Budget committee receives six‑month status report, files hearing after Controller flags FEMA and state revenue risks

San Francisco’s Budget and Appropriation Committee on (date not specified in record) received a six‑month budget status report from the Controller’s Office and voted unanimously to file the hearing.

Michelle Alersma of the Controller’s Office told the committee the office is "projecting an improvement in the current year ending balance of about $35,000,000," which reduces the previously projected shortfall for the budget period (the transcript did not provide a clear consolidated shortfall figure). She said that additional weaknesses in citywide revenues—about $36,000,000 in projected property tax refunds tied to assessment appeals and roughly $48,000,000 in business tax weakness from litigation and prior‑year refunds—are partially offset by departmental improvements and stronger revenues at the Department of Public Health.

"We're projecting an improvement ... of about $35,000,000," Alersma said. "A lot of numbers on this page ... these are citywide revenues. ... At the bottom line, an additional $75,000,000 in projected weakness from these citywide revenue sources." She also reported some improvement in transfer tax collections after the assessor issued and collected demand letters.

Alersma highlighted several key risks that could change the forecast. She said new FEMA Region 9 guidance issued last October limits reimbursement for stays in SIP hotels to 20 days and raises questions about pre‑positioning vacant rooms; the city is communicating with FEMA, the state and Cal OES and has not yet changed its FEMA revenue forecast. "The main one being that stays in SIP hotels would be limited to 20 days," she said. She added the city has submitted large federal claims related to the COVID pandemic and expects audit work and potential disallowances to continue for years.

She described unresolved assessment appeals as a second risk: the assessment appeals board is still hearing 2021 and some 2022 cases with no 2023 decisions yet, so the Controller’s Office is projecting likely outcomes until actual decisions are available. A third risk cited was the state‑level "excess ERAF" issue: Alersma said the current‑year excess ERAF looks manageable but the governor has proposed changing the law on ERAF allocation (including charter school treatment), which could affect county revenues going forward.

On reserves, Alersma said the city’s economic stabilization reserves balance is "about $390,000,000," roughly "just over 6% of general fund revenue," short of the 10% target. She said the approved budget includes planned uses of reserves (transcribed amounts indicated planned uses in the current year and FY25) and that a federal and state emergency grant disallowance reserve of roughly $40,000,000 is available to help cover potential FEMA disallowances.

Chair Supervisor Connie Chan asked for further detail on reserves, ERAF and transfer tax projections, including whether the Controller’s Office had assumed the outcome of any pending voter measure. Alersma replied the office does not assume the passage of any policy or voter‑approved measure that has not yet been approved, specifically noting Prop C was not assumed in the transfer tax projection.

After brief public comment, Chair Chan moved to file the hearing; the motion was seconded and the committee recorded five ayes. The hearing was filed with no further committee action. Alersma said the office will continue to update forecasts and intends to provide a nine‑month update in mid‑May.

The committee took no additional votes on budget adjustments at the meeting.