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Breed asks for spending cuts up to 6 percent over the next two years

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Mayor London Breed has asked city department heads to submit potential spending cuts of up to 6 percent. (Kevin N. Hume/S.F. Examiner)

Mayor London Breed has asked city departments to submit plans to cut spending by up to 6 percent over the next two years to help close The City’s projected budget deficit.

Government spending is outpacing revenue growth, resulting in a projected $107.4 million budget deficit in the next fiscal year beginning July 1, and $163.4 million in the following fiscal year.

In five years, the deficit is expected to exceed $640 million. The City plans to release its five-year financial plan later this week.

To view the Five-Year Financial Plan released Friday click here.

To close the projected deficit over the next two fiscal years, Breed told city departments last month to come up with budget proposals with 2 percent cuts in each of the next two fiscal years, along with a 1 percent “contingency savings” in each of the two fiscal years, for a total of 6 percent. The 1 percent “contingency cut” proposal is “due to the uncertainty of labor negotiations and city revenues.”

The cuts, which are supposed to be ongoing savings, would draw down the five-year deficit projection.

“We must make responsible choices in the short-term because while we continue to enjoy good economic times and strong revenue growth, we can’t ignore the risks and uncertainty the future holds,” Breed said in a statement to the San Francisco Examiner Wednesday.

Departments must submit their budget proposals to the Mayor’s Office by Feb. 21. Breed will then submit a city budget proposal by June 1 to the Board of Supervisors for review and adoption.

The deficit projections for the upcoming two fiscal years are “the result of strong year-over-year local tax revenue growth in the short-term, offset by expenditure growth largely related to rising employee costs (pension being the biggest factor), increasing voter mandated commitments through baselines and set-asides, and growing required contributions to support existing entitlement services,” according to Dec. 21 budget instructions issued to city departments by the Mayor’s Office and the City Controller’s Office.

The deficit widens in subsequent years as “the City’s revenue growth projections slow in outer years and are outpaced by expenditure growth nearly three-to-one, making it unsustainable for the City’s expenditures to continue to grow at its current rate.”

San Francisco operates on a two-year budget cycle, but must approve a new two-year budget annually, a process that begins with the mayoral budget instructions. The current fiscal year budget is $11 billion.

In what will be her first city budget proposal as mayor, Breed told city departments last month she can balance the budget without severe measures like layoffs or hiring freezes, but they must not create new positions because of the labor costs. Government jobs have increased in recent years.

However, the instructions said, “new positions may be considered by the Mayor’s Office if they align with Mayoral priorities.”

“My priorities are to reduce homelessness by providing housing and shelter, address behavioral health needs, build more housing, and clean up our streets and make them safer for our residents,” Breed said in the statement.

Also included in the budget instructions are new initiatives around accountability and equity.

Breed told city departments that they will “select key initiatives or programs to develop more detailed accountability and implementation plans, titled ‘Accountability and Equitable Outcome Plans.’” These plans, developed with the City Controller’s Office, will detail outcomes the programs should achieve, timelines for achieving certain goals and ways they can be monitored.

She also told departments to submit budget proposals “that seek to attain equitable outcomes across the City, focusing on communities most impacted by economic and social inequities. And she said not to propose any fees that would “disproportionately impact low income communities and communities of color.”

“I instructed departments to focus on two priorities in this budget: equity and accountability,” Breed said in the statement. “I want to make sure we are helping those residents of our City who have the greatest needs, and that we are spending City funds effectively and efficiently.”

jsabatini@sfexaminer.com

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