supervisor chu: hello. welcome to the regular meeting of the full budget and finance committee. supervisor chiu will be joining us shortly. mr. clerk, do we have any announcements today? them yes, please turn off all cell phones. if you wish to speak during public comment, please fill out a speaker card and turn it i mean to myself. if you submit documents to the committee, please provide a copy to the clerk for the file. items submitted today will be before the board april 5, 2011, unless otherwise stated. item one, ongoing hearings to receive updates on anticipated budget shortfalls for fiscal year 2011-2012 and receive updates from various departments. supervisor chu: thank you very much. does the mayor's budget office

have an update on the ongoing budget conversation? in particular, a wonder if we have any new news from the state -- i wonder if we have any new news from the state. >> good afternoon. the mayor's budget director. kate howard is going to walk you through the latest from the state in terms of other upcoming news. we will have more to give you an update on the status of our balancing plan when the joint report is out. we expect that to come out sometime next week. that will update our deficit projection. we do know that we are still going to have a very substantial deficit right now. my office is working with departments to go through their budget submissions, including their contingency proposals, and as you will hear from kate how or from the mayor's office, there is additional significant

uncertainty in the state budget, which we will have to see how that plays out over the next weeks and months before we decide how we are going to handle that in the budget submission on june 1. we will have a more thorough update about our balancing plan for you within the next week to two weeks, but today, we will focus on the latest information we have from the state. >> good afternoon, supervisors. kate howard, the mayor's office. thank you for having me here to talk about the state budget again. as you have no doubt heard, budget negotiations have stalled at the state. the governor and republicans are

not having further discussions. that does not, however, mean that nothing is happening. where we are now is that the legislature has passed the package of cuts worth $12.5 billion. this includes the things we went over last time. cuts to calworks and medical. as well as changes that would permit realignment to move forward. what has not yet been acted on is the proposal to eliminate redevelopment and the tax extension ballot measure. what we know from the governor's office and from folks that have been talking both with him and folks in the legislature is that

the governor has indicated that he is not likely to sign the legislation authorizing realignment until there is a firm plan for putting those tax measures on the ballot. he has made a commitment to the county, to the sheriff, to the probation officers, the there will be funding that comes with realignment, so that has been his commitment at this point. that is basically my update on the state budget. the only other thing i would mention is that my sense is that at the state level, all parties are going back and reassessing what their next step will be. they are looking at whether a special election can be called, whether they might use the november election to put these

measures on the ballot, and then, what can they do, as a legislative body, with a simple majority vote, and that maybe the next half forward in terms of moving forward with eager redevelopment and/or the tax extensions. -- either redevelopment and/or the tax extensions. happy to answer any questions. supervisor mirkarimi: thank you for the report. who from the city is representing us on the realignment discussions? >> chief still of the probation department has been very active in representing us as well as our lobbyists. we have been working with the probation officers and i believe the share has also been involved in those conversations through the sheriffs association. supervisor mirkarimi: i asked,

and i'm not so sure they are, to that degree. in just curious -- do we know specifically, and move from the mayor's office, if anybody from the mayor's office, is involved? >> i have been following this issue, working with our lobbyists. supervisor mirkarimi: but are these meetings happening in sacramento? >> when you say meetings, which meetings? on realignment? so some of them are happening in sacramento. some of them are happening -- so, for example, i believe a week and a half ago or two weeks ago, the governor met with the county -- the association of counties, and talked with them about realignment. that was in sacramento.

our lobbyists were there and participated in that conversation. the governor's office staff have been very involved, specifically in working with probation officers for the state, and a lot of the conversations about how realignment will work have been with that organization. and vocally, then, we are also having conversations about how realignment will move forward. i believe we are scheduling a meeting for next week to continue that conversation. we had an initial presentation at reentry council yesterday. it ended abruptly due to the need to leave the building related to a bomb scare, but there's a conversation that will be happening there as well as within the city departments. i know that mayor lee has asked

that he be involved in his conversations -- ask that you be involved in those conversations. supervisor mirkarimi: i'm just asking from a public policy perspective when we should assert ourselves at any point. sounds like this is something that could be reconciled in the next month. >> it should be soon. maybe you and i can talk following the meeting about timing for that hearing on realignment of public safety, but my sense is that once the governor has a plan for getting tax extensions and securing revenue with realignment, things will need to move quickly. the way the law is written currently, realignment would be implemented -- would need to start to be implemented as of july 1. so we would need to plan very quickly. supervisor mirkarimi: thank you. >> if i may -- mayor's budget

