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Controller Projects $38.3M Year‑End Surplus but Flags $45M Public Health Shortfall; Committee Continues Discussion
Summary
The Controller—s six-month report projects a $38.3 million year-end surplus driven by tax gains but identifies major departmental shortfalls — notably an estimated $45.9 million gap at the Department of Public Health — prompting the Budget & Finance Committee to continue follow-up and request additional reporting.
The Budget & Finance Committee received the Controller—s six-month financial update and a companion presentation of budget instructions and deficit projections from the Mayor—s Office.
Deputy Controller Monique Smuta reported a projected current-year surplus of $38.3 million, driven principally by stronger-than-anticipated tax receipts including property transfer tax and other local revenues. The surplus reduces the two-year planned deficit modestly, but the Controller and Mayor—s Office warned that structural pressures remain.
The Controller—s report identified department-level variances that, taken together, create fiscal pressure. The Department of Public Health (three funds: General Fund public health, Laguna Honda Hospital, and San Francisco General Hospital fund) was estimated to be out of balance by roughly $45.9 million overall, with the largest shortfall at San Francisco General Hospital (about $24 million) and the general public-health fund short on revenue (approximately $15.6 million) tied to anticipated federal/state retroactive reimbursements that have not materialized.
"The public health department is broken out into three separate funds... taken together, all three of these funds amount to the estimated deficit of $45,900,000," Deputy Controller Monique Smuta said, noting some offsets such as higher Laguna Honda revenue tied to increased state per‑diem rates but also overspending in salaries and pharmaceuticals in that fund.
Other net shortfalls identified included the Sheriff (overtime and staffing pressures) and the Public Defender (salary pressures). Surplus departments (Human Services Agency, City Planning fees, Recreation & Park and certain enterprise funds) will offset much of the departmental deficits, leaving a net negative operational variance the Controller quantified in the six‑month report.
Kate Howard, Mayor—s Budget Director, reiterated that the two-year projection assumes baseline funding increases and that personnel and benefit costs (pension and health care) are primary drivers of multi-year cost growth. The committee agreed to continue Item 11 to the Chair's call to allow follow-up on Public Health—s structural issues and possible supplemental needs.
What happens next: The Mayor—s Office and Controller will work with the Department of Public Health on near-term corrective options; the committee signaled it will schedule hearings on the health department budget and may consider supplemental appropriations if offsets are not identified.
