general operations. -- in general operations. the following slide is further demonstrating the gap in our wage and benefit costs alone, how those are by themselves stripping revenues in the next five years. this plan was produced several months ago, and things are changing. we are in the process of updating our revenue projections, but i think you are likely to see the general trend is not going to change all that much. the strategy is that the plan recommended and the board and they are have now signed on to-- and tehe mayor and board have now signed onto is capping spending while we are coming out of recession and slowly building back up and so we're at the capital plan recommended level and initiating savings through

restructuring debt with the help of the comptroller's office and office of public finance. controlling wage and benefit costs is a big piece of the long-term strategies. that obviously, pension benefit reform on the ballot would be a big part of that. as i said, we also have 27 labor agreements expiring, so we can look for savings through collective bargaining. and controlling health and dental benefits costs. additional revenue is a balanced approach. this is also on the revenue side. the biggest component would be the sales tax measure on the ballot next month. it that does not pass, it will be difficult for us to achieve the $100 million target oracle we have set for 12-13. we will have to think of some other way to grow revenue, but it probably means it will put pressure and force us to make additional cuts if that does not

pass. a dashing -- adjusting baseline and revenue allocation, we have not given them $50 million of their 60 million total annual contribution, so the plan recommends, and we have now adopted a strategy of pulling the trigger, and we want to repay that or prop h is up for renewal in a couple of years, so that remains to be seen how it will be addressed. there are hotel allocations that are in the code, and the strategy would be to cap the hotel tax allocation at its current level and assumed the hotel tax growth goes to the general fund. we have adopted the strategies, but they are not binding to future boards and mayors. this will be part of the budget deliberations, but the intent was to serve as a guide and layout plan for how we're going

to bring this city back to the long-term structural fiscal balance. supervisor chu: i know each one of these wines have a number of things rolled up into it, but let's say we take the wage control and cost benefit analysis alone, we expect in the next budget year we would have $100 million of solutions in that category, of which if prop c it would be worth 45 million. if it does not pass, we would be short 45 million. have you started to think about how we would close that gap? even if it passed and got the 45 million, 55 is still very large. >> we have labor contracts expiring. working with health services and trying to limit debt expenses we're seeing and into devising employees to use more cost- effective options and their healthcare behavior and utilization, as well as -- even

if it does not pass, i think our assumption is we will likely see some phasing in the retirement costs, because it is unclear what the impact of the good returns in the investments means for our contribution rates for next year. it is possible that will be offset by increasing health and dental costs beyond what we assumed in our five-year financial plan. i think it will be difficult, and obviously it at the end of the day we cannot achieve these controlling wage and benefit costs through reducing the unit cost of labor through wages and benefits, we have to think about contracting the city's work force. at the end of the day we have to balance the budget, and if we're not able to achieve revenue through prop c, or d, then it

means we would have to do more ongoing service cuts or program cuts or layoffs or other options that none of us want to take, but we have to to balance our budget. i think the bottom line of this is -- without going into more details on this is the matter what, even if we implement all of these strategies, we will have the last line, ongoing department toll revenue and savings. we will go to our departments with budget reduction targets to support reduction targets in any event, even if it passes, even of all of the ballot measures passe. we're still going to be going after departments with targets in a month and a half or so. so just to keep that in mind as we are thinking about the current year and possibly

tapping further into the reserve and other programs that come up, keeping in mind we do have a long-term ongoing problem. just a very preliminary preview of 2012-2013. these estimates are based on what we knew of the time that we adopted the budget, and we not updated our revenue projections. the comptroller's office is working on that. we're coming up with their best guess is as far as labor costs go, but from what we knew at the time when we adopted the budget, knowing what we know with savings that were implemented in the budget, our preliminary general fund deficit reduction would be $350 million, and that is largely due to the loss of one-time revenues.

with furlough days, those are expiring at the end of the fiscal year, and our base case default assumption is we see those cost increases take effect starting july 1st. obviously we know the employee benefit costs are going up. that is the projection that would assume we did fund the capital budget that the full plan that level recommended, and it seems we're facing some inflationary cost increases on non-personnel costs measures. $350 million. in the five-year plan that was 458 million, and that is less because of encored revenue improvement we saw as we were going to the budget process that carried into the current year. depending on the november election, it could decrease the pension and benefit reform of 45 million in savings. the sales tax measure would give

us $60 million annually, so this deficit would immediately come down by $100 million if this measure were to pass next month. if we implement other strategies in the five-year plan like pulling the prop h measure, we could achieve between 50 million and 100 million in additional savings before we factor in ongoing department or reductions in savings, but again, in any event we're going to be issuing targets and looking for departments to come in with recommended general fund reductions. as i mentioned, budget instructions. we will planning -- the planning to issue those in late november/early december. this is the first year we are issuing fees for all departments. that means there is even more of a need to look good on going solutions. we have to balance the second year, too.

