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Announcing that federal money will come to San Francisco, Mayor London Breed said, “We are not going to need to…

San Francisco’s once whopping budget deficit projection has decreased to just $22.9 million on account of the federally-approved American Rescue Plan, a new report shows.

The City was looking at a deficit as high as $653.2 million over the next two fiscal years, raising fears of potential layoffs and deep service cuts. But severe cuts are now unnecessary to bring the budget into balance.

The American Rescue Plan, signed into law earlier this month by President Joe Biden, will provide San Francisco with $636 million in one-time direct federal funding, according to The City’s updated Five-Year Financial Plan. The assistance is the primary reason why the deficit has declined so dramatically, but other factors include a modest increase in projected tax revenues.

“What a relief it is to have a federal administration in the White House that actually wants to work with cities like San Francisco instead of spending time and energy to target us,” Breed said during a Wednesday virtual discussion with U.S. Department of Labor Secretary Marty Walsh and New Orleans Mayor LaToya Cantrell about the impacts of the American Rescue Plan.

Breed said The City managed last year to “close a $1.5 billion budget deficit without laying off any city employees, but “this time around we weren’t going to be able to delay the hard decisions.”

“We were facing the reality that we were going to have to cut jobs and likely a lot of them,” Breed said. “That would have meant fewer police officers, fewer 911 dispatchers, fewer homeless outreach workers. This would have had a major impact on our city right as we were starting to look toward our recovery.”

Breed said that the American Rescue Plan “has changed all of that.”

“We are not going to need to lay off any employees,” Breed said. “Instead we are able to make investments in our recovery.”

Breed must submit a budget proposal for the next two fiscal years to the Board of Supervisors for review and adoption by June 1.

However, The City’s budget projection for the fiscal year beginning July 1, 2023 shows a deficit of $350 million as the federal stimulus funding runs out and government expenses grow at a faster rate than revenues.

“We still have to fix the ongoing deficits that exist in future years,” Breed said in a statement. “If we’re not responsible in this budget cycle, we could find ourselves right back here again in the coming years facing the same terrible choices we have been lucky to avoid this time around.”

jsabatini@sfexaminer.com

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