director -- just to add to that, i think it will probably be a good time to have a hearing sometime in the next couple of weeks. there are a lot of moving parts, as you have heard, particularly knowing that we are not going to have a ballot measure in june, as previously contemplated. there are a lot of moving parts, a lot of uncertainties, a number of discussions about how we would handle this, and i think a public safety hearing or budget committee hearing with the public safety departments -- it would probably be a good time to start tackling some of these issues because we are going to have a lot of decisions to make in the budget and after the budget about how we allocate our resources to handle this influx of new responsibility that we are going to get, so it is an active discussion. i think it would be a good time to start having a hearing. supervisor mirkarimi: i would be

more than happy to follow-up with you. why don't we just forecast we will do a public safety hearing in april? if the plan is to implement july 1, that is really just now. supervisor chu: thank you, supervisor. the take away i get from your presentation is there are still some moving parts with regards to the state budget, but generally, the cuts that were proposed, roughly $12 billion worth, have passed. in terms of the changes that were talked about, those are all things that the governor has proposed and the legislature has approved. >> that is correct. supervisor chu: so short of what we can anticipate is that if there is no tax extension in the november ballot, we could expect to see even more cuts coming to the tune of about $12 billion, on top of those already

discussed, right? >> the governor has said that if he does not have the ability to extend the tax is that he will move forward with an all-cuts package, which would be another $12 billion of cuts. likely starting with education, but i imagine that will not be the only thing affected. supervisor chu: and then just another question with regards to the memo that i think the budget director provided to the mayor and did share with us. is this an opportune time to talk about the memo, or would you prefer to do this with the joint report? >> can you repeat the last part of the question? supervisor chu: with regards to the memo you provided the mayor recently, and i know you share with members of the committee, talking about where we think we

are in terms of the budget update. is this a good time to talk about the contents of the memo? >> that would be fine. i think it would be a good time to talk to where we are. i think we can have a more full discussion once we have a number from the joint report, which we will soon. the big picture from my perspective, as we talked about earlier today, is the outlook is that we will show some improvement in the joint report, driven by tax revenues. the big picture is that that improvement will not be on a scale that is sufficient to really change our fundamental picture. where we are right now -- and we talked about this a couple of weeks ago at this committee.

with a $380 million deficit, we have about $75 million of city- wide solutions, which are the porp h trigger, capital budget reductions -- the prop h trigger. that is about $70 million. and our first tend% target that we gave to departments. the total value of that is about $80 million. between those, we still have a very significant gap. the other things that have been happening, as you know, that we have talked about in this committee are we had an initial mid-year target that we issued with budget instructions. we received about $20 million worth of cuts. that was immediately increased by the increase in our hedging costs -- that was immediately erased by the increase in our

pension costs here we have also had a significant loss of state and federal revenues in the current year, which has wiped out some of the revenue growth that we have been seeing. i think we are taking two steps forward and one step back. ultimately, just to be very realistic about where we are right now, we are in the process of working with departments to start getting into the contingency proposals, and i think the reality is that we have to look very seriously and probably accept a significant portion of those contingency proposals to get us toward balance. if we have, using the first 10% -- if that gets down to about $250 million remaining deficit, our contingency proposals, if we accepted all of them, get us

another $108 million. even if we get all the contingencies proposed by departments, we would still have a significant gap. we're trying to set expectations about where we are in the budget process and the fact that we have some pretty difficult decisions [no audio] you have been hearing some of those proposals. some of these proposals will include we will have dcyf next week and other departments following, but that is basically where we are. we will get a little bit of good news in the joint report, which is a good thing, but will not be enough to fundamentally change the fact that we're going to have to look very seriously at some significant reductions. supervisor chu: looking at the

memo, what i take away from that, the back of the envelope math, $380 million, we are out of balance about -- out of balance of about $225 million still peer you are asking the mayor to consider accepting the department was a contingency plans at the moment. looks like you are asking the mayor to consider additional layoffs. it looks like you are asking -- basically saying we cannot be the stopgap bill we did not have the resources to fill all the stopgaps we have been seeing. >> i think that is fair. those are not necessarily mutually exclusive options, either, but i think the point is that where we are, we have to consider some of the more

difficult options. when we initially planned for what our budget process would look like an issue our targets, we had a set of scenarios about what they would look like, and our optimistic planning scenario, we had hoped that with some revenue growth and other good news that we could get through the budget without having to go too far into the contingencies. the less optimistic scenario would mean that we would have to go further, and that is what we did. he issued the instructions for those contingencies. some of those options you just discussed, the contingency proposals, looking at eliminations, revisiting the assumption that we are going to be able to fill cuts, those are

the types of options we need to be looking at, seriously, given where the outlook is today. supervisor chu: i know one of the criticisms we have had at the board with regards to the processes is to act when the board can weigh in and can we way in early on some of the things being considered -- whether we can weigh in early. what is the best venue? i know the mayor is hosting a number of different meetings with community-based organizations, departments, in the upcoming weeks and months. from your perspective, i know we're going to have a couple of apartments that will be coming up. shares apartment coming up, police, fire, dcyf, rec/park.

