Budget director outlines plan to use $18 million reserve to soften state cuts; advocates press for IHSS backfill

Greg Wagner, the mayor’s budget director, told the Budget and Finance Committee on Oct. 14 that a Sept. 14 controller report estimated a $26.5 million general‑fund impact from proposed state cuts and that the city’s adopted budget included an $18 million reserve to address that shortfall. “We are proposing to use that $18,000,000 to backfill $18,000,000 worth of the impact of the state budget cuts,” Wagner said.

Wagner said two later developments reduced the city’s exposure: state officials indicated counties would not absorb a previously projected $6 million reduction tied to drug and Medi‑Cal allocations, and the state found a replacement source for about $250,000 in immunization funding. Together those changes lowered the city’s unfunded exposure from $8.5 million to roughly $2.25 million, he said.

To address the remaining amount, Wagner said the administration plans to draw down an estimated $300,000 in federal matching funds by using the city reserve and to partially not backfill certain state pass‑through programs. “By not backfilling [the Prop 99 pass‑through], that will reduce our deficit by about $1.1 million,” Wagner said, referring to a state program that delivers funds to emergency rooms and distributes much of that funding to private hospitals and UCSF/San Francisco General.

Wagner also described other targeted changes: revised county allocations reduce an apparent $700,000 Prop 36 impact by about $400,000, and the city proposes to backfill roughly 80 percent of an approximately $800,000 drug Medi‑Cal cut (about $650,000), spreading the remaining roughly $150,000 across eight provider organizations.

On redevelopment, Wagner said the state proposal would reallocate about $28.7 million in redevelopment funding to the state; his plan is to use approximately $4.9 million of the redevelopment agency’s cash balance and ask the agency to issue bonds in December to avoid short‑term project impacts, noting those bonds would be repaid with future tax increment.

Wagner warned of continued state budget uncertainty and additional pressure on local governments. He said legislation and a redevelopment resolution implementing portions of the plan would be introduced to the committee the following week.

Public commenters focused on the proposed and pending cuts to In‑Home Supportive Services (IHSS) and long‑term care. Benson Nadel, director of the long‑term care ombudsman program, said removing IHSS funding would move more people into hospitals and nursing homes and urged temporary local backfilling. “If the IHSS funding is removed through the state reductions, more individuals who need certain crucial assistance in the activities of daily living are going to be hospitalized and placed in nursing homes or residential care homes,” Nadel said. Marie Jobling of the Long Term Care Coordinating Council said more than 8,000 people could lose services and recommended setting aside funding now to respond quickly as cuts take effect. Several speakers urged the committee to reserve $5 million to backfill IHSS pending state action.

The committee heard that the administration will return with legislation and that staff expects to bring further updates as state actions unfold.