i will not go through each of these charts, but they are there for your reference to just give you a sense of where our funds come from and where our expenditures are used. these will show up in the mayor's budget book. it is to try to give you sense of where we are now compared to where we have been over the last few years. one thing i will note on these charts, and it was no surprise, if you look at our city budget, we're still at about 50% of our budget in personnel costs. salaries and benefits. so almost half of government spending is in direct operating personnel expenditures. that is the reason that those costs for such a significant factor in our future financial planning.

over the last couple of months, i know you guys are all aware and have been participating actively in this process, but we have spent a significant amount of time -- the mayor has spent a significant amount of time having public discussions about what is going to be included in this budget. we have had town halls with each of you at this committee and with your colleagues to hear from the public about the budget. we have gone through a two-month long process, working with our cbo service providers to discuss how we can minimize the impact of health and human service reductions, and we have had countless, at least california list by me, meetings with various stakeholders from the community, with our employee organizations, with our commissioners, and with members of the public.

ultimately, i think the hope has been, going into this budget, that we would be able to make a lot of the changes that we need to make up front and avoid doing it at the last minute. we have made a really serious effort, along with all of you, to try to do that. compared to where we started, in terms of reduction proposals, we have about $28 million worth of changes that have been made in the budget to reflect the information that we have received and the thoughts that we received through that public process. lastly, i think as we go through this budget process, my hope would certainly be that we continue to kind of look at our decisions through the lens of our five-year financial plan. starting next year, we're going to have to actually adopt a two- year budget city-wide. i think we have got some real

challenges ahead. i hope the five-year financial plan helps give us a little bit of a road map and provides us with some guidelines about how we can make our decisions. but again, we have, despite getting through this budget, the future looks like if we do not take correction acts -- corrective action, our budget deficits are going to grow, even if the economy recovers, unless we take corrective action. the most significant driver, of course, is in our wage and benefit growth. over the next five years, we have projected that if the economy recovers, our general fund revenues are going to grow by $416 million, which is good news, and that is a sign that we think the economy is going to slowly began to recover. but over that same time, wage and benefit costs alone are going to grow by $648 million, unless we take corrective

action. that is going to be an ongoing issue that we are all going to have to tackle over the coming months and years. so that is all i have got. i am happy to answer questions. i know you'll have plenty of time with the department of the next couple of weeks to get into the details. supervisor chu: thank you very much. why don't we move on, because we have got a revenue letter as well.

>> good morning. i am the controller. as you're likely york, the charter and administration code requires the controller to provide an estimate on the reasonableness of their revenue assumptions proposed by the mayor. to meet that requirement yesterday, we issued what we call our revenue letter. it provides some summary about revenue assumptions underpinning the mayor's proposed budget, and also comments on a number of other items on the mayor's budget. i can briefly walk through that. i have copies available on the podium next to me. it is always available on our website. generally speaking, we find the revenue estimates assumed in the

mayor's proposed budget to be reasonable, given current thinking about the state of the local and national economies. a couple of caveat to add, the first, of course, is that the city's general fund relies heavily on the state of california for revenues to support both city and county functions. the mayor's proposed budget includes a $17.5 million allowance for future and, as of now, unknown state budget cuts, and to the extent that final state actions are less than or more than that $17.5 million, it may require later corrections by the mayor and board of supervisors. it would appear that we're going to actually have an adopted state budget today. at the legislative level, we will work with the mayor's budget office as to get more details about what the final budget holds and provide an update to the committee in the coming week about how that reconciles to the budget you

have before you. it would appear that the state is likely to adopt a budget later today. that will provide some certainty on planning going forward that we have not always benefited from at this time of year. secondly, the fy 2012, fy 2013 shortfall remains a significant challenge. looking ahead to the year beyond the one in front of us, we do project persistent deficits. our base expectation would be that we would start next fiscal year with approximately a $350 million shortfall, with a couple big buckets of solutions available to begin working that down. the first in the five-year financial plan proposed by the mayor and adopted by the board, multi-year strategies were outlined that would continue to have a certain amount of capital, suspend nonprofit colas, and some other actions that are within the authority of

