>chairperson chu: hello and welcome to date two of the budget and finance committee. our court today's mystery on. do you have any announcements? >> yes. please silence all electric devices. any documents should be submitted to the clerk. chairperson chu: mr. young, would you call items one through four? >> item number one, proposed budget of preparation of expenditures to the department of the city and county of san francisco as of may 1st, 2012 for the fiscal years ending june

30th, 2013 and june 30th, 2014. item number two, an annual salary ordinance any meriting positions in the annual budget appropriation ordinance for the fiscal years ending june 30th, 2013 and june 30th, 2014. item number 3, an ordinance amending the san francisco fire code section 1 13.10 and 1 13.21 to increase fees for certain fire department services. item number four, an ordinance amending the san francisco police code sections two 0.26 and to two 0.27 to increase the permit application fee. chairperson chu: a note to the

members of the public, there are those here to listen to the proceeding and provide support to the apartment, but i want to make a quick note that we will not be hearing public comment today. we will simply be hearing from our departments and our budget analyst. we will not be hearing comments this afternoon. we will be hearing all public comment on the budget this friday, the 22nd, beginning at 10:00 a.m. you can stay and listen to the presentation, of course, but we will not have public comment today. we will have public comment on friday, the 22nd, beginning at 10:00 a.m., first-come, first- served. we do have a number of departments who are here to present to us. i would ask that you keep your presentations fairly brief. we want to hear about major changes, significant trends in terms of the revenue

expenditures or major initiatives that will be part of the budget in the coming years, and in particular, major changes to the budget in this coming year. if we have questions, the committee will ask them during the course of your presentation. again, i would ask for brevity from the department heads. because there is a scheduling conflict, i would like to call the department of human resources, micki kaleka arron, first. she does have a conflict of schedule, so i would like to call on her first. >> thank you, chairman chi-- chairman chu . i am the head of the department

of human resources. i read like to start by thanking the mayor's office and the budget analyst for assisting us in reaching one i'm happy to say is an agreement on our budgets with the budget analyst. in the materials that you have in front of you, we have made a technical adjustment. there was an error in our original submission, which reflected an increase of 3.71 positions. in fact, we only have an increase of 0.71 positions. fob and handling -- it will be a handling of transactions for the workers' comp. i will follow your instructions to be brief. we are happy to answer any questions. there are three major areas that you will see changes. koppers, a labor and negotiations project at employee

-- first, a labor and negotiations project at employee relations. it required as to increase our expenditures on attorneys, arbitration, and staff to help negotiate those contracts. that has been concluded and next year we have what we call a down year. we still have the obligations that we took on as part of o labor agreements. i will be happy to talk about those obligations. we do have some staffing, but it is a reduction from this year. in the following year, 2013-14, we will have to go back. we will have a labor project in 2013-14 of this size that we have -- two years from now in 23 -- in 2014 -- 15 that we have now. we spend some $45 million in

claims each year in benefits to injured workers. the costs are starting to creep back up. however, happy to report that we outperformed almost all other agencies in the state, and we believe that is because of our efficient claims administration, the some changes that we've made. we adopted paperless processing instead of our claims. we have quicker treatment for injured workers to help get them back to work sooner. as a result, while the claims are starting to inch back up because of the increase in costs, largely medical costs that we do not control, there still lower than in 2003-04. we do not have results yet for 2011 -- will, but we anticipate coming in about -- for 2011-12, but we anticipate coming in under budget. you may know that city hall

fellows is a program in which we work with a nonprofit to bring in recent college graduates that have an increase -- an interest in public service and to build a knowledge of public service to get them to build technical projects for us, and at the same time, prepare future leaders. we want to beat a top choice for some of the candidates coming out of the colleges, and public employment it's physically in the city of san francisco. -- public and claim it specifically in the city of san francisco. it is an increase in the dhr budget because we are their employer, if you will, but we actually do not have a city hall fellow in the dhr budget. supervisor kim: when does the city hall fellowship program began -- when does it begin?

>> it begins in august. i do want to comment -- with your permission, we are doing a major initiative in dhr, but it affects all departments. we have done a process review and we have several new systems that we think will speed up hiring going forward. that is one of the burdens that we have -- i don't want to city's civil service system is a burden, but it is an obligation. when we want to fill a job, we have a very technical process. we have to create an exam that is job-related and can be evaluated it so we can hire on the merit basis. it all takes time. we have adopted a number of core examinations that can be adopted

or added on to write various departments. we think that will result in both better hires and more rapid hiring. we have an electronic service request system of that we are in putting. all of these we think will lead to faster hires. the department of building inspection has to europe's more rapidly. they have not been able to do suit -- be able to do so as rapidly as they would like. to the extent possible, we are streamlining our processes. this is an update with our current staff, so it is not reflected in the budget as an initial initiative. the other item that has led to slower hiring is that we have rather purposefully through the

