department. this is the most sophisticated, though i would never say the most important part of our system. the amount invested primarily on the private equity side, transactions and investments that are not publicly traded like stocks and bonds, rather they are things like venture capital real-estate and long- term investments that require significantly more individual analysis then we would need on the publicly traded side. the board has made a longtime commitment to increasing internal expertise to bolstering consultant expertise in this area. that is why the positions have been in there. by the way, the system brought in independent consultants some years ago, before i arrived, and

did a study. that is how these positions were actually flushed out. that is what we are basing them on. fortunate now, given the economy, that we were able to find the talent at a more affordable level because of what is going on in the outside industry. supervisor chu: thank you. supervisor mirkarimi: good morning. i am curious about what is on the radar for sfers and the members that are a part of purrs in san francisco. is there a plan to change those relationships? in thinking about the environment?

>> we simply administer the existing system and members that were not in ssers because they were in purrs. that would be a message -- now be a decision made by the body. >> you are not aware of policy actions being taken by the administration? >> mine understanding is that basically there may be issues being looked at but i would have to deflect -- defer that to the department of resources, rather. supervisor mirkarimi: any of the staff in your department, as it is being asked, are they not being used for that endeavor, potentially? have any changes or enhancements come to those that are already in purrs that you are aware? >> we might be asked to look at

other financial matters. supervisor mirkarimi: ok. we will talk to a chart. -- hr. supervisor chu: mr. rose. >> just for clarification, on the security analysts position, our does -- department does not agree with that reduction. the details for the committee, our recommended reductions with that those changes detailed on pages 3 and 4, instead of the 577862 that we cited on page 2 of the report, there is also $1,962 of general fund reductions of the general fund

monies. therefore, if they commit except recommendations, that would wipe out the return to general fund. on page 3 of the report the changes that the department has referred to, i am withdrawing the recommendation on page 3 for air travel, $2,000 given to us by the department. the department has given a sufficient justification. similarly in professional and specialized services, instead of recommending the reduction of $100,000 i am recommending the reduction of only $50,000. from $350,000 to $15,000 in reductions.

those are the only changes, as i say. as i understand it the department is in concurrence with the recommendations resulting in $490,862. as you know, this is not a general fund as indicated by the department. but it would result in general fund reductions. supervisor chu: to clarify it sounds like it would be reducing the specialized services and you are suggesting the $15,000 reduction? >> correct. supervisor chu: the department is in agreement with remaining components? >> we are. supervisor chu: can we accept those recommendations? we will do that without objection. thank you for your presentation.

let's move on to katharine dog with the health service system. >> thank you for the foresight of requesting that the department look at challenges in the pressures we will face over the next five years. i would like to a knowledge the health service board chair in the audience. looking at the health service budget over the last five years , the budget was less than $6.1 million.

two of those fte's were added to the hss department in 2009 without additional funding. during the last five years with every line item not in control to emerge in all of the constant salaries, they have increased. hss has provided more complex function programs for essentially the same that we had in 2006, 2007. we have successfully begun to standardize and document employee retiree health benefit administration procedure is not just for the city and county but for the college district and superior court. we have put into place labor- intensive eligibility schedules per your conservative estimates with basic eligibility for $1.5 million savings.

i have authorized the use of substantial time for staff to complete the first ever medicare compliant and roman enforcement. the average age is only 59. it was completed yesterday and hss will have a new role as of the 31st. to whom we were previously pay and non-medicare premiums. estimated savings for the next year are thought to be $1.1 million until these numbers -- members turn 65 and would have been eligible for medicare anyways. administration health benefits have become far more complex. along with anticipated state changes and a possible local changes. to successfully navigate these changes we must educate and

train staff as well as the board of trustees to enhance and develop statutory compliance with information technology. the health service system manages close to $700 million per year for nearly 109,000 covered lives with an administrative budget of less than 1%. requiring the administration costs be paid for by the district. 51% of the budget is paid for by enterprise departments and by school districts and community college districts. the costs for retirees is 64% of the typical expenditures but most companies make for health benefits administration. our top priority has been maintaining day to day operations that make sure benefits are accurately

