Mayor's budget director warns of multi‑year gap; health care costs near $971 million for city

San Francisco’s budget outlook presents an acute challenge for agencies that fund employee benefits, the mayor’s budget director told the Health Service Board.

Anna Dunning said the city expects to spend about $971,000,000 on health care this calendar year and that revenue growth is slow while costs — including salaries, pensions and benefits — are escalating. "We're projecting that our revenues over the next 4 years grow by about 2 or 3% every year," Dunning said, and under status‑quo spending and healthcare rate assumptions the city faces a multi‑hundred‑million‑dollar gap.

Controller Ben Rosenfield framed the problem as a lingering effect of the pandemic’s fiscal shock and the exhaustion of one‑time federal relief and reserve funds. Dunning emphasized structural drivers: persistently high downtown office vacancy rates, assessment appeals and weak transfer‑tax receipts are depressing revenue, even as long‑term cost baselines rise.

Board members pressed staff on health‑plan design choices, RFP processes and how employer groups are experiencing the changes. The board heard employer representatives from the school district and City College who described direct, programmatic impacts: SF Unified reported shifts in plan enrollment and emergent employee cost sharing for Kaiser employee‑only coverage; City College said employer health costs rose about $2.5 million from 2022 to 2024 and warned continued increases would strain its budget.

The presentations aim to inform the board’s decisions in the upcoming rates and benefits cycle and the FY25 budget discussions; staff and commissioners said they will continue close coordination with employer groups and the mayor’s office as the city reviews options to close the projected gap.