San Francisco’s fiscal year ends each year on June 30 and begins anew on July 1, so we are now in the final stages of ratifying The City’s new budget. Every citizen of our city should understand how the budget works, but very few do. If you want to learn more about how San Francisco’s budget works and what it means for our new mayor, this column is for you.
Budget Process Explanation
Although the Board of Supervisors has some oversight and must ultimately approve it, the mayor largely controls how the budget is developed. There are three reasons for this. First, the Mayor drives the lengthy budget preparation process from December through June, during which the Mayor’s Office works with each department to craft its portion of the budget as part of the total budget the mayor submits to the legislature on June 1. Second, the Controller’s Office and the Office of Public Policy and Finance, which both work with the Mayor’s Office, are far more robustly staffed than the Budget Legislative Analyst’s Office, which works with the Board of Supervisors; hence in practice the defining fiscal frameworks and analyses come mainly from the Mayor’s Office. Third, the budget approval process (which is defined in the City Charter) gives the mayor considerable leverage over the Board of Supervisors.
The budget approval process consists of two votes by the Board of Supervisors between July 15 and August 1. At the first stage, amendments may be proposed by any supervisor and added to the budget by simple majority vote, while at the second stage the board votes the revised total budget up or down. The approved budget then goes to the mayor, who has 10 days to sign the budget as a whole or to veto any portion and return the amended budget to the board. In order for any of the mayor’s vetoes to be overturned the board needs a two-thirds majority, i.e. eight out of 11 supervisors.
The upshot of this process is the mayor needs only four supervisors to block any unwanted changes out of a budget that the mayor has largely defined. Given the current balance of power, this makes it impossible for the Board of Supervisors to mount any successful big budget fights. Instead, the board uses the approval process to cut small amounts (targeted this year at roughly $50 million out of an $11 billion total budget) and then engage in an “add-back” process where the monies that were cut are reallocated to specific items the supervisors deem a priority.
Additional Key Facts
The budget must be balanced, i.e. forecasted revenues must be expected to meet or exceed budgeted expenses.
Each year The City adopts a budget covering two years:
The City engages in long-term planning in three key ways:
(A side note about the Five Year Financial Plan and associated documents: these are the source materials I used for the description of the long-term structural deficits in the “Follow the Money” column published March 18. Overall, the documents are excellent but budget wonks should note that since they use cash flow accounting rather than accrual accounting, they recognize expenses only when they are paid, not when the obligation is incurred. This hinders planning for long-term commitments like pensions and healthcare, where cash is paid many years after the obligation is incurred.)
Key Elements of Mayor Farrell’s Proposed Budget
Mark Farrell took office as a caretaker mayor when the Budget Preparation process was almost one third done. He was in no position to make dramatic changes. To position himself for a potential 2019 run (especially in case either of the more progressive candidates, Mark Leno or Jane Kim, had won) the obvious strategy was to propose a budget with small ticket changes that would be noticeable and popular. That is exactly what he did.
Some of the notable proposed changes in Mayor Farrell’s proposed budget are as follows:
Together, the annual impact of the above programs equals approximately 1 percent of the proposed $11 billion budget.
A Unique Opportunity for Incoming Mayor Breed
London Breed takes office on or around July 11. Let’s suppose that like many incoming mayors, she is ambitious and wants to make big changes. Typically, the first year is when a new mayor is in the best position to pass an ambitious agenda. But given the unusual election timing where she will run again in November next year, in this case she has a unique opportunity to use her first year to set her up for her second budget cycle, the one that will commence immediately after next year’s election.
Instead of trying to make big changes one year before having to run for reelection, Breed can use her first year to lay the analytic and personnel groundwork by commissioning studies to tee up her issues, directing departments to measure and communicate what she wants to emphasize, and appointing the right people to key positions. Meanwhile, her first budget can be crafted as a response to the Farrell budget she has been handed: anything she likes about his budget she can campaign on and seek to expand; anything she doesn’t like she can campaign against and seek to change.
A lot can happen in a year and a half, but right now it looks like the potent combination of popularity, incumbency, a strong economy (notwithstanding our cost of living challenges), and the opportunity to define the debate could put London Breed in position to win reelection with a commanding margin. If that happens, she will be in an exceptionally strong position to use the budget in the following fiscal year (for 2020-2021) to enact bold and sweeping changes.
Patrick Wolff lives in the Sunset District. Email him at firstname.lastname@example.org.