[gavel] good morning, everyone welcome to the san francisco supervisors budget and finance committee, i am mark farrell, i will chairing this meeting, and want to thank sfgtv for taping this meeting. clerk, any announcements? >> yes, chair, please silence all phones and submit documents

to be submitted to the clerk, as today will appear on the may 33 meeting. >> call item 1. >> item 1, proposed budget and appropriation ordinance for selected departments as of may 1, 2014, fiscal year-ending june 30, 2015 to june 30, 2016. item 2, proposed annual salary ordinance for selected departments for year-ending june 30, 2015 and june 30, 2016. >> item 3, hearing for mayor's proposed budget for selected departments, for fiscal year

2014-2015, and 2015-2016. >> thank you very much, we have a continuing number of city departments coming before us, three departments, child support services, retirement system and municipal transportation agency, with that we will start with child support services.

>> good morning chair farrell and members of the committee, i am carol roy, head of child services, i would like to thank you for rin vieting the department to present before you today. in the interest of time, i will keep my remarks brief. the presentation i will provide today will be a high-level review of the department mission, and case load, and fund structure and existing funding challenges and solutions to those challenges. and i will complete today with a quick look at our service delivery strategy. the child support program understands that sometimes parents need help in meeting their obligation to provide economic support for their children. many parents responsible to pay child support are themselves

struggling with poverty, lack of permanent housing, face long-term unemployment and significant barriers to gainful employment. in response the department has changed their skrukture from punitive to family centered. helping parents meeting their economic commitment to their children, leads to stronger family ties and cooperative parenting. based on district representation, our clients are predominantly african-american, latino with a number of asian and caucasian families. many receiving public assistance, but personality to note that our services are available to all parents that need them, regardless of income. low-income families that timed out of public assistance, rely

heavy on child support as a safety net. child support is 40% of a family's income. for deeply poor mothers that receive it, child support is 60% of the family's income. in 2014 we collected and distributed $26.6 million, and of that 95% of every dollar collected, $25.4 million went directly to families and through those families into san francisco economy for basic needs. provided by federal and say the and local governments and recoups welfare cares. 100% is from federal and state

resources, the county does have cover this cost and with the expenditures in 2014-15 is to live within revenue streams. the most significant budget challenge facing the department s. rests with the growing cost of doing business today and tomorrow with funding that is less than the department received 11 years. the program stresses on this budget are growing costs of salaries, business and office space. funding for fiscal year 2015 is reduced by 2.6 percent for phase 1 of a department labor grant, and one-time funding for it-service replacement. the department has absorbed the short fall without interactions and direct services. in 2016 the department anticipates a minimal increase

of 1.8% in federal funding that represents an increase of matching federal funds and completion of the demonstration grant. over the last decade our case load has steadily dropped from approximately 28,000 cases and 158 budgeted positions in 2004, to maintaining positions that represent salary savings but can be filled should the case load grow. there is are no new positions in this budget and the department does not have an overtime budget. the funding sources are

threefold, to provide excellent in-house service to the staff and controlling impact of the operational budget. direct services now represents 93% of this budget. second, the department began working with the department of real estate a few year prior to the end of our lease to leverage the opportunity to renegotiate new terms and prepare increases in the budget. led to competitive rates and slower lease costs over time that translates into long-term lease savings. and we floon share our office space and savings with other city departments. finally the department has right-sized overhead and keeping costs in line with a small are workforce and reallocating savings to fund increases in salary cost. going forward we will continue

to engage our employees to look for ways to deliver quality case management is both efficient and keeps pace with the needs of our clients. the department will carefully manage its staffing levels and reduce spending on non-salary costs. we will continue to settle worker injury cases when possible and remain committed to reduce the number of new cases through prevention strategies that include ergonomic training, evaluations and work-station assessments. the department will also focus on cultivating alternative grant opportunities that utilize existing services, build resources and promises a 66% federal match on every dollar invested. these solutions are thoughtful, viable and ensure that the department will live within its baseline, ongoing reductions are

seamless to clients, and that service delivery continues to exceed state-wide performance. the department has a workforce that is culturally competent. case workers appreciate and respect cultural differences and take them into consideration in order to effectively provide excellent customer service to parents in a reliable manner. the department has prioritized language access understanding that absent effective communication and cultural inequity service delivery is very possible. we regularly analyze and criticize our systems in relation to client feedback and concerns, to ensure that systematic barriers to access do not occur. roughly 2,000 noncustodian

