The San Francisco Municipal Transportation Agency could lay off as many as 1,226 full-time employees next fiscal year, representing 22 percent of the transit agency’s entire workforce, in order to close a budget deficit that seems increasingly insurmountable without dramatic action.
Many of the workers most at risk will be the same people who have served on the frontlines during the coronavirus pandemic as bus and train operators, maintenance crews and engineers.
“It tears me apart to think that now those people are at risk of losing their jobs, and to lose your job in San Francisco in this economy means jeopardizing your ability to pay rent or your mortgage,” SFMTA Director of Transportation Jeffrey Tumlin said. “This is unconscionable. That this is even possible in a country like the United States of America baffles me.”
Agency leadership will present the latest budget projections to the Board of Directors Tuesday, the first update since April when the pandemic was believed to be more of a short-term phenomenon buoyed by a national strategy to eradicate the virus.
The picture is staggering.
SFMTA projects a $68 million deficit in the current fiscal year, which runs through next June, and a $168 million deficit in the following year, despite significant efforts to cut costs during the pandemic.
Tumlin called the current financial situation “far worse” than even the worst case scenarios entertained back in April when the board signed off on a suite of cost-cutting measures to respond to pandemic-related revenue losses.
Since then, it has reduced spending by nearly $118 million for the current fiscal year by cutting almost all overtime hours, keeping nearly 1,000 job vacancies open, cutting non-essential contracts and nixing other material and supply expenses that are deemed non-mission critical.
It also used $373.8 million in CARES Act funding to balance last year and this year’s budget. That money is set to run out by the end of 2020.
A jarring projected shortfall still remains over the next two-year budget cycle, and absent federal assistance specifically for transit — which is viewed as less likely since the Democrats did not succeed in taking over Congress in the November election— workforce reductions are “likely necessary” to keep the agency afloat.
SFMTA forecasts anywhere from 989 to 1,226 full-time jobs will be needed to close the estimated deficit in fiscal year 2021 – 2022.
Other scenarios could require layoffs to start as early as this fiscal year, possibly putting 226 and 504 jobs on the chopping block in order to prepare for — and pehraps limit or avoid altogether — additional layoffs in the future.
Workforce cuts of this magnitude would significantly compromise Muni’s ability to operate.
According to Tumlin, there would undoubtedly be a “massive decrease” in Muni service, well beyond the current 30 percent reduction.
“I don’t know yet how much more we’d have to do in cuts but it will be substantial,” Tumlin said. “The future of Muni absent outside support looks very grim, which means the future of San Francisco’s economy looks very grim.”
There are two paths to close a budget deficit: cut costs or raise revenues.
With farebox revenue still down by roughly 93 percent, parking revenue plateauing at roughly 50 percent of pre-pandemic levels and reductions to the agency’s General Fund contribution and sales tax revenues, funding through the traditional channels is unlikely to move the needle enough to close the gap.
Simultaneously, the agency can’t author a tax ballot measure to raise funds until the 2022 election.
That leaves cutting costs, where already, Tumlin says, the agency has done almost everything it can to create savings outside of labor, including “exhausting” potential spending reductions in the capital budget that could be operationalized instead.
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Though this approach could lead to some short-term savings, it leads to dramatic long-term harm for Muni.
“This is dangerous because it means eating your seed corn,” Tumlin said of shifting too many dollars away from the capital budget to the operating budget. “One of the reasons why Muni is unreliable is we have decades of experience deferring maintenance in order to hold onto operations.”
He used the example of aging rail cars, which not only don’t work well, but also require “a massive amount of maintenance that I don’t have a staff for,” and referred to “locked” contracts such as the Central Subway that can’t be paused to fund operations.
Roger Marenco, president of the San Francisco Transit Workers Union Local 250-A, said he has been working with his members to compile a list of possible solutions to avoid and/or delay layoffs of Muni operators.
Communication between SFMTA leadership and his union has been improving, Marenco said. He learned of the possible layoffs just before Thanksgiving, all agency staff were invited to a meeting to discuss the budget Monday and representatives from stakeholders plan to meet Wednesday to brainstorm possible mitigation strategies.
Ideas from TWU 250-A informally include unpaid furloughs, a more extensive hiring freeze and early retirement incentives for eligible staff, among others.
For his part, Tumlin said partnership and transparency with the labor union will be crucial to surviving the coming hardship.
Apart from the traditional ways to impact a budget, there’s use of reserve funds.
SFMTA currently has about $126 million total across its reserves this year, having already zeroed out the board reserve funds in their entirety to mitigate losses this fiscal year.
The deficit stands to exceed all the remaining reserves, and Tumlin says gutting those dollars would fail to close the gap and “result in a catastrophic financial event” down the line “which would force us to lay off far more workers,”
As such, the agency is recommending using 30 percent and 35 percent of the reserves in the current and coming fiscal years, respectively, in order to ensure there’s enough money in the bank to last through this budget cycle and give the agency a chance to watch revenues recover.
“The best strategy now is to use remaining tools to buy time,” a staff presentation that will be shown Tuesday to the board says.
While the SFMTA Board of Directors will hear this presentation Tuesday, it will not take any action.
Over the coming weeks, a series of workshops and conversations will take place between staff, stakeholders and the board before directors vote in early February.
But any solution will be painful, not just for SFMTA and its workers but for the entirety of San Francisco.
“If this were a first world nation, we would invest in transit’s recovery as critical prerequisites for larger urban economic recovery, and that would mean, first and foremost, operating funds to get us through the gap in order to put transit back on its feet again,” Tumlin said.
There, Marenco agrees.
“Without public transit operators, nobody goes to work, school, shopping, doctor’s office, church, nothing happens. That right there is a scary and terrifying domino effect on everybody,” Marenco said.