i think that will be a good time for us to weigh in at least publicly about what to think about some of the proposals, but are there other ways in which we could start the process and be helpful helping us get to the balance? >> absolutely. i think the committee hearing process is a good start. i would like to hear from you individually, however you would like to do it, about what your priorities are. the mayor has been starting to have discussions with you, i know. i think his intention is to put together an outline of what the budget would look like and essentially make that available to you and the public to start providing some feedback on what that is going to look like. we have, starting tomorrow, a group of cbo's coming in to meet

with the mayor and our office and with a number of department heads to talk in particular about health and human service cuts that are proposed as part of the department's submissions and the contingency proposals. the goal of those meetings will be to take a look at what they thought process is for those departments, decision making, and to suggest alternatives, a more efficient way to do work for an alternative that we can approach those reductions to minimize service impacts. we want to hear that. i think, probably, the best ways are through these hearings and for us to communicate individually, either off line or through the hearing process -- either offline or through the

hearing process. if there is something you are uncomfortable with, which i think a lot of them are, to start getting some alternative ideas out on the table over the next two months. supervisor chu: thank you. why don't we open this item up for public comment? are there any members of the public who wish to speak on item 1? >> ♪ name your price for tickets to see paradise we could always use some more so please make the budget shine with more pennies and dimes and try to remember

the kind of september when we had more more legal tender and deep in december you will have money if you will lend her then you will follow follow with even more deep in september you will have more money and all you board members and you will help us and you will remember and we will follow with more money through the city thank you ♪ supervisor chu: thank you. any other members who wish to speak on item 1? seeing none, public comment is closed. can we continue this to the call of the chair? without objection. would you call items two and

three. >> item two, a hearing on the federal budget impacts on san francisco for fiscal year 2011- 2012. supervisor chu: would you call also item 3? >> item 3, resolution urging the federal government to minimize the cuts to the community development block grant program proposed by the president and the united states congress. supervisor chu: thank you very much. before we begin on the federal impacts, i want to announce that on the budget website of the board of supervisors, we have put up their -- there a number of hearings that we will be having. we have also included online the dates of when some of the town halls will be happening across the city, so people are well aware of their opportunities to come and bridges debate. we also will be putting up the departments that will become in

a fight advance of their budgets so people will set aside the time to come and speak. again, on the san francisco government board of supervisors website, that information was available, and, of course, we are open to suggestions. with that, why don't we turn it over to kate from the mayor's office to provide an update on the federal budget impact? >> thank you. in back to talk to you about the uncertainty associated with the federal budget. there continues to be uncertainty in terms of what the final cuts will be to the city and when we will know what those are. as you all know, the federal fiscal year runs from -- it is an oct. to the end of september fiscal year.

in this current fiscal year, there is no budget. they are operating on a continuing resolution, which means they'd provide appropriation authority on a rolling basis. at this point, i think they are operating on a two-week extension. ideally, we would have a federal budget at the beginning of the fiscal year, but that seems to be difficult for them. and is challenging for us because it means it is hard to plan. the president proposed his budget in the middle of january, and proposed some significant cuts to programs that affect community members in san francisco and that will also affect our budget. many of those cuts were proposed at even deeper levels by congress. so i thought i would review a couple of the major cuts that

have been proposed and what those level of cuts would look like if they were adopted by congress. for example -- and you will here momentarily from the mayor's office of housing, the community development division -- in greater detail. an annual basis, the city receives approximately $22 million, and those funds support a variety of computing -- community programming. most of those funds are channel through non-profit organizations in the community. on an annual basis, we receive about $22 million. the president proposed a 7.5% cut in year one, and in the

second year, a 10% cut, so approximately $2 million. congress has proposed a 62.5% cut, so that would be about $12 million or $13 million. the department is planning, based on our conversations with our federal lobbyist and with their own contacts, on a 25% to 30% cut. we believe that it is very likely there will be a significant reduction to cdbg in the fiscal year 2011-2012 budget, and that it may deepen in fiscal year 2012-2013. another program, for example, that is proposed for a cut by both the president and congress, is the whole program, which provides -- it is a federal formula that provides funding for low-income home ownership programs, home rehabilitation

programs, rental assistance to low-income individuals. that program currently receives $8.5 million, and the president has proposed a 9.5% cut, and congress has proposed a 10% cut. so $850,000 there. the other one that is important that i wanted to point out to you now with some specific numbers is our work force investment act funding. as you know, this funding supports training for individuals related to job training -- training and support for individuals who have been laid off from their current jobs, and we receive about $6.5 billion right now. the president has not proposed a cut, but the house of representatives has proposed a 100% cut, completely eliminating the program.