parents are delinquent in their payments. 85% of these parents have a relationship with the criminal justice system. the department is committed to do more to assist all parents in their effort to overcome barriers and to successfully compete in jobs. we understand that this requires a concerted effort and child support must be a part of that effort. we can and must do three things, continue to grow partnerships with other service providers, continue to grow and enhance case management to barriers that reflect our client demographics, and continue to develop realistic orders that are reliable and make sense for both parents. we have created initiatives to confront the challenges these

parents face. in my experience a good budget offers practical solutions to the problem of its time. and practical solutions work. we have made meaningful progress, we have proven to our colleagues, our child support colleagues in other counties and other states, that fresh thinking leads to strong performance. of the 58 california counties in san francisco, san francisco is ranked fourth in statewide collections. and although the majority of our parents on our case load have a low income and struggling, parents are stepping up for their children. 74% of families with children are receiving child support. the san francisco department of child support services managing both with conviction and optimism. we continue to build a stronger

and more valuable program for all san francisco residents. for all san francisco families. by leveraging our partnerships with relevant city agencies and community-based organizations, strengthening outreach to our neighbors and inreach to our national program to build deep client connections, and through holistic case management we deliver relevant services through innovation and promote familiar relationships. i would like to take this opportunity to thank the men and women who continue to make child support services in san francisco their career, and service to the public their passion. i would like also to thank the mayor's budget office and the controller's office, particularly marisa and teresa cal and teresa sandler.

to help the department connect to county policies. and on behalf of the 11,699 children we support, thank you for your time and attention. that concludes my presentation, and i would be happy to answer any questions. >> thank you very much for your presentation, colleagues do we have questions at this point in time? comments. okay, we don't have a budget analyst report. as you know. thank you for being here, we will hear all three department budgets and then take public comment thank you very much. >> thank you very much. >> up next i believe i saw jay hulet here from our retirement system. we will get started. >> good morning, members of the committee. we will have copies for the

staff, they are being made right now. hopefully you have a hard copy of my presentation. i am the executive director of the san francisco employee retirement system. our mission is dedicating to securing the trust assets and managing the programs and providing promise benefits. the next page shows the number of current plans, for active employees, it's 14. most of you are aware that over the last three to four years there is a lot of pension reform to the voters. of the city and county of san francisco, that resulted in nine additional benefit plans that we administer. we have still some folks that are actively employed that were

hired prior to 1976, they are covered by a separate benefit plan, those hired after '76 but before 2010, the first phase of the pension reform. they are covered by separate plans and have a one-year comp used in calculations. those hired after june, 2010, most of you participated in changing that plan to a two-year comp plan. and those folks hired after january 7, 2012, are covered by a three-year final comp plan. these changes were designed to provide fair benefits but obviously lower the level of benefits that are available to retirees once they retire. our total membership exceeded 60,000 for the first time this year. we have under 35,000 active

non-retired employees. some of those will include folks that have vested and left their money on account with the plan. they may not be working for the city but have rights to come back and claim benefits. and we have 26,000 retired members and we have a retiree payroll of over $1 billion. the next page is trends over the last five years. again we have a total active membership broke out by active and vested and reciprocal members. active members over a five-year period are still in a decrease from the level of active employees we had as members in 2008-09. and you can see the effects of the streamlining of the

positions. going through and coming out of that difficult period. we also show the active to retiree ratio and you see that it's steadily declining but not as quickly over the last three years in the prior two years of this five-year snapshot. and you will notice that retired members increase by over 16% over the same five-year period. and that we continue to have a net increase, we measure obviously some retirees will end up eventually dying. but we still have a net increase of nearly 1,000 a year of retirees going into payment status. the next page tracks the funding levels over the last five years. you notice in 2008-09, we had

market values assets just under $12 billion. and that was the end of the difficult financial markets in 2007-09. >> mr. chair, excuse me, as i benefit of the public, these slides should also be on the projector. >> asking you to go to the projector, please. >> right. >> again pointing on this column, the market value assets at the end of the financial, what they call the great

recession, just under $12 billion. and then increasing to $17 billion which reflected a market value funding status of 84%. i am happy to report with the markets so far this year, through the end of april, we have exceeded $19 billion in assets. and on target to return over 14.5% return for the current fiscal year. again as long as the financial markets hold through june 30, it seems arbitrary but that is the time that we do a snapshot and measure the health of the plan. so over the four years since the great recession, as it's called, we have increased the market value of this trust approximately 5.1 billion. and at the same time over this same period we paid in excess of

