SF to protect ‘safety net’ services despite departments having to reduce spending

San Francisco’s largest city department, which provides a “safety net” for The City’s most vulnerable residents, will cut spending without impacting services in the coming years, health officials said Tuesday.

At the same time, the Department of Public Health will move forward with a more than $350 million new electronic health record system and advance capital projects totaling hundreds of millions of dollars.

Surging city revenue in recent years has helped the $2 billion-per-year department increase services and add employees to its system of care that includes Zuckerberg San Francisco General Hospital, community health clinics, medical respite services for the homeless and psychiatric services.

But that growth doesn’t come without limits — especially as The City’s revenue growth shows signs of cooling. The nation’s economic expansion has hit a near-record-setting eight years without a recession, and there is a projected city budget deficit that needs to be closed.

In one of Mayor Ed Lee’s final acts in office before dying unexpectedly Dec. 12, he asked all city departments to submit their budget proposals to his office by Feb. 21 with a 2.5 percent cumulative cut, or commensurate revenue increase, in each of the next two fiscal years. Lee also told them not to add any more employees.

Department of Public Health Director Barbara Garcia, center, flanked by Acting Mayor London Breed, left, and Supervisor Jane Kim, speaks at the unveiling the expansion of the Medical Respite and Sobering Center on Monday. (Jessica Christian/S.F. Examiner)

For the Public Health Department, that means its budget will continue to grow, just not as much. The department will have to reduce its spending growth by $16.5 million in the fiscal year beginning July 1, and in the subsequent year by $33.1 million, according to budget details provided at the Health Commission’s first budget hearing Tuesday.

Greg Wagner, chief financial officer for the Public Health Department, said “it’s a big number.”

“We can tackle it with a sound approach to our financial management,” he said.

That means no service cuts. “We are not talking about making cuts to services — unless there is some dramatic change in the economy or the federal environment,” Wagner said.

The department is also planning for the future. After the next two fiscal years, its growth in revenue from the general fund, projected between 5 to 8 percent, will grow at 3.5 percent — instead of about $60 million annually, about $30 million.

“We can move the needle without a lot of pain if we can simply limit the growth in our costs,” Wagner said, noting a 1 percent increase in department-wide revenues generates $15 million.

Health Commissioner David Pating said, “I would hear this not as cuts, but as just being more prudent about what new commitments we would take on.”

Employee costs are the biggest driver of spending growth. In fact, over the next four years, government employee costs alone increase by $539 million, which is greater than the growth in total projected revenues.

“That is the reason for the instruction about no [new employees],” Wagner said, adding, “The City is at a historic high in the number of [employees], as is the Health Department.”

As the Public Health Department manages its spending growth, it is also installing a new electronic health records system that will cost more than $350 million in the next decade. The Board of Supervisors approved earlier this month a contract with Epic City Government, LLC, to advance the project, which is meant to improve medical care, create more accountability for services and optimize charge-capture from Medicaid and other health insurers.

Department of Public Health Director Barbara Garcia said in a report to the commission that the records system “will improve the patient experience for San Francisco Health Network’s more than 100,000 patients per year, who visit us more than 550,000 times annually.”

The department is also overseeing during the next eight years $800 million in approved capital projects, such as the renovation of buildings at the General Hospital campus, where the department plans relocate to from its Grove Street location and other leased space near City Hall.

As The City was overseen by the late mayor for the past seven years, there is some level of uncertainty in the budget process, which is has just gotten underway and will set the spending priorities for the next two years.

After Lee’s death, Board of Supervisors President London Breed became acting mayor under the City Charter. The board could vote at the earliest on Jan. 9 to make Breed interim mayor, or appoint someone else. The board could also take no action, leaving Breed serving the dual roles.

In any event, voters will decide on June 5 who to elect as mayor, four days after the mayor must submit a budget proposal to the board for review and adoption.

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