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Supervisors advance binding reserve rules under Proposition A, approve controller amendment
Summary
The Board—udget & Finance Committee advanced controller-recommended financial policies under Proposition A to create a 2% general reserve and a new budget-stabilization reserve funded largely from volatile revenues; the committee approved an amendment to delay the general-reserve ramp-up and forwarded the ordinance to the full board.
The Budget & Finance Committee on [date not specified] advanced an ordinance that would add binding financial policies under Proposition A to create a larger general reserve and a new budget-stabilization reserve.
The controller told the committee the rules aim to reduce the city nd county—ity and County of San Francisco—udget—oom-and-bust cycle by increasing the general-fund reserve from its current budgeted level of roughly 0.9% (about $25 million) toward a 2% target over several years and by creating a stabilization reserve that draws from volatile revenues such as property transfer taxes, unanticipated year-end windfalls and nonproperty asset sales.
"Stable budget stabilization reserves specifically allow governments to save money during stronger economic times and then spend them during weaker economic times or during recessions and downturns," the controller said in presenting the proposal. The draft ordinance would deposit 75% of defined volatile revenue amounts into the stabilization reserve and cap the combined rainy-day and stabilization reserves at 10%.
Committee members pressed the controller on rationale and mechanics. Supervisor David Campos asked, "How did you get to some of the numbers, like for instance, the 2%?" The controller said the 2% target was informed by Government Finance Officers Association guidance (recommended ranges of about 5% to 15% for different jurisdictions), peer comparisons and what appeared practical given the city—urrent fiscal constraints.
The controller also explained withdrawal rules intended to smooth help over multi-year downturns: combined withdrawals from the rainy-day plus stabilization reserves would follow a three-year schedule (about 30% of combined value in year one, 50% in year two and 100% in year three of the reserves' combined value), rather than allowing a large single-year drawdown.
Committee members discussed a technical amendment to adjust the five-year rolling average used for transfer-tax calculations to account for the prior voter-approved transfer-tax increase (Proposition N) so that that rate increase would not unintentionally be deposited into the stabilization reserve. The panel accepted the controller mendment to the ordinance on a roll-call vote recorded as four ayes and one no; the committee chair said the measure would be forwarded to the full Board of Supervisors with a recommendation.
Debbie Lerman of the San Francisco Human Services Network urged the committee to adopt the proposal, saying it would reduce volatility and reduce damaging midyear cuts to human-services programs. The committee also accepted a procedural amendment from the controller to delay the scheduled ramp-up of the general reserve by one year to reflect the committee's near-term fiscal outlook.
The committee's action was limited to forwarding the amended ordinance; the full board will consider adoption and, if adopted, the ordinance would establish binding reserve policies to guide future budgets.
