Controller outlines San Francisco's reserve balances and rules, flags FEMA and Laguna Honda risks

City Controller Ben Rosenfield told the Budget & Appropriations Committee that San Francisco maintains multiple general-fund reserves with distinct purposes and withdrawal rules and provided current balances and mechanics for each account.

Rosenfield described four reserve categories: two multi-year economic-stabilization accounts (the charter-established rainy day reserve and a budget-stabilization reserve established under Proposition A), a short-term general reserve for unanticipated in-year needs, one-time purpose accounts that match non-recurring revenue to non-recurring spending, and a set of specialty reserves for specific risks (for example, FEMA audit risk and a fiscal-cliff reserve intended to smooth the loss of federal/state stimulus funding). He said the rainy day reserve balance is just over $114,000,000 and that the general reserve currently holds about $43,800,000.

Rosenfield noted that the rainy day reserve is governed by a charter formula (deposits triggered when general revenue growth exceeds 5%) and cannot be suspended without a voter amendment, while the budget stabilization and general-reserve policies were adopted by two-thirds vote and can be suspended by ordinance at the board's discretion.

On federal-aid and public-health risk: Rosenfield said the city has set aside roughly $81,300,000 against federal and state revenue-audit risk (including FEMA) because the city has budgeted hundreds of millions in federal reimbursements; those funds could be subject to future audit disallowances. He also highlighted a public-health-revenue risk tied to Laguna Honda, where federal reimbursement uncertainty could cost roughly $16,000,000 per month if continuity of payment or certification is not maintained.

On the fiscal-cliff reserve: Rosenfield described a fiscal-cliff account with a current balance of about $229,800,000 that was designed to soften the budget impact as federal and state stimulus dollars decline over the coming multi-year forecast. He said combined rainy-day and budget-stabilization reserves are capped at 10% of general-fund revenue, and that the two reserves together currently cover a portion of projected recession-risk exposure.

Supervisors asked about mechanics and timing: several supervisors pressed Rosenfield about when projected gaps would materialize (he said deficits appear in years three and four of the five-year forecast, roughly FY2024-25 and FY2025-26 in the presentation), how FEMA reimbursements are flowing and the potential timeline for Laguna Honda certification issues. Rosenfield said FEMA reimbursements have been claimed and will continue to be claimed over multiple years but stressed that audit disallowances can appear long after initial expenditures and that reserves are intended to hedge that uncertainty.

Outcome: After questions and no public callers on item 3, Chair Ronan moved to file the hearing; the committee voted to file the item.