take action to balance the budget (e.g., mid‑year cuts, reserve use). The deficit is the “do nothing” scenario, not a prediction of the final outcome.
- Supervisor Dorsey: Raised concerns about the uncertainty of federal funding given ongoing litigation and policy changes at the federal level. He suggested a closed session or full‑board discussion to assess risks. The Deputy City Attorney noted that closed sessions require a specific legal basis under the Brown Act, such as pending litigation. Supervisor Walton suggested a public forum instead of a closed session. Chair Chan proposed further consultation with the Controller’s Office and City Attorney to determine the appropriate transparent approach.
- Chair Chan: Emphasized the structural imbalance between revenue growth (7.6%) and expenditure growth (29%) over the next five years, and the need for collaborative budget decisions with the Mayor’s office.
Key Outcomes
- Hearing Continued: The committee voted 4‑0 (President Mandelman absent) to continue the hearing to the call of the Chair, meaning the item will be brought back at a future date for further discussion.
- Future Planning: Supervisors expressed interest in a public discussion on federal funding threats and agreed to work with the Controller and City Attorney on the appropriate format (public forum vs. closed session).
Meeting Transcript
Good afternoon. The meeting will come to order. Welcome to the March 5th, 2025 meeting of the budget and appropriation committee. I am Supervisor Connie Chan, chair of the committee. I'm joined by Vice Chair, Supervisor Matt Dorsey and Supervisor Joan Guardio, Shawan Walton, and shortly President Raphael Mendelman. Our clerk is Brent Halipa. I would like to thank Eugene Lombardia for from SFGov TV for broadcasting this meeting. Mr. Clark, do you have any announcement? Yes, just a friendly reminder. If we had attendees to please make sure it's sounds all cell phones and electronic devices to prevent interruptions to our proceedings. Should you have any documents to be included as part of the file, it should be submitted to myself, the clerk. Public comment will be taken on the item on this agenda. When called and uh when public comment is called, please line up to speak on the west side of the chamber to your right and left holding those curtains. Um 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 E N T dot J A L I P A at SFGO V dot O R 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 at one Dr. Carlton Be Goodlet place room 244, San Francisco, California, 94102. And Madam Chair, that concludes my remarks. Thank you, Mr. Clark. And with that, um, could you please call item number one? Yes, item number one. Pardon. Is a hearing to receive updates on the six month budget uh status report for fiscal year 2024 to 2025. Madam Chair. Thank you. And we have the controller's office here. Thank you very much, Michelle Ellersmith from the controller's office. I have a very short slide deck, and then after that, I'm happy to answer any questions. Um let's see, let's get started. Um we issued our six-month report a couple of weeks ago. Um, what this report does is it updates the um current fiscal year revenue projections in the five-year plan that we did last fall that were published um with the mayor's office and budget and legislative analysts' office in December. Um, and it also projects kind of operating revenues and expenditures for departments uh in the middle of the year for general fund supported departments mostly. Um the kind of the bottom line is that um we are improved from our prior projection by about $36 million, um, which reduces our two-year projected shortfall by a like amount, so to $840 million. Um there's a revenue story and an expenditure story. Our projected net revenue shortfall in the current year is about 115 million from budget. Um and the the change you're seeing here from our last report is that we now have the actual assessment appeals that were filed for tax year 2024, the assessment appeals board last fall. We have the full kind of population of those appeals, and we've applied um some assumptions about uh refunds to that population. So that was the big change. Um talk about revenues a little bit more. Um on the department side, offsetting a lot of that weakness is a 98 million department um surplus, and that's kind of a couple of things. Um departments have been uh working through the year to um constrain expenditures. So um back in September, the then mayor um placed some expenditures on reserve, particularly for um CBO grants um that had been included in the budget, and I believe there is a um detail on that provided to the board on February 14th, kind of a list of those items. So that's currently extraining your current year spending or constraining your current year spending to to save money for later. Um kind of the second flavor of that is that departments were also asked last fall to try to achieve three and a half percent salary savings. Um however you want to do it, just don't hire. Um try to incur less overtime, whatever you're you know, however you achieve that.
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