San Francisco Department of Public Health outlines $3.2 billion budget and a two‑year shortfall, seeks 15% reductions

The San Francisco Department of Public Health presented its first hearing on the fiscal year 2025‑26 and 2026‑27 budget at a San Francisco Health Commission meeting, outlining a $3.2 billion departmental spending plan and warning that expenditure growth will outpace revenue and create an $876 million shortfall over the first two years of the plan.

The presentation, led by Drew Morell, DPH chief financial officer, and Jenny Louie, DPH chief operating officer, described the size and composition of the department's budget and the mayor's budget instructions. "It's that shape of the curve and actually the distance in between those two that are more significant," Louie said, describing how expenditures are growing faster than revenues. Morell said DPH's annual operating budget is about $3.2 billion and that personnel costs — salaries and fringe — are a major driver of rising expenditures.

Why it matters: DPH provides core public health and hospital services across San Francisco. Department leaders said revenues remain available in some program areas but are insufficient to cover rising personnel and baseline costs, and the mayor's instructions ask departments to identify ongoing, permanent reductions equal to 15 percent of general fund support beginning in FY25‑26.

Key numbers and context

- DPH presented a $3,200,000,000 annual budget authority and about 7,700 budgeted full‑time equivalents (FTEs). San Francisco General Hospital accounts for roughly $1.3 billion (~39 percent) of the department budget. Morell said reliance on general‑fund subsidy has fallen from about 31 percent to roughly 25.7 percent of the department budget while the gross general‑fund contribution has held near $800 million.

- DPH personnel spending is roughly $1.5 billion in the current year; Morell reported small personnel savings to date but warned those are partially offset by higher premium pay and temporary staffing while the department ramps hiring.

- The citywide five‑year financial projection that underlies the mayor's instructions projects an $876 million deficit in the first two years of the planning period and larger gaps in later years. The mayor's instruction is for departments to find the equivalent of a 15 percent ongoing reduction in general‑fund support for FY25‑26 (DPH estimated that translates to roughly $150 million).

What the department will do

DPH officials described several approaches they will use to meet the mayor's instruction while trying to protect core services. Those include:

- A programmatic review of community‑based organization (CBO) contracts and non‑personnel spending to prioritize services that demonstrably produce outcomes and cost‑effectiveness; DPH staff said they do not expect an across‑the‑board cut but will seek targeted efficiencies.

- Maximizing revenue draws where permissible (federal/state revenues, medical waiver revenue), noting DPH has several revenue tools that can help reduce the general‑fund gap.

- Holding vacancies under close review and repurposing or eliminating positions where feasible; DPH said a citywide hiring freeze announced January 9 will affect projections and that they are seeking clarification about which public‑safety and health positions will be exempt.

- Preparing an expenditure reduction plan and an initial departmental submission by the Feb. 21 deadline required by the charter, with a planned commission review of a more detailed package at the Feb. 3 meeting.

Officials noted additional fiscal risks, including volatile state and federal grant flows, outstanding FEMA reimbursements, potential declines in certain tax receipts and the fiscal effects of several November 2024 ballot measures that the mayor's office projects will reduce revenues for the city.

Public comment and priorities

Several members of the public urged the commission to protect HIV prevention, care and support services and harm‑reduction funding as the department develops cuts. Eve Chiu, a San Francisco resident and health‑center worker, said, "I urge you all to keep a healthy budget for HIV health care in this city," and William Dean of the San Francisco AIDS Foundation's HIV Advocacy Network asked commissioners to avoid cuts that would harm mental‑health and supportive services for people living with HIV.

David Counts, a Tenderloin resident and harm‑reduction activist, told commissioners that "harm reduction...saves lives, period," urging the department not to cut naloxone distribution and other proven interventions.

Process and next steps

Department staff said they will continue briefings with CBOs, prioritize contractual performance data and produce a more detailed reduction plan for the commission on Feb. 3. DPH officials said they expect a dynamic process through the mayor's and controller's review and the Board of Supervisors' hearings in June, and they emphasized that layoffs are not preferred and that the department will prioritize vacancies and efficiencies where possible.

Commissioners asked for written breakdowns of general‑fund support by division and for timely access to materials before the Feb. 3 hearing so the commission can provide feedback prior to the department's Feb. 21 submission.