the mayor and board to implement. but those actions adopted in the five-year financial plan are taken, that would shave about $100 million of the three and $50 million. the mayor has proposed two ballot measures for this november's ballot that would reduce that by about another $100 million. a charter amendment would serve to reduce costs. there would be some sales-tax increase to provide about $60 million in that year. depending on what happens with these items, you can see that the city has the opportunity to make significant progress toward meeting its structural imbalance. and potentially leaving us with a preliminary estimate and shortfall for next year of just under $150 million, which would be significant progress towards structural balance in the city's budget. >> what specifically from the

five-year plan? >> it is $115 million in solutions adopted for the 2012- 2013 fiscal years. the single most significant one of those is the continued retracing of our capital spending. so the budget you had before you reduces the planned spending level on capitol significantly from that adopted in the 10-year capital plan. continuing that action next year is the single largest piece of this $115 million. other significant pieces included suspending colas for nonprofit providers for the next several years. that is approximately $20 million. capping hotel tax allocations and taking all of the growth from the hotel tax and to the general fund is about another $10 million. lastly, suspending the prop h for this goal set-aside trigger.

>> maybe this is a question for the capital group. i am not sure. i think it is $35 million that we cut from the capital budget this year. i assume that that is part of this $115 million. >> that is correct. i am the mayor's budget director. the reduction in the deficit that the comptroller is discussing, part of that would be from the reduction in the capital budget contemplated in the five-year financial plan. $35 million in the 2011-2012 budget. going for, it will decrease to $25 million in 2015. over five years, it will catch us back up with the original capital plan assumption. >> has there been analysis done about the long-term costs will

be of these reductions in the capital budget? are we sort of borrowing money, in a way, because it causes deterioration of assets and it is more expensive to fix it in the future? >> it is a great question. there has been some analysis on an asset-by-asset bases, and i think the general thought is correct, that it would probably be more cost-effective over the long term to be adequately maintaining our facilities. the issue has been and continues to be that, even at the capital plan funded level, we're having to make decisions, because the actual need is greater than even at the level that we had contemplated in the capital plan. i know that is not a satisfying answer. it is essentially saying that we are deferring an even greater amount than we would like to. but the reality is that it is a

job for us and for the capital planning committee to try to make decisions about where the highest return on our investments is in the short term. and if we have additional funding that is available to be allocated to capital projects, that would probably be cost- effective use of general fund dollars, and we could probably plan to find projects that would have a high return in terms of savings on future reconstruction or other costs. supervisor wiener: thank you. >> returning to the next slide. it was already noted, the total all fund budget included the enterprises is growing. it is just over 4%. the general fund budget is growing at a greater rate than that, about 9% year-over-year increase in the general fund budget. that is predominantly driven by the continued expectation of revenue growth next year, but

then also, the significant good news in the current year. so those two things stacked on top of each other and lead to a pretty significant year-over- year growth in the general fund budget. you see the largest increases in terms of projected revenues for the coming fiscal year are driven by transfer tax, property tax, and business tax. and then the largest decreases, the most significant being almost a $30 million year-over- year loss of federal exemptions. that is the result of the expiration of federal stimulus funds and the loss of the hospital fee waiver that was used to balance the current year budget. the report itself goes into great detail about each of the major revenue streams. for those interested, it has more information on each of these and others. their proposed budget does rely on just over $200 million in

one-timer nonrecurring sources to bring the city's revenues and expenses into balance. the most significant of these is the accreditation that we will end the current fiscal year in the general fund with about $153 million as an ending balance. other one-time revenues appropriated in this budget include $18.5 million in at the mental health state plan amendment revenues. almost $12 million in one-time savings for the department of public health. and in the facilities fund. and the first of the acoc's payments for city reimbursements is assumed in this budget at approximately $12 million, with offsetting expenditures. as you know, we provided periodic updates to the board on our projections for ending fund balance. the nine-month -- the balance

