Facing a more than $650 million deficit over the next two fiscal years, Mayor London Breed told department heads Wednesday to come up with 7.5 percent budget cuts plus an additional 2.5 percent contingency should the financial picture worsen.
The projected shortfall is attributable to slower than expected growth in revenues from a local economy hit hard by COVID-19, rising employee salaries and benefits, and additional costs associated with responding to the pandemic.
“The challenges facing our City in the months and years ahead are significant, and we have a lot of hard choices to make to get our City back on the road to recovery,” Breed said in a statement. “Closing this deficit will not be easy, and it’s going to require tough choices and real tradeoffs.”
Breed directed department heads to come up with 7.5 percent in ongoing reductions in spending and a 2.5 percent contingency cut to help close the projected $653.2 million deficit over the next two fiscal years.
Department heads have until Feb. 22 to submit their proposals to the Mayor’s Office. Breed will then work with them to submit by June 1 a two-year city budget proposal to the Board of Supervisors for review and adoption.
Breed told department heads they should prioritize responding to the COVID-19 pandemic, supporting homelessness and mental health investments and helping small businesses. They were also told to view any cuts from an equity perspective.
San Francisco’s $13.6 billion budget for the current fiscal year was adopted after The City had to close a more than $1 billion deficit over two years. Despite the challenging shortfall, layoffs and severe service cuts were avoided. Breed, however, clashed with the Board of Supervisors over its decision to fund raises for city workers in the budget after she had asked labor unions to negotiate concessions. Only police and fire unions took her up on the offer.
The grim financial toll COVID-19 has taken on the economy is acutely felt by the San Francisco Municipal Transportation Agency, which has already said it is facing the prospect of laying off more than 1,000 workers next fiscal year, some 20 percent of its workforce, due to a projected deficit of at least $68 million this fiscal year and $168 million next fiscal year.
The San Francisco Chamber of Commerce wants the Board of Supervisors to prioritize funding in The City’s budget for the MTA, warning that “this massive deficit will cripple the existing Muni system and impede San Francisco’s overall economic recovery.”
“This essential need must be reflected in our city budget, and its integrity prioritized before expansion or introduction of other city programs,” said the letter sent by chamber CEO Rodney Fong, noting many employees rely on public transit for their commute. “As we cannot count on outside resources, we urge you to make the tough decisions needed to allocate funds in the 2021 budget for the continued operations of SFMTA.”
Meanwhile, The City faces a budget deficit of $115.9 million in the current fiscal year, the City Controller’s Office estimated in a November report.
The Mayor has also asked departments to prepare proposals to reduce the current fiscal year’s shortfall, a recent budget analyst report said.
“The Mayor’s plan to rebalance the FY 2020-21 budget is expected to be finalized in January,” the report said.