administered through health coverage. streamlining initiatives over the last 18 months that have saved the city $16 million, not including the audit that we just completed. over the next five years we have identified three primary areas, including the implementation of day-to-day operations. including management focus and staff development. let me outline some of those areas. to maintain statutory compliance, we must institute care acts that have a role in decisions through plan year 2018. if they are not implemented there are significant finds. we must update health insurance affordability and accountability x, policies and procedures as we implement the system. we must implement the success of

local ballot propositions that will affect public employee retirement benefits. the second key area is providing cost of health care and it clearly is our greatest challenge as an employer. in order to do that we have to continue the eligibility bought it. we must commit management, time, and resources to the implementation of those organizations that began on july 1 of this year and a pilot program designed to mitigate the city's rising premium costs and improve patient care. we must begin to develop fund- driven and data-driven well as programs designed to reduce and manage the cost of a chronic disease burden within the population. we must improve data gathering and analysis capabilities around care utilization predicting target areas to reduce cost

savings. we need to strengthen vendor management and performance guarantees including financial penalties to those lenders regarding a workers compensation and disability benefits administration. we must also focus on the baby by key challenges ahead of us. that -- big it challenges ahead of us. becoming components of the new health system we will need to build a communications program to assist members as they transition to online enrollment to access aspects of our benefits situation, including engagement in the benefits program. we must establish and begin to establish and maintain a digital records system through storage and staff training transferring over 50 years of

paper records, which we will continue to maintain this year. the effective use of financial resources has always been a priority in our department. initiatives listed must be undertaken and they are not optional in terms of administration. this year after the budget process the mayor's process was $6.5 million. in six years the budget will have grown. the budget analyst is proposing additional cuts that are primarily onetime reductions that will jeopardize our ability to maintain compliance and respond to the rapidly changing health care environment. we have had discussions with budget analyst staff and we plan to continue those conversations. to summarize, priorities for next year address the rising costs of health care in transition to emerge.

we appreciate your thoughtful assessment of the challenges that the city will be facing and thank you for your consideration. supervisor chu: can you speak a little bit about the efforts being made with regards to the and it -- the account care organization? >> these are not the same animal. they require coordination between hospitals, physicians, and the pair. blue shield's when we look for a new in -- hmo, blue shield was the only hmo that responded to that end agreed to establish accountable for their organizations. allowing patients to know when patients are being discharge and it will require electronic

health record communication for the blue shield members. it is really the second and third public sector organization in the state. in san francisco we will be doing with other hospitals. the goal, they came in with a 0% labor increase this year. the goal is to reduce costs by better coordinating care. all eyes are on the city and county of san francisco in terms of being successful when it was announced. it begins on july 1. we were working closely with blue shield to stay on top of those utilization numbers. >> do you expect we will be seeing that in the upcoming

budget year or the year after? >> i hope to see savings associated with that in the form of it lowered ratings increase and negotiations are scheduled to begin in september or october. remember, they are just beginning this process in july. they will be basing rates on utilization this year. both physicians realize they will not be able to grow in terms of the health budget rate as realize. health-care costs continue per person on health care benefits. for that you could hire a computer programmer in india. controlling health-care costs is key to keeping jobs here in san francisco. we have to control those costs

can be sure that the doctors are on the same page with us. >> the last question that i have pertains to one of the items pulled out by the budget analyst. the plan analysis of the city planned, currently we have blue shield, kaiser, and an option for city plant. can you speak about the expectation for when that process will begin? >> completely funding the professional service line, the analysis needs to be done tomorrow. only 8% of the membership are enrolled in the plan. the primary payer is medicare. early retirees and active employees. what you have is a group of employees staying in a plan where they can go to any doctor that they want within the

health-care network but it is still a much broader network. there is no management of their care. what are our options in terms of that? i am hoping that there are many. probably only two or three, but it needs to be done with recommendations to the health services board. otherwise it will continue to become more and more expensive. supervisor mirkarimi: just curious -- is there any conversion of service being provided through the health service system for people that are being asked to supplant that level of service in alabama >> not that i am aware of. are there employees being asked

to enroll, is that the question? >> yes. >> and not continuing to be enrolled in the programs now. >> not that i am aware of. when employees are laid off they get help subsidize benefits for five years and have cobra for 18 months. many of them, when we call and say we have terminated benefits, even though they have paid for dependents, they are desperate. >> it can be very region supervisor mirkarimi: cobra can be read supervisor mirkarimi: jaycee -- supervisor mirkarimi: cobra can be very expensive. >> and we refer them to help the san francisco so that they can enroll and so that their kids can enroll. the local public health

insurance programs. supervisor mirkarimi: do we have a class of employees that are not in the system but are being asked to be a part of a healthy san francisco's system? >> there is a class of as needed employees that are a part of the san francisco health plan. so, yes. the answer is yes. they become eligible when they have worked 40 hours. the director of the department of health and human resources, we actually did an analysis of what it would cost to bring them in. because of the services provided with an hmo being much broader, it would be more expensive than what was budgeted for.

