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DPH outlines mayor's budget instructions, warns of $936M two-year city deficit and $17M CBO cuts
Summary
Deputy finance staff and DPH budget leads told the commission the city's five-year outlook shows a roughly $936 million two-year deficit and instructed departments to identify ongoing general-fund reductions; DPH plans $50 million in division-level savings and a $17 million CBO reduction to phase in for FY 26-27.
Deputy Finance Officer Emily Gibbs and DPH budget staff on Jan. 5 presented the mayor's budget instructions and the department's planning approach as the city faces a multi-year fiscal challenge.
Gibbs summarized the mayor's guidance and the five-year financial projection, saying the city's fiscal outlook is "challenging." Slides from the mayor's office show a projected $936,000,000 two‑year deficit, with roughly $262,700,000 in the first year of the projection (FY 26‑27). The chief remedy called for by the mayor's office is $400,000,000 in ongoing general‑fund savings across the city through service restructures and targeted program eliminations.
DPH-level targets and process
Drew (DPH budget lead) described the department's internal approach: divisions were instructed to identify $50,000,000 in ongoing general‑fund savings or new revenue proposals for the behavioral health budget planning process, with an explicit direction of "no net new FTEs" in the savings proposals. Separately, the department has identified a $17,000,000 reduction in contracted community-based organization (CBO) spending to be implemented as part of the FY 26‑27 budget.
The department said it conducted a program-by-program review of more than 300 contracted CBO programs (totaling roughly $215,000,000 of spend under review) and used seven guideposts to inform decisions; the $17,000,000 figure represents about 8% of spend in the reviewed pool.
Timeline and community engagement
Drew said the department intends to publish a draft list of proposed CBO reductions on Jan. 16, hold community meetings and accept comments, provide a second commission hearing on Feb. 2, accept comments through Feb. 4, and publish a finalized list on March 6. The DPH budget submission to the mayor's office is due Feb. 23. Staff emphasized transparency and community engagement as part of the process.
Operational notes
Presenters also highlighted personnel and cost drivers: DPH's annual budget is nearly $3.4 billion with about $800 million in general-fund support and almost 7,700 budgeted FTEs. The department noted growth in salary and benefit costs citywide and local impacts from federal and state policy changes. Staff said some rate standardization and CalAIM-related changes are expected to yield about $10,000,000 in savings in FY 26‑27 as providers are aligned to state reimbursement rates over time.
Commissioner reaction
Commissioners pressed for clarity on how data about client preferences and program refusals would be captured and shared, and asked that staff forward any public comments or updated material to commissioners if the comment period extended past the meeting. The commission also noted that, because of an absent quorum for the Finance & Planning Committee, the consent calendar tied to that committee was tabled.