proposed in the mayor's budget is modestly higher than the nine-month report ending balance, by about $17.3 million. that is driven by slightly better news on property transfer tax in the current year and better news in the current year on the supplemental party tax bills processed by the assessor. again, some good news from that that has assisted with the balancing of the budget. page six is a summary, and this is a detailed more in the report itself. a summary of all the different revenue and staffing and expenditure-driven baselines or fodder requirements that sit in our charter. -- or voter requirements is that in our charter. generally, it is showing that the mayor's proposed budget meets or exceeds the baseline

requirements in the majority of cases. one exception with the budget provides more funding than is required is the children's baseline. so the budget before you proposes about $12.6 million in spending above and beyond the level required in that amendment. that continues a trend for many years now were the city has opted to spend more on these services than the voter initiative requires. it is driven heavily by about an $8 million allocation of the rainy day fund to the school district. and that $12 million, roughly $8 million of it is driven by the rainy day fund allocation to the schools. in terms of -- the the thing to note here is that the proposed budget that is before you is likely, over the course of the budget year, not to meet the required staffing level for police, required by prop d.

currently, if the police chief or to authorize civilianization that has previously occurred and that the mayor and board have approved, the required number of officers to be funded in the budget is just under 1900. 1894 -- 1894, down from the p 1971 prop d. the budget before you funds 2100 officers, and adjusting for leeds and over * and other factors that go into the calculation, we're left with about 1874 funded officers -- suggesting for leaves and overtime. the challenge will likely to face during the coming year is that the budget assumes approximately 100 retirements of police officers and assumes no backfills. so it is likely to become

imbalanced over the course of the year in terms of this one voter requirement. lastly, the charter requires the controller to place reserves on the budget on certain items until revenues are received. we have placed $87 million in reserves on the budget before you, pending the receipt of actual cash. the majority of these are related to capital-funded projects in the budget before you, where we have not yet issued the debt that is assumed. our long standing practice is to not let the department began expending into the debt issuance has been approved and proceeds proceed. we have placed two reserves within the mta's budget, pending continued information and actual receipts from the sales that the mta has been pursuing, which remains an issue that we're monitoring within the mta's budget.

very high level and a quick summary. thank you for the attention. i am available to answer any questions you might have. supervisor chu: thank you. let's go to any comments the budget analyst may want to make. >> madam chair, members, i do not have any specific comments on the presentations that were made. however, if the chair wants, i can summarize the interim budget report that we prepared. would you like me to do that, madam chair? as you know, supervisors, the annual budget process for the city and county requires that the board of supervisors approved an interim appropriation ordinance and annual salary ordinance. that is for fiscal year 2011- 2012, on or before june 30, 2011.

as the chair indicated, the purpose of these interim ordinances is to provide expenditure authorization for various departments during the time that the budget and finance committee is reviewing the mayor's recommended budget for 2011-2012. on page 7 of our report, regarding the revisions that have been proposed, the administrative provisions of the interim manual -- and from the annual appropriation ordinance and salary ordinance, those revisions are described on pages two through six. there are two items that we consider to be policy items. one is section 8.3 of the administrative revisions, the appropriation ordinance, and that would delete an existing requirement that the comptroller report to the board of

supervisors on the revenue impact on the state budget on the general fund. it up -- it would also delete the provision that the board hold hearings on the mayor's plan and alternative proposals to address any revenue shortfall. we also consider approval of section 15 of the administrative provisions of the interim annual appropriation ordinance and a section 2.6 of the administrative provisions of the interim annual salary ordinance to be a policy matter, because these sections create a new employee monthly stipend without specifying the amount payable to employees to use their personal cell phones for work-related duties. as a general policy, i believe you know the board has not approved capital and equipment during the interim budget period without a detailed review unless the budget and finance committee and full board authorizes

