San Francisco emergency rooms and substance abuse treatment programs will take the bulk of the $2.25 million hit to direct service programs if all goes according to Mayor Gavin Newsom's proposed budget balancing plan.

The city needs to close a smaller than expected budget shortfall for the remainder of this fiscal year and Newsom released his proposal Friday in a letter to the President of the Board of Supervisors explaining how he thinks the city should close the $26.5 million hole created by state budget cuts.

The mayor and the board anticipated cuts from the state and had $18 million in a reserve fund to cover it. The supervisors expected Newsom to propose how to make up the rest — $8.5 million.

But, Newsom's letter explained, the city recently found out the state is cutting Med-Cal dollars from internal administrative layoffs rather than reducing payments to counties, meaning the city has a smaller task to balance their books.

Newsom was down to just $2.25 million in state cuts the city should not refill with its $18 million reserve.

The biggest blow is to San Francisco's hospital emergency rooms, where Newsom proposes not restoring any of the $1.1 million in state cuts. Based on past year estimates, the reduction will impact University of California physicians working at San Francisco General Hospital's emergency room and community physicians at all the other emergency rooms, according to notes from the controller's office.

"While these hospitals provide critical services to San Franciscans, the city has not in past years restored direct funding cuts of this nature, and is not in a position to assume financial responsibility for backfilling what is essentially a direct pass-through program," Newsom wrote in the letter.

Newsom believes current service levels can be continued by restoring just $1.3 of $2 million in slashes to substance abuse treatment from the state's Proposition 36 program. Other substance abuse programs will suffer too as Newsom will not fill $150,000 (19 percent) of substance abuse treatment services cut by the state through the Med-Cal program.

Newsom wrote the city would be eligible for $300,000 in federal stimulus money if it restored some of the state's cuts to funding for maternal, child and adolescent health programs and dental disease prevention for children.

The mid-year cuts will not go into effect for 45 days, in which time the Board of Supervisors can review the proposal and hold hearings. The board can approve the plan or amend it if a super majority of supervisors agree to do so.