Controller: Six-month report shows $98M improvement but COVID-19 threatens city revenues

The Budget and Appropriations Committee heard a six-month budget status report on March 11 from City Controller Ben Rosenfield, who said the city recorded about a $98.1 million improvement in ending fund balance but warned that the economic effects of COVID-19 will likely reduce revenues in the coming quarter.

"We do see, good news in the 6 month report ... about a $98,100,000 improvement in ending fund balance," Rosenfield said, attributing most of the improvement to the Department of Public Health and the Human Services Agency. He said public health accounted for roughly $60 million of the gain and the human services agency about $20 million.

Why it matters: Rosenfield said the three fiscal offices had earlier projected a $419 million two-year shortfall; applying the six-month improvement would reduce that projection to about $321 million, but he emphasized that pandemic-related revenue declines could widen the gap. "This is obviously an extremely dynamic situation and evolving," Rosenfield said.

Rosenfield detailed departmental drivers: much of Public Health's improvement stemmed from higher patient revenue at Zuckerberg General Hospital and one-time prior-year claim settlements. He cautioned that the state is completing audits of prior claims and that a federal waiver affecting many health services expires at the end of the calendar year — both factors that could change projections.

Committee members pressed for details. Supervisor Hillary Ronan asked whether Public Health's better-than-expected position reflected salary savings; Rosenfield replied that Zuckerberg was overspending its salary budget by about $5.8 million but that nearly $50 million of revenue improvement more than offset that overspend. Rosenfield offered to follow up with a more detailed salary-savings breakdown.

On juvenile probation, Rosenfield said prior finance vacancies delayed claiming about $6 million in federal and state funding; the city has since placed accountants and a new finance director in that office to remedy the issue.

Rosenfield also discussed the earliest local economic impacts of COVID-19. He said international landings at San Francisco International Airport were down about 20 percent this week and domestic landings about 12 percent, and that Moscone Center conventions sponsored by organizers (not the city) are canceled through May 15. "The cancel[ed] conventions account for about 235,000 room nights," Rosenfield said, adding that many downtown hotels reported occupancy rates this week of 20 to 30 percent compared with a typical 80 to 85 percent.

Transit and retail indicators likewise showed sharp near-term declines: BART ridership was down about 9 percent last week and downtown BART exits were off roughly 24 percent on Monday, and downtown restaurants and tourism-oriented retail reported steep sales drops. Rosenfield said his office will publish an initial range of tax-revenue loss estimates next week and that losses in the coming quarter are likely to be in "the tens of millions." He said other impacts (such as business tax) may be deferred to the next fiscal year because of payment schedules.

Public comment included an allegation that city corruption has reached a "saturation point" and a claim that General Hospital nurse turnover exceeds 80 percent; no staff rebuttal was recorded in the meeting.

The committee voted to file the six-month report without objection. The chair moved to file the item and the motion was taken without objection, after which the meeting was adjourned.