Budget and Appropriation Committee Hearing on Five-Year Financial Plan Update and Federal/State Funding Impact – April 8, 2026

The Budget and Appropriation Committee, chaired by Supervisor Connie Chan, met to hear the March 2026 update of the city's five-year financial plan, discuss threats from federal and state funding cuts, and explore mitigation strategies. The committee received presentations from Mayor's Budget Director Sophia Kittler and the People's Budget Coalition, followed by public testimony.

Five-Year Financial Plan Update

• Budget Director Sophia Kittler presented updated deficit projections: a two-year deficit of $642.8 million, a nearly $300 million improvement from the December 2025 joint report. The year-one deficit is $168.5 million, growing to over $1 billion by year four. The city continues to assume approximately $306 million in revenue losses from HR1 (federal immigration and health policy changes), which accounts for 48% of the deficit.
• Positive factors include: a spike in business tax revenue in year one due to Prop M filing timing, improved hotel and sales tax (hotel tax up $36–$37 million over two years), increased patient census revenue at SF General and Laguna Honda ($30 million in year one), and a $150 million fund balance from current-year savings and additional tax revenue.
• Negative pressures include: rising labor costs, health insurance rate increases (9.5% annually), property tax appeal refunds ($56 million), correction of OCII bond property tax treatment ($40 million), and ongoing ERAF risk from state proposals (AB 2526 and enrollment-based attendance changes, estimated $15–$90 million).
• Federal and state risks highlighted: HR1 implementation (work requirements, six-month re-enrollment, loss of Medi-Cal eligibility for 7,500–10,000 people in San Francisco); proposed cuts to continuum of care ($55–$70 million annually); potential elimination of non-citizen Medi-Cal; and state ERAF diversions. The city maintains a $400 million HR1 reserve, with $3.5 million spent to date.
• Key uncertainties: recession risk, federal policy volatility (tariffs, H1B changes), pension return rates, unresolved police/fire labor contracts, and June ballot measures that could affect revenue.

Community Impact Presentation from People's Budget Coalition

• Coalition coordinator Anya Worley Ziggman presented analysis showing that proposed local cuts disproportionately impact immigrants (60% of cuts affect immigrants), low-income families, and communities of color. 20% of all grant funding to Filipino, Pacific Islander, and transgender communities is proposed for elimination. Cuts to workforce development, HIV services, and immigrant services are compounding federal reductions.
• Laura Thomas (San Francisco AIDS Foundation) detailed federal threats to Ryan White funding: a 19% reduction over five years due to formula changes, and ongoing litigation against executive orders targeting HIV prevention and gender-affirming care. She noted that local cuts to HIV services undermine the safety net for people losing Medi-Cal.
• JM Jaffey (Lyon-Martin Community Health Services) described the collapse of gender-affirming care networks as hospitals scale back services. They reported that city cuts are canceling out new state investments, and that providers are absorbing increased demand from across the state and nation. They urged backfilling federal losses.
• Katya Padilla (Latino Task Force) stated that cuts shift burdens onto community-based organizations without resources, and that 60% of cuts target immigrants.
• Marnie Regan (Larkin Street Youth Services) warned that SNAP/Medicaid work requirements starting June 1 will harm homeless individuals without corresponding workforce program investments.
• Colleen Rebecca (TNDC) and Stone Thomas Selseth (PSH resident) highlighted the compounding effects on housing stability, food access, and benefit navigation, calling for updated city mandates and capital improvements in supportive housing.

Discussion Among Committee Members

• Supervisor Walton questioned whether the city is in a better position than last year. Director Kittler replied that the two-year deficit is smaller, but HR1 reversed progress made by prior tough budget decisions. Walton urged honest assessment and preserving services.
• Vice Chair Dorsey explored HR1 mitigation, including creative work requirement compliance (e.g., volunteer service) and additional eligibility workers. He requested more details on disability waivers for those in drug treatment.
• Chair Chan emphasized the need for frequent communication between the Mayor's Office and community partners, proposed regular meetings before June, and requested breakdowns of workforce development and LGBTQ program funding across departments. She encouraged progressive taxation and expressed solidarity with LGBTQ and immigrant communities.
• Director Kittler committed to earlier engagement, cross-departmental analysis of grant cuts to avoid double-hitting organizations, and shifting cuts to year two when possible to allow planning.

Public Comment

• Speakers expressed support for preserving safety net services, protecting immigrant and LGBTQ communities, and opposing cuts. One speaker opposed tax increases and expressed support for Trump administration policies. Others urged release of the HR1 reserve to backfill DPH cuts.

Key Outcomes

• The hearing was heard and filed on a motion by Chair Chan, seconded by Vice Chair Dorsey. The motion passed 4-0 (Supervisors Dorsey, Sauter, Chen, and Chan voting aye; Supervisor Walton absent).
• The committee urged continued dialogue and partnership between the Mayor's Office, city departments, and community organizations ahead of the June budget finalization.