Mayor London Breed outlined a plan Friday to offset the detrimental impacts of the coronavirus crisis on the city budget by relying on voters passing a business tax reform measure and asking government workers to hold off on raises.
The $13.7 billion budget proposal Breed announced Friday for fiscal year 2020-21 is an increase from the previous fiscal year budget of $12.3 billion, in part due to an influx of federal funding to help with San Francisco’s response to the COVID-19 pandemic. The proposed budget decreases to $12.6 billion in fiscal year 2021-22.
Breed needed to close a more than $1.5 billion deficit in her proposal after the coronavirus stunted the local economy and created “a very different San Francisco,” the mayor said in her budget address to the public on Friday.
Breed said her proposal closes the shortfall “while still meeting the needs of our city.”
While the budget proposal makes a number of assumptions and there are a number of risks given the uncertain times, it closes the deficit without layoffs or major service impacts while increasing spending on mental health and homelessness.
In fact, the budget assumes a slight increase of .2 percent in the city workforce for a total of 31,853 employees.
But Breed’s budget assumes that current city workers will agree to defer their scheduled wage hikes for the next two years to save $270 million.
That includes a 3 percent raise scheduled for January that would cost The City $