SFHSS warns of growing claims and prepares for mayor's budget cuts

Theresa Tan, SFHSS chief financial and affordability officer, reported through November 2025 that high medical claims are driving a projected fiscal year end decrease in the employee benefit trust of $38.1 million. She said pharmacy rebates of about $22.5 million and $3.0 million in interest income are expected to partially offset costs.

Tan also explained mayoral budget instructions for FY2026-27 and FY2027-28: departments must distinguish mandated core services from discretionary programs and identify proposals that align with city priorities. The mayor's office asked departments to identify $400 million in citywide general fund reductions and to restructure around current staffing; filling vacancies will generally require mayoral approval.

Tan described SFHSS's three main funds: the $1.3 billion health benefit trust, a general fund (about $12.3 million approved budget), and a healthcare sustainability fund (approved budget $5.7 million) funded by a $6 per member per month charge. She noted the sustainability fund currently projects a $1.2 million net use with an estimated ending balance of $5.2 million and that HSS will prioritize core services and examine transfers to align with fund intent.

Board members asked whether vacancies are frozen and whether Mayoral Office actions could impose punitive cuts; staff said no punitive communication has been received and that the department will submit proposals to the finance committee and the full board in January and February as part of the normal budget timeline.

Next steps: SFHSS will present a budget proposal to the finance committee on January 20 and to the full board on February 12; the mayor's proposed balanced budget will go to the Board of Supervisors in June.