DPH warns of mounting multi‑year deficits; mayor requests 3% cuts, department outlines priorities

Greg Wagner, the San Francisco Department of Public Health’s chief financial officer, told the Health Commission that the city’s five‑year financial outlook shows slowing revenue growth and growing deficits that require corrective action.

"The projected deficits are $119,000,000 in the coming fiscal year and $283,400,000 in the second year," Wagner said, and he described a year‑five projection of roughly $848,400,000 if present trends continue. In response, the mayor’s office has instructed departments to propose a 3 percent reduction in general‑fund support in the first year and an additional 3 percent in the second year, which equates to DPH targets of $18,400,000 and $36,900,000 respectively.

Wagner framed the gap as the result of slower revenue growth outpaced by rising employee and benefit costs, set‑asides and new baseline commitments. He said the city has added about 5,000 FTEs since 2011, with roughly 1,000 of those in public health. Wagner described three immediate department priorities to respond to the outlook: complete and implement the electronic health record (EHR) program, strengthen core services and infrastructure, and pursue revenue maximization and operational improvements through Lean methods.

Wagner said DPH is preparing a balancing plan and will return to the commission for more detail on Feb. 21. He also noted reserves the department has built: an EHR reserve and a broader revenue reserve that he said has been built methodically to about $100,000,000 (figure provided as an approximate account balance by Wagner). He cautioned that reserves are limited if there is a major economic downturn or abrupt federal funding changes.

Commissioners pressed for contingency planning and for analysis of deeper cuts in a worst‑case scenario. One commissioner suggested planning for 4–5 percent reductions; Wagner said staff have begun reviewing such scenarios but urged clear internal messaging to avoid unnecessary panic among employees. Commissioners also asked how Lean will affect financial systems; Wagner said Lean work is being applied to the revenue cycle — from patient intake to cash collection — to recover lost revenue and improve patient flow.

Wagner listed near‑term program adjustments likely to appear in the mayor’s budget submission: funding and implementation plans for the EHR; continued planning for a 15‑bed addiction and mental‑health program at the ZSFG campus (the Hummingbird Navigation Center); continued implementation of the Whole Person Care Program; budget adjustments for the ZSFG new building’s operating experience; and transfer‑related changes tied to EMS jurisdiction moving to DPH on July 1.

The commission scheduled a follow‑up hearing on Feb. 21 and will monitor the mayor’s June budget submission and the Board of Supervisors’ amendment process through June and July.