it will really be important that we think about ongoing solutions, and its departments come in with recommended savings and revenues -- if departments come in with recommended savings and revenues. supervisor chu: what will be different this year is the general fund and develop project apartments will come in with a balanced -- will be different this year is the general fund and developmental departments will come in with a balanced two-year budget. >> correct. including potentially limits on our use of one-time revenues, a position of a fixed budget for enterprise departments where we would not open up the budget and the second year and less revenue and expenses vary by a certain amount, and caught fire

limitations on our ability to issue debt cop's and other revenue bonds. again, 27 labor agreements expiring june 30. labor agreements will take place in the spring. obviously that will really factor into the budget balancing process, and our cbo/stakeholder process was very successful last year is already underway, and we have already convene the meeting of that group of stakeholders that will be ongoing throughout the next year. the bottom line, i think, as far as the current year, cautiously optimistic. we have said the vigorous, but we're seeing good news on local revenues. i am hopeful we will be able to get through this year without having to do a round of mid-year cuts, but it is by no means certain we will not have to do that. in any event, with the looming

deficit next year, we may look to get current year savings in anticipation to help balance next year's budget. for example, we could issue targets that require departments to come in with a certain amount of their cut so that we achieve the savings over the next 18 months in what less of an impact on services and programs. projected deficits persist. costs are growing faster than our revenues. it is a fact we have to address, and we need to implement a five- year plan. and continue fiscal discipline. the november ballot will be critical. again, departmental reductions seem certain a matter what happens in november and the labor negotiations. and then just some key dates that i will not go through. supervisor chu: thank you for

the presentation. i know the mayor's budget office has already begun to have conversation with department heads about where their projections might be. at that time i felt it was important that this committee was briefed on what the outlook looks like for next year. i appreciate the presentation. i know you will continue to update us as we hear about any impacts we might have in the current year. why don't we open this item up for public comment if there are no other questions. any members of the public that would like to speak on this item, item number three? >> first and foremost, i would like to revise the person -- i think his first name is rick to speak slowly. he was rattling too fast. over 300 items. people at home have to have an understanding, because this is our taxpayers' money.

having said that, in all of our deliberations i would like you, because this is the first time i am meeting you. i have not met you before. i supported the person who was in your chair before and always asked him, like i am asking you, and at some point i will make that known again, that you have an important position. you have the ear of the mayor, and you need to represent the constituents of san francisco in a very compassionate manner. and i am saying that because the city is named after [inaudible] . we get a number of workers, city workers who this number is thrown around, but again and again people say this is a moving target, and some say it is 33,000 temporary workers or

whatever. so we, the taxpayers, need to know exactly what this number is. if we have a population of 816,000, and if we have only 33,000 city employees who are performing whatever types of works they are performing and getting over 125,000 on an average, we really want to know what is happening about this number, because it ties into what ever is said. for example, the board of supervisors at one point were paid 124,000. today they get over 160,000, plus benefits. i know i could go to the comptroller's office and get a book. i am not an economist, but i know how to balance the budget. i could speak on the redevelopment grants and what ever, but i do not have sufficient time. i want you to do this on behalf

of the people. you notice i did not address the people to that. thank you. supervisor chu: thank you. are there other members of the public that wish to speak on this item? seeing none, public comment is closed. and we continue this item to the call of the chair? item number four. >> item number four, ordinance are perpetrating $1.9 million children's fund designated contingency to the department of children, youth, and their families to a low california department of education title five contractors to provide subsidized child-care funding for low-income families in order to mitigate state cuts in 2011- 2012. for this item i know that supervisor kinm would have liked to have been here for this meeting but she is out of town. supe-- supervisor kim.

>> i am machel rutherford, human services agency, program manager for family planning. i have been working to design how we would work these dollars out and support the providers that were severely impacted by state budget cuts last year. there were a number of child cut proposals on the table. the final cut that was taken, the state reduce the contractors by 11 percent signed, which was a really steep cut, and many of them were reeling from those cuts. -- the final cut that was taken, the state reduce the contractors by 11%. so we did put out an application for funding, and we have 15 of the 30 contractors applied for

funds. what you have before you is a request to provide -- to support the providers to help keep their classrooms open and teachers employees and maintain the slots for the families that otherwise will lose their care. if you have any questions, i would be happy to answer those. supervisor chu: any other for the presentation from the department? -- and the othey other further presentation from the department? >> there was over $6 million that was cut from the 30 contractors. of these you have the persian -- portion that is attributable to these contractors, so we did not make the funds available to the public agencies. it is really the contractors who

really live hand to mouth trying to keep their doors open and slots in role for these families -- enrolled for these families. we have modeled a parallel process to what the state requires of the reimbursement rates and everything will be modeled after the state contracts, so it is just a separate replacing what the state was doing, keeping the same standards for income level feees for parents, and we're working with the state and modeling that practice so it is not as if -- we do not want to get our contractors in trouble with the state in terms of how they're being financed. and this is approximately 200 slots. they get adjustment factors for whether it is full day/part day, whether the child is