3.5 billi$3.5 billion in benefi. >> can you talk about the difference of actuary value and market value. >> the actuary is what they determine it will grow, which is currently 7.58%, and each year they will assume over that previous year that it grew at that rate. we used to regularly be when we are better funded have more market value of assets than actuary of assets. the important part is that actuary assumes that we have the actuary value, and when actuary exceeds market value as it did in 2008 and 2009.

i am happy to report for fiscal year 2012-13, now the market value of assets is $17 billion, and the actuary value is 16.3. again we don't have to make, we are investing more money than the actuary assumes we have and make it easy to meet the target of 7.5. and we are making 14.5 through the end of april. >> not predicting a dive in the market, that will continue to compound itself. >> what happens once we invest more than the actuary assumes and hopefully make the gap larger, and that we are meeting the required return assumption,

b bah -- because we are able to invest more than the actuary. and they measure the assumptions and grow the trust based on 7.75 as it was in the 2008-09. >> can you remind me what we obligated as the city to fund, don't we have a requirement? >> yes, there is a required per contribution that is currently 28%, and however with the cost sharing where the active employees based on their salary level have an additional contribution, the net number is 23 or 24. >> is there a funding level market or actuaryial that we hold? >> the charter doesn't require

that there be 100% funding, the charter requires that the retirement board has a plan in place with a goal to pay dollar for dollar the promised benefits. what we have is projected liabilities for every dollar of pension that we anticipate we will have to pay for the retired as well as all active employees of $20 billion. in order to get to 100% funding level, the market value of those assets would have to match the actuary match would have to match. >> got it. >> there are some triggers for cost of living adjustments that are now based on whether the plan is fully funded. and those changes were made at the same time. we are very cognizant we have an improving market value ratio, from 79% to 84% in one year, and we anticipate that we will see again the same reaction. obviously our goal is to get

both market value and actuary funding to 100%, that means we have a dollar for every dollar promised to the employees. >> thanks. >> the retirement board also administers the city's employment plan, establish in april, we have 42,000 active participants and 25,000 participants that are not currently deferring but have assets in the plan. and we have assets in the program as of april 30, $2.6

billion. this is part of the retirement plan budget, it's separate because we don't use trust monies for the program. however pointed out in the report, the activities of this program are completely reimbursed by the third-party administrator, currently prudential, by contract they reimburse the city for the cost of this plan. this is our 2014-16 budget outlook. the two-year outlook is all costs that support the administration program and paid on the trusts. all costs of administering the comp plan is reimbursed by the third-party administrator. no general fund used to support

this department's budget. this year we have asked for a large number of new positions. the result of the retirement board making decisions as it faced the 2014 asset liability modeling study. we do this every three years. and part of the analysis is they are directing us to go and investigate three new investment strategies for the trust. they include what we call alternative equities. and they include hedge funds and they also include investment in real assets. not real estate, more infrastructure, timber, those types of things. the board is determined that we need to bring on staff to support the implementation of these strategies. for example, in the hedge fund are arena, if we didn't have staff on board, the option would go

fund-to-funds. and there is additional costs associated fund-to-funds, and the board believes that the savings will multiple times over support the cost of these new positions. there are seven new positions in the division, and five to be funded in 2014-15, which is targeted what the board set as a priority of starting in hedge funds and equity. and two in the year 2015, that is a reflection of investment not just real estate but real assets. there are two positions in the retirement services area of our budget that we are requesting. senior management assistant, and that's for fiscal year 2014-15,

and 15-16, a principal program analyst in support of our development team, which basically supports our application, pension administration application. and there is one 1842 management assistant that is requested in the administration division to support the executive director and his immediate office. that is a result that we had over the last two budget cycles eliminated executive secretary positions from our budget. we wanted a closer skill match. so we are bringing back the management assistant. we have money in our budget that includes an allocation for the mayor's summer youth program. we have an overtime budget of $5,000, and generally speaking we manage it very well. we have never exceeded that in any budget year in the last 15 years. and also thanks in part to

supervisor avalos's effort, we are confident that we will bring the monthly retirement board meetings to a chamber here in city hall so they will be televised live. and we have money in the budget to support that. and we conduct committee me meetings and we have the money in the budget for televising those meetings. i will be happy to answer questions. >> thank you, any questions? move on to the next report, please. >> members of the committee, does the department have comments? >> will you come up the budget analyst has made a few recommendations to your budget. why don't we