going for next year, and what we have previously anticipated from the general fund, we expected to see set a should -- be expected to see citation revenues with a healthy base line revenue growth in the next couple of years. on the expenditure side, a little bit of a different story. we have been working hard since we met in november to release see where we could whittle down the baseline expenditures. i emphasize the bat -- the word baseline. as we discussed in the november workshop, there is the baseline situation in the overall structural situation. to close the base line gap is really belittling away at expenditures to deliver the

same service that we are delivering now, and the same quality of service within our existing base line revenues. with that, we have made some progress. from the time of the workshop, we have reduced expenditures for the next fiscal year by $2 million. we will walk through what some of those are. walking through the proposals for consideration in the budget that we will be bringing forward. slide #six shows the major changes from the current fiscal year projection of $820 million in the budget going to next year and the following year. again, most of this are things you have seen before. a few things about point out. on the salary benefits line,

proposing management reductions in the current fiscal year, and the overtime reductions of the second fiscal year, falling in it -- falling in it -- following an increase in the next fiscal year. i think we are chronically under-budgeted over time. why we do have some over- spending over time, we will try to bring the budget up in the spending down to what we think is the right level of overtime for the next fiscal year. because of a number of initiatives that we are overtaking, including the prop g initiatives, they are expected to do better in terms of bringing the overtime costs down. it is why i am proposing bringing the budget up in the coming fiscal year, for them to drop it back down by half in the following fiscal year.

these are pretty ambitious numbers, frankly. we have been challenged to meet the overtime budgets in the past. i think that it is a management challenge that we really need to achieve in order to demonstrate that we can manage our budget well. i will point out in the insurance claims and the other payment mind, we have a good sized reduction there. showing more detail in the following slide, we are putting a lot of focus on workers' comp, which you approved earlier today in the consent calendar. managing the workers' comp program, we are doing that now because of problems with our current one, but because of the city's contract with their 30 -- third-party administrator joining together with the joint purchasing power of the city and

the mta. but you have been running before are completely separate worker'' comp programs, which i do not think i gives you the best value. putting those together, i do not think that we can reduce workers' comp costs. there are a number of things where we are resetting, through the fiscal 2011 actuals, the basic premise being that we are able to live within these spending amounts and they should be more or less good enough for next year. those are the highlights. >> in the work orders, this is the entire change on page 6 here. >> this is what we understand at this point in time. the work order budget, there are some specific increases that we

know of. the public utilities commission provides very little -- under- cost power to city departments and muni. they are going to raise that up by half in the coming year. in the following year, they will keep going, stepping up. the head ceci -- hetchhetchi fund is running dry. but will be in the proposed budget is what has been increased in the proposed year. at $1.6 million impact on us incrementally each year. the balance of what is shown in this line, the work orders that we know about, there is the department of human resources that will be a shift of costs

currently paid by us through a contract. it is not a decrease in mta costs, it is just shifting to thethr. we are contemplating funding the tax collector for additional parking tax revenue collection services that we think will have a greater than 100% return on investments. igbo rebound $1 back to us in the parking tax. if in the department of emergency management, there is after hours dispatched for us that we had here to fore not been paying for. we are working hard to hold the line, if not increase what we see from other departments. however, the other departments have not drifted into what they are proposing in the budget,

which is a follow-through impact to us. city department budgets are due to the mayor's office this week. the system would get a sense of whether the baseline numbers from the other departments will be changing significantly or not. we have already started to engage conversations with the other agency to identify ways that we can reduce costs. let's from their perspective, they are likely looking at just the opposite? >> true in some respects, but they have also been given a budget cut target from the mayor when he issued instructions from the department last fall. presumably, they are cutting their costs and we should get some closure benefit for us. we will see. it is something that we are working very hard to hold the line at.

from the members of the board of supervisors, no one wants to see these work orders increase. >> it is important to note that it was six years ago when it was over $80 million. one of the dynamics of the thing, are we actually getting the service that we are paying for? we have certainly made progress in that area through these years. >> yes, we have made progress. we are not committing funds until the documentation is available. >> we always get hit by that in the budget process. for these numbers. >> agreed.