the good thing about that is that those tend to be younger employees. the risk adjustment, and we are all about bringing in younger people to lower the risk pool. supervisor mirkarimi: thank you. >> thank you, a supervisor. >> as both of the comptroller and a budget analyst has reported this year, the budget will increase by 4.5%. $283,000 more than the original budget. totaling $71,981, 100% our general fund reductions.

still allowing the increase in the department. we will be happy to work with of the department. supervisor chu: thank you very much. we will see you back here next week. thank you. next we have the department of human resources. >> good morning, chairman, supervisors. if he would like i can begin with an overview of the department and high-level changes in the programs. then i would be happy to suggest the questions that came up in terms of health services and those initiatives.

by way of the overview, we have in our budget nearly two-thirds of that as the payment of workers' compensation claims. medical and temporary disability benefits. basically, we are the conduit through the city's insurance program as it is paid to injured and retired former city workers. that is the largest part of our program. we have possibly 20% of our cuts in salary and benefits. professional services is 11%. tuition reimbursement programs are negotiated with labor unions to reimburse employees under the terms of their labor contract. training, workers' compensation, and additional

services, examination consultation, etc. we have a small amount going to the city attorney's office. just a basic overview. we have three areas that have changes of any significance over the prior year. the first one is the city hall program. this is a program that is typically for recent college graduates to expose them to public service and introduce them to the public realm. it has been very successful. sadly in recent years it has been restricted to the apartments that our enterprise funded. we simply administer the program so that they appear as they are in fact working in various departments. we receive work order funds for them. this year we have participation from the comptroller's office. this is to be held to that in a

future year that the general fund department will continue this unique program. workers' compensation is increasing by five for a sense i'm because of increasing medical costs payment benefits. i would note that this is favorable to the statewide average where other public agencies are anticipating 10%. we are banking on better experience programs for claims and have been coming in under the state average and hope to continue to do so. some of the things we have done to help to improve our claims administration this year, we went to a largely paperless processing system that we think will yield significant improvements. that has also enabled us to fully comply with state recording requirements and avoid some of the massive charges that other public agencies have been

exposed to buy failing to meet those reporting requirements. the most significant change in the budget from this year to next year is in fact a labor negotiation project. as you know, we bargain on a cyclical basis. burt -- virtually every labor agreement with the exception of public safety is up next year. larger than 2006, which was our previously largest labor project. it will all be up for negotiation next year and there has been some discussion where we told them we would be willing to start almost immediately in those negotiations, but we cannot assume that we will need fewer resources to conduct those negotiations. supervisor chu: you said that 30 of them would be open?

>> including registered nurses and public safety department. we certainly hope we do not need to spend all this money, but we might. for as a professional services covers the potential for contacting labor negotiations. there appeared to be continued economic constraints that streamline the process similar to what we did with our internet based workers' comp management systems. hopefully we implement over the next year and electronic form of administration tuition reimbursement programs that work closely with the comptroller's

office that we think will ultimately achieve the significant efficiency and reduce the need for some of this paper heavy and resources of the transaction. that is our plan for navigating. if you like i will note that we have reached agreement with the budget analysts office, thank you, for their excellent work has always. i can address some of the questions that i heard earlier. if you have others, i would be happy to as well. i know that the supervisor had a question regarding the public retirement system and deputy sheriff in particular. we have 1000 employees in the purrs or calpurrs program that are not in the san francisco

retirement program. the deputy sheriff system has virtually identical benefits to those provided by public safety or police and fire. as you know, we have entered into negotiations with labor partners and have an agreement amendments going to the board and you will be hearing more on that very soon, i am sure. an element of that does address membership. first there is agreement that new hires, in the public employment retirement system currently, they will come into benefits in this san francisco employee retirement system equivalent to what we will be adopting. they have