bilingual. this is an approximate number, but really what we are hearing is that this will make a huge difference for them in terms of maintaining their operations. supervisor chu: one of the items the budget analyst did report on was the number of slots we thought we would be losing and what we would be backfilling. it looked like there were 200 slots that we would be losing but restoring 196 lots. they analyst report also indicated we did not think that was going to be a service level reduction. could you explain that? --t the analyst's report also indicated we did not think that was going to be a service level reduction. the other 15 contractors lost a lot more money than this reduction. for these contractors, some

contractors have the ability to enroll private payers, so some of them are doing that. if you work in a very concentrated low-income neighborhood, that becomes not possible. it is different from contractor to contractor. we have been working around psa funding and head start sites the other half of the day, which is a good strategic use of our local dollars there. so depending on the contractor and their current sites, and a variety of factors, this is what they applied for. so some of them are making different choices, but we made up to the 1.9 million available, and this reflects the request we received it from the contractor from a very simple application

process to make this dream wind and easy for these contractors. supervisor chu: thank you. this might be a question for dcwy. it included a certain amount of state budget cuts that we expected to come down the line. if we go forward with this proposal, we will utilize $1.9 million. can you tell me what the long- term plans are so you might be able to save the slots in this car year because there is a $1.9 million reserve balance that is available, but what happens in your out years? >> paris madison for dcwy. we included in the reserves. we're using $1.9 million. it is my understanding at this point in time that these are one-time funds in using it at this time for one-time funding. we will be working to see what will happen going forward.

maybe i did not understand the question. did i answer the question? supervisor chu: you are hitting added that we have this one- time source available for this purpose, but i would imagine the need will continue on to of the child-care slots, so i am wondering what is the plan moving forward for this? will it require a replay toward the starioritzation within your funding? >> there are cost pressures on the city in terms of ongoing commitment, but it is hard to imagine doing this for just this year and unraveling it, though it will be part of our strategizing together with first five of what the

priorities are within the portfolio investments, in making sure we are supporting the title five providers to our system and helping support low- income families. this is important. not to say that every single dollar might make sense, but analyzing what is really needed based on what is used and what the best configuration of redirecting funds might be. supervisor chu: thank you. why don't we go to the budget analyst report? >> madam chair and members of the committee, attachment one on page 5 of our report provides details of the application for each of the 15 cbo's the totals 1,814,722. as you know, the requested amount was 1.9 million. the requested amounts would paid

for an estimated, as you stated, 196 slots in early child care programs, and that would be an estimated average cost of $950,000 for each lot. on page four, our recommendation based on the budget details, we recommend you approve it to reduce the appropriation by 56,00875. -- by 560, 875. we recommend you approve the ordinance as amended. supervisor chu: thank you. are there members of the public that wish to speak on this item, item four? >> i am the new executive director of florence creed and services and whitney young development center. we have several hundred slots that we operate, and 700

families in the lowest economic strata and the city, and we serve five different string districts. with the support, we will be able to support them for the ongoing needs as they try to work and go to school. >> we are not able to open a full time slots to families that come in, because realistically families will go there if they have a choice. this is really saving our school. we will lose up to 10 slots, children-wise and four teachers if we do not get the money. supervisor chu: thank you. next speaker, please.

>> i am the director of environmental justice advocacy. i focus a lot of my work in district 10, in district 11 in district 5 when it comes to young people. i want to ask why one in three children go to bed hungry in this very rich city? why do we have 10,003 wind0 tru/ s? i want dcwy to give us a long- term plan and encourage all of the city departments and the representatives that represent the 11 districts to have a plan so that they really represent our children and our youth.

there is a lot of fluff in what people say, but when it comes to the practical, our children and youth are not getting our services. in the short time you are giving me, i cannot go into the juvenile area and stuff like that, but let me point out to the witness circle -- whitney circle child care center, the whole area is being bombarded by asbestos particles and other just, and we continue to have child care centers in this area, and we continue not to pay attention to the adverse impact to our children. so that needs to be a factor. i say that because people think they can come and conduct a child-care center, but they have to do that in a good and clean and are meant.

think you. -- but they have to do that in a good and clean environment. supervisor chu: public comment is closed. supervisor mirkarimi. supervisor mirkarimi: i am a former member of the first five commission and very much welcome the proposal that is before us. there are two challenges that are on going to san francisco. one is in our attempt to become more family friendly -- family friendly and confronting the notion that this is a cost- prohibitive city. in our aim in order to maintain class diversity, i see no other choice in the choice that is before us today. at least trying our best to preserve the slots for child-care. i very much would recommend we passed this forward to the full

board. -- we pass this forward to the full board. i think supervisor kim is just during similarly. supervisor chu: while we're waiting, i am proud to support this as well. i am really glad we have the four sought -- foresight to put some of our funds in reserve. early child care is file in the city to protecting our young people and their future.