i am working with the city comptroller to do a deeper analysis on work orders. the numbers that drive the work order amounts, to make sure that we are getting good value, that we can explain, defend, or modify if needed each line of the work orders. >> go ahead. >> the next slide, number seven, provides detailed over something i have talked about. over what we have been able to do so far, it is identify net reduction as $32 million respectively in the next fiscal year. our challenge will be working forward and much simpler. as i mentioned, the reduction of management facts will be difficult, but necessary. i mentioned some of the other

costs and payments, of which really justret re-baselined the fiscal year 2013 baselines, which we are using it as a guide. we are looking at ways to get out of leased space and consolidate the existing building space. you can see that there are other details here underneath of the lines. happy to quickly redirect them. >> so, i guess i would say that the good news is in terms of closing the base line gap, we have been able to identify a number of areas with potential expenditure reduction that we would be poised to bring to you. as i mentioned, in the november workshop, closing the base line with the balances the budget

under the current service model whereby, for example in muni, you are not adequately funding maintenance. the cleaning of the cars, the training and supervision of the operators would enable us to close the gap and continue what i think is the inadequacy of the level at which we are funding all of the supports that should be making that frontline service run well, dealing with budget gaps and training issues. we are about the breakdown for the vehicles, funding for the vehicles. but i have mentioned in november is what i did not want to do, a budget that keeps us limping along in the same way, limiting -- kicking down the road the decisions to fully address what we need to in order to make the system worked well. that issue impacts muni. it is the same in terms of

parking and traffic operations, where despite the opportunities to reduce expenditures in the baseline, we are fundamentally resources in the operations and, in my estimation although we have been able to find all of the potential expenditure reductions, which slide #eight shows, our additions that i will likely be proposing in the budget, all of which we have not found funding for -- basically, what this will be doing is, in my mind, right sizing. these are mostly have your numbers for fiscal year 2012, -- these are mostly half of the year numbers for fiscal 2012, 2013. the basis of this is in muni support services. rail maintenance, bus

maintenance. the tracks, the signals, the electronics. all of these through the mr. haley staff analysis are provided close to the levels that we would need to properly maintain and run the system. this is not all of what did it -- the division directors would say is needed. this is what would say is a reasonable first caught. the reason that the numbers are lower in the first place is that they are largely included with half years staffing. >> the issue raised is an interesting one. that the baseline seems to be providing more service over the past year. is the baseline based on all of those things that we did last year?

does that become the new baseline? >> we have been funding those service improvements basically threw open runs. but we have, we are missing areas of service throughout the system. we are capturing those savings and putting them in the areas that you have mentioned. m, x, 28, where the capacity and demands were not able to carry otherwise. " we are not contemplating in this budget is a change in the service level. this is really fully restores in the service level that we have today. it does not presume significantly increased writer shipped from increased use writer ship. it is really the baseline level

of service that is properly resource. >> i assume that this is long term, correct? >> we will get to that in the next couple of slides. >> well, quickly. >> what we have tried to present to this task force is a basic understanding of the baseline challenge and are structural challenge. we have been keeping them up-to- date on the expenditure side end they have been focused on the revenue side in terms of things that we might want to include in the budget that we bring forward to you in the coming fiscal year. and, or, things that might be on the ballot in subsequent years. it is not all extremely long term.

you will see it in the next slide. if you want to add this level of support service into the system, we will need some other revenues solutions. i have been able to close the base line gap, in theory, but not with enough room to support these new programs. going to the next slide, the net of where we end up is a 20 million gap next year, with a 33 million gap in the following year. absent additional expenditures solutions, which i do not expect to be able to find it at those orders of magnitude, we would need revenue solutions in order to close some of those gaps. the numbers on the previous slide, while not falling but the bird -- division directors say is what they really need, it

is nonetheless an ambitious task, putting us kind of back into the red in the expenditure cuts. this is where it leads us. the remaining slides are just kind of reminders of what we have previously reviewed in november. these were not things that we are necessarily recommending. i have asked for your authorization to convene this budget balancing panel. we started that work in the beginning of january. their final meeting, their next meeting is when they are supposed to develop short-term solutions, of which would be ready, if not for the meeting later that day, our next board meeting, our april budget discussion. and then they are going to meet for another three sessions, four sessions, to develop

longer-term solutions. we should get, for you, in the next month or so, a more refined list from this laundry list based on what this panel is suggesting. >> are these from the panel? >> no, with the exception of passes, these are just issues that have been brought up in the past and brought to you again. just to kind of remind you that this is not the first time that we have all been thinking about what the potential revenue sources could be. we do ask that you address some of the requests of the public speakers. because there are impacts to the huge their policy decision, it is taking into account the larger context. it is my recommendation that we

do include the decision about the youth passed their into the budget process. -- youth pass fare into the budget process. it is only a difference of one or two meetings, in terms of timeline. and we would all like to get this resolved sooner rather than later. i guess it does a disservice to consider it outside of the budget process. we included it here to get a picture of the budget impacts. these are just ideas that could be included in the budget. lax completely balanced. do you still come up with a 19.6 and 30.6? will one of the considerations

be a service reduction? >> that would be an honest option for the board to put on the table to the sitter. additional revenues, additional expenditure cuts outside of cutting service. i think we have found tens of millions of those already. it would be to continue doing what we have been doing, maintaining the frontline service without fully funding the maintenance, car cleaning up, and supervision. or, we write sized the service for the levels of stabbing a we have. >> when we cut the service by 10% two years ago, how much money was involved? >> $30 million. >> 61%? >> that gives us the range.

