Controller projects $209.3M general-fund balance but transfer taxes and FEMA timing cut into outlook

The San Francisco Controller’s Office reported on May 24 that the city projects an ending general‑fund balance of $209.3 million for fiscal year 2022–23, a $36.3 million improvement from the March forecast but still leaving a projected two‑year shortfall of about $744 million. Carol Lou, citywide revenue manager, presented the nine‑month forecast to the Board of Supervisors’ Budget & Appropriations Committee.

Lou said two main factors are driving the forecast changes. First, the Department of Public Health is facing a revenue shortfall at Laguna Honda Hospital due to a declining patient census; that gap will be covered this year by a $6.9 million public‑health management reserve. Second, savings in the Human Services Agency are being partly offset by $26 million set aside for repairs and demobilization costs at SIP hotels.

The presentation highlighted sharp revenue shifts in several major lines. Real‑property transfer tax revenues have fallen dramatically from last year’s unusually high levels: transfer tax receipts closed at about $520 million the prior year but are now forecast at roughly $174 million, a decline Lou described as the result of fewer residential and commercial transactions. Lou characterized transfer tax as a “highly volatile” revenue source and said the budget office’s forecast assumes a gradual move toward a lower steady state over the next several years.

Other tax and revenue items varied: hotel tax and some airport concession transfers are performing better than expected as hospitality rebounds, while business tax receipts and commercial rents transfers are weaker than budgeted. Lou also said interest income is expected to be significantly higher as rising interest rates boost the city’s pooled‑fund earnings.

A major timing issue in the forecast involves FEMA reimbursements. The city originally budgeted $243 million in FEMA reimbursements for the year but now expects only about $23.4 million in the current fiscal year; Lou attributed the $219.6 million gap primarily to FEMA’s shifting administrative priorities and a reordering of claims processing, and said the city still expects to receive additional FEMA funds in future years.

Supervisors pressed staff on details and scope. Board members clarified that some programs — including homelessness and early‑childcare funds — are not included in the general‑fund table Lou presented but appear on other funds tables. Budget Director Anna Dunning told the committee that much of the Human Services Agency underspending reflects vacancies and unfilled staff positions across departments, producing personnel savings this year.

Floor action: the committee voted to continue Item 1 to the call of the chair. Chair Connie Chan’s motion to continue passed on a roll‑call vote with five ayes.

What’s next: the nine‑month report will inform the mayor’s budget and supervisors as they prepare for upcoming budget decisions; staff told the committee more precise figures (for items such as excess ERAF) will be known when year‑end actuals are available in August and September.