receptions requested by the -- exceptions requested by the mayor's office. it is the position not to certify the funds during the interim budget process between july 1 and july 31. if an exception is approved by the board of supervisors, new positions can be filled effective july 1, 2011. otherwise, new positions will generally not be filled until october 1 of each fiscal year. in certain cases, specific exceptions requested by the mayor's office to the interim budget general policies have been approved by the board of supervisors. exceptions have been based on such factors as new positions and programs that produce revenue or cost savings or prevent major service efficiencies will -- which will result from delays in filling positions or starting new programs. yesterday, supervisors, we received various requests for exceptions to the interim budget submitted by the mayor's office. we are presently analyzing such

requests, and we will report to the committee on such exceptions during the forthcoming budget review process, which, as you know, i believe, begins next monday. except for the two policy matters pertaining to the administrative provisions of the ordinance, which i just mentioned, and except for the budget exception requests, just received by the budget and legislative analyst's office, we recommend that you approve the fiscal year 2011-2012, it -- interim annual appropriation ordnance, interim annual salary ordinance, and treasure island development authority budget, and i will be happy to respond to any questions. supervisor chu: thank you very much. >> mayor's budget director. my apologies to budget and legislative analyst for not getting them the interim -- proposed interim exceptions far

enough in advance. i know they had asked for them a while ago and we got them to them as he said, just a couple of days ago, but i do have a copy of our proposed interim exceptions that i will distribute to you and the clerk, and we will be working with the budget and legislative analyst to make sure they have the information that they need. supervisor chu: thank you. why don't we open these items up for public comment at this time? if there are any members of the public who wish to speak on these items, again, these are all items pertaining to the overview of the revenue letter and the budget that has been proposed. on top of that, we have the four items that are simply interim budgets for the month of july. >> my name is francisco da costa. let me begin by saying both the controller and budget director have done a pretty good job, considering that nowhere in the

explanation mention was made of unfunded resources pertaining to our pensions and benefits and so forth. i would also like to commend mr. rose for the many years that you have evaluated our budget and for your evaluation. having said that, i spent two weeks in washington, d.c., visiting the many departments, and as you noted, on august 2, there is going to be some determination made on our debt ceiling that is going to affect us. having said that, i have been monitoring the budgets, link to quality of life issues because i am the director of environmental justice advocacy. you know and most of you should know that because of our

economic crisis, this city is not doing sufficient to address our poor and those that need help most. so i am asking the controller and the director of the mayor's office of the budget, as i spoke to you when you first assumed this position, you are a good man. do not allow the politicians to rule you. think outside the box and did a service to the people of san francisco. thank you very much. >> supervisors, members of the public, people of san francisco, i am here to speak as a home care worker. i am an elected executive board member of the united health care workers west.

we represent the 20,000 workers in the program. we would like to address you on this budget and across the board 10% and give you a perspective of how our members are looking at this, how it is affecting us. following the will be other speakers representing some of our communities within the ihss workers community. of course, the funding comes from federal, state, and county, the county being the smallest component of this. our work that crosses over contributes to the work of our health services and health department. it is a key component of our city pose a health program because we are the ones that help keep our community is at home, healing, living vibrantly.

please do not undercut our ability to contribute to this work. right now, we are looking at across the board 10%, when you look at the costs at home care workers have faced, the cost of living figures -- there is some question as to whether they are even on his right now. we have not had a wage increase since 2008. we are not asking for any sort of cost of living high. we have already made -- we have lost ground there. we are not asking for additional benefits, but what we're asking today is that the one benefit that we do have, our health premium costs, not go up 300% for our members. it looks like a very small figure for people who are making different amounts of money, had different incomes, but for home care workers, this is a wall

that is very difficult to scale. this year, we took a 3.6% cut. this year, we contributed to our security as well. supervisor chu: thank you. >> [speaking foreign language] >> just to translate, hi, board of supervisors. he is from ihhss home care.