i think it is the best option to have, without people understanding this, as opposed to what. i realize that i thought that that was a more honest way of doing it. >> certainly, i do not want to be the one to start in a new job in immediately recommend that the board cut services. but i do want to bring forward an honest budget. if the resources that we have available are not responsible things to bring forward, options accordingly. >> you mentioned these things in your letter, about the issues in the other things. other virtue options that are left.

>> can i just clarify the numbers we're seeing on page nine? the $19 million gap, the $33 million gap, they do not include the possible new revenue sources. >> that is correct. all that they assume is the indexing that is shown on slide 12. >> all the things that you noted have been brought to the board before, but are now in front of us again. they exist in order to close the gap? >> based on the march 6 public hearing in town hall meetings that i will make reference to later, based on input from this panel that i have convened, we will put that all together. we have proposed a series of things that would provide for a

balanced budgets at this level of funding. >> in congress, the house proposal is a devastating one. that would not have an impact on the coming year, would it? >> not so much an impact on the operating budget. this is the capital budget we will be getting to in a minute. >> also, the numbers on page 9, that we can impact with the additional revenue sources on page 10 and page 11, they still do not really get to the numbers on page 8, the new program. >> are the numbers included in slide 9? >> they are. >> thank you. >> to be clear, slide 9

basically captures what we have already been able to identify as potential expenditure reductions, adding in the raid advisory on the expenditure side. this is a worst-case gap, if we were to fund everything that we wanted on page 8. which is not as much as we would like to, but it is a reasonable and significant step. 10 and 11 have some of the old ideas. one thing that i should point out that we have added arm slide 11, the last line, eliminating the free employees transit passes, except for those for whom we have a contractual obligation to provide them. it is not a lot of money and, obviously, a very unpopular proposal to put forth. as we listen to public comment

about the difficulty of affording transit, it is difficult for me to defend why people who are gainfully employed, with good jobs, should not be paying their fair share. >> the total democrats have of a million dollars. >> this is employees and family? >> everybody. >> this would only apply to the employees for whom we are not contractually obligated to provide passes. that is the biggest chunk right now. but it is also an estimate of how many used revenues they would get when they switch from a free pass . >> do you know how many people take advantage of this, roughly?

>> our estimate is that those employees that do not have this bargaining agreement, 25% of purchase passes. >> how many are actually using it now? >> everyone gets a free pass. >> the users? >> everyone uses that. the use it daily. >> thank you. ok. >> #12 just shows the indexing that is largely seen before. you can see that there will be transit fare increases, according to the board indexing policy. not a single fares, but the way the policy rounding works. the regular adult fast passage of go from 62 to 64, then 66. the discounted one, a unit and senior, would go from 21 to 23.

this is the indexing policy. slide 13 shows some of those potential revenue solutions and, therefore, would be available to us at the earliest if they were on the ballot and approved in november for the second half of the first fiscal year. it would be difficult to budget for at, as we have no idea if we will get approved. this is a sample of what the panel is currently considering for the long term. finally, the operating budget, as i mentioned, it will be coming at the next meeting for the first public hearing and budget presentation.

we will use the next meeting for that opportunity. we do have a number of town hall meetings currently set up. we will put it on our website, if it -- if it is not there already. i believe that i mentioned it in my last report, we want to try to take an opportunity to solicit fraud to educate on the state of the budget and get some feedback on the budget. in addition to this panel that we get from public comment at these hearings, in this room, we have will have a nap -- we will have an opportunity to hear more from the people of san francisco. of course, all meeting locations will be accessible and served by

muni. the board is -- we will make sure they have all the time my information. so, then we will be coming to you in april to approve the budget. or if you need more time in the middle of april. getting to city hall on may 1. i wanted to pause for any additional questions on the operating budget. >> members of the board? >> thank you very much. >> very comprehensive. let a lot of good staff work on all of this. moving quickly on to the capital budget. is this one of those things where we have to have public comment?