approval committee, we have not moved rapidly to higher in many areas because of the -- hore in many areas because -- we have not moved rapidly to hire in many areas because we have not been able to have the certainty to do so on a permanent basis. we do not want to be filling jobs at too high a level. if it is an entry-level job, we are pushing for entry level filling of the position. that requires three scoping of positions occasionally. -- that requires rescoping of positions occasionally. chairperson chu: we had a number of department hearings on monday

and there were recommendations for additional positions. our budget analyst has looked at past history and said, your department, for example, you add had vacancies over the past year. why should we allow you to hire additional positions when you have had vacancies? on the one hand, it makes a lot of sense if you have not fill the position, why would we add even more positions than what you have in your budget? at the same time, i know it has been very purposeful, even if there might have been a need from the department's point of view. you have not allowed for hiring. perhaps that is a question for the mayor's office. >> when we have cyclical needs, when the economy is starting to recover, we have -- we need to higher -- we need to hire. we need to be gearing up for the

next round of hiring. we do not pose a position and create the exam unless there is a position available to fill. we have to be looking for work even as we gear up. it does take a seat -- take us a while to gear up for the reasons i this -- i described. we do not want to be left unable to fulfill our responsibilities because we have a position to fill. we have been scrutinizing very carefully both the need and the level. it is, in fact, true that city- wide we have been looking very carefully at positions and have been very careful not to hire when we might have to turn around and lay somebody off. that is much better not just for

economic reasons, but for humanitarian reasons. we would much rather not higher than late someone off. -- not hire someone that lay someone off. >> human resources has accurately a fact -- reflected how we are approaching filling positions. but i would also add that for certain departments, like the department of building inspection where there are cyclical need and we need to hire more quickly, we do make an effort to expedite that hiring. sometimes that is challenging because of the existing civil service process because of the list that they need to hire off five has expired -- off of has expired. in addition, we also do try to expedite positions that have a 20 four/seven -- that have 24/7

responsibilities, like nursing. through the mayor's office and dhr, we have intentionally slow down hiring because of the impact of layoffs on the city. but as the economy is improving, and particularly as the jobs that are generating for the economy, we are actively helping them to hire up for those capital projects. chairperson chu: if i could make a request for budget analyst as we go forward in our conversations over the next week, make sure we provide additional information about whenever there is a recommendation because of vacancy. we might make sure that we had

because there is a civil service examination or something else that they are waiting for that prevented a hiring from occurring. that would be helpful for us to understand. supervisor kim: i thought i would ask this question now, because i was going to have this when department of emergency management about, but is actually a dhr issue. i'm curious about the classification. you went in and change the arts vacation to be more corporate for what the employees actually do. i sent you have to create tests for new classifications. -- i saw that you have to create tests for new classifications. i'm curious about how long that takes. i want to get a sense of the projections that people are making in terms of when hiring can take place. >> it certainly depends on the kind of job and whether we have a job data analysis. but for example, we did a

custodian and it was a city-wide classification. the person we hire could work at the puc, city hall, department of public works, the airport. we have to capture of the possible duties, the significant duties of the position that are required to be successful and do an examination for those. we will do a huge job analysis and we have to manage thousands of applicants. we plan for those at hoboes regularly, but they may take six months or something like that from start to finish if we do not have an updated job analysis. for a position-based test, which would be one within the department, which run for 90 days. -- we try for 90 days. for example, i mentioned core exams. we have a core exam for supervisory skills and management skills, two different skills. also an administrative analyst core exam. you can add on to the duties for

the department and not create a whole exam from scratch each time. we think that will speed things up. i will ask ted -- is my tiny about right? -- is my timing about right? >> we have been working very closely with the department of emergency management. the project is to identify exempt positions and move those into core staff. as a result, the department has requested that we establish eligibility for permanent civil service examinations. we start at the top looking at management and then will be doing classification actions for the staff beneath them. that is a year-long project. we are about one-quarter of the way through in terms of identifying all those eligible for management positions for which the department can make a selection. from there, we will be moving to the line staff. we will be done in about six months, i would hope, to get all

of the permanent work done. supervisor kim: on the issue of workers' comp, i appreciate the department's efforts in this area because the workers' comp reduction is an impact that happens city-wide. you had mentioned a trend that we are down comparatively and are doing fairly well compared to other jurisdictions in workers' comp, but that we are beginning to see a trend hinging out. the -- inching up. do you know what that is a result of and are there ways to manage that? rex -- >> the slight trending up is largely due to the increase in medical costs and slight increase in injury. there is a presumption, if you will, that a certain type of injury is work-related. whereas it might otherwise not have been considered work- related. it is more likely to be

considered work-related. in the public safety areas, there is reason legislation in those areas as well. those are things that can increased costs. -- can increase costs. one way to offset that is -- we have now gone from a three or four months to turn around to wait 2 to 3 day turnaround to approve documents by the workers' compensation appeals board. through electronic processes we have gone from five to six months to a five-day turnaround on disability rating spirit we have made a lot of changes that we think will offset that, but -- on disability ratings. we have made a lot of changes that we think will offset that, but the cost of medical treatment and amount of injury, we cannot control those costs. the base cost is so going up. >> -- chairperson chu: and in

terms appellant budgets -- and in terms of budget recommendations, the analysts are any agreement? >> yes. chairperson chu: what we go to the budget analyst report? >> our total reductions, of that amount, $93,000 are ongoing savings and 22,000 are one-time savings. this would increase the budget slightly over $1 million or 1.4%. and those recommendations would result in general fund savings. before 2013-14, we recommend reductions totaling $93,000. this will increase two $0.2 million of the department's budget, or 3%. and as i and understand it, the

department -- the department concurs. chairperson chu: if we have no other questions for the department, can we entertain a motion? we will do that without objection. thank you to micki and her team. we will not need you to come back next week. >> thank you pierpont chairperson chu: thank you -- thank you. chairperson chu: thank you. and to the retirement system. >> good morning, supervisors. i am the executive director of the san francisco employees' retirement system.

i'm very pleased to be here for you this morning. i prepared a very short presentation. if i could get the overhead, i would appreciate it. we are in concurrence with the budget analyst recommendations regarding our budget this year. the first slide of our presentation gives you a basic indication of the impact of the last two years of pension reform and the -- the proposals that have been approved by city voters and the effect on our department. prior to 2010, we were administering a total of six benefit plans, to each to fire and four other -- two each to fire and four other miscellaneous plans. we're now administering several

others. we have three two-year plans that became effective in 2010. and with the latest proposition "c" effective january 7th, which traded three -- we created three plans for fire and safety as well as shares personnel and miscellaneous safety. our current membership, 33,407 non-retired members. we of 22,000 retired and a total of the chip to 7767 members. -- 57,767 members. active membership over this five-year time frame declined

7.5%. as people leave city employment, they either take a refund, or if they have at least five years of service they can go into this next column of vested members. we saw an increase of 45%, roughly 1400 folks who left city employment during this time and elected to leave their money with the city to come back a later day to collect a pension benefits. the third column indicates the reciprocal members. those folks when they leave city employment go to work for another california reciprocal plan with the state. we had an increase of 31.9%, or 247 of those individuals. during the same time frame, the net growth of our retired members on continuance has been 300,076.

chairperson chu: can you explain the complement of active to retiree ratio? -- can you explain the column of active to retiree ratio? >> you have seen a decline, but 1.378 is still a very healthy ratio, meaning that there are 1.378 active employees continuing to contribute against the retirees who are no longer contributing chairperson chu: is there a metric where we would be concerned? >> if we ever got to make point -- ever got to a point where from the city's perspective there were fewer contributing that the retiree pension obligations, that would raise concern. the good news is, retirees are

living longer. for all of us, that is good news. from a pension perspective, not necessarily good news, and for finding liability, not necessarily good news. but we know that will trend into the future. chairperson chu: and on the reciprocal members, why is that we track this number? >> we have an obligation to report. they leave their money here just the way a vested member would leave their money. sede had a 10-year career with the city and went to work for san mateo and when they get ready to retire, they retire from both systems and we still have to be that 10 years of retirement to them. they get to cap their benefits at the end of their career. the next slide demonstrated over a five-year time frame are funding levels. i'm showing you this to demonstrate the impact.

obviously, we had very difficult financial markets in 2007-08, 2008-09. you can see in this column the value of the markets in the trust went as low as $9 billion. it i'm happy to report that over the next two years we are back at about $15.6 billion as of july 1st, 2011. we continue to be relative to other public plans across the united states among a handful of folks in the still have this type of a funded level. we're very proud of that. because the voters basically control the benefits, among other issues, it is well managed. we're still among a handful across the u.s. to have these types of funding levels. you'll notice we are having a declining funding level on an

actuarial value basis. but that is because of a slowdown in the pension reform and the changes and reduction in benefits for new hires. by you will notice on the market value, after the initial decrees of the market value in 2009, we're actually building upward on a market value basis. and an 83.9% funded level is extraordinary in the industry. >> what is the difference between the market value of assets and the actual? >> market value assets are what we actually invested. actuarial investments are what is assumed. they will increase the actuarial value based on what we are soon to learn, even if we did not actually earn it. in a lot of cases, the actuarial

will be higher. in 2007, the market value was $16.9 billion. the actuarial was $14 billion. the actuarial assumed higher, so we were actually investing $17 billion. it will become more standard that we will report and focus more on the market value. chairperson chu: and the difference between our actuarial liability compared to the market value assets, or in the actuarial value of assets, there's still a gap. we know we have a liability of 18.5 $9 billion. -- $18.59 billion. where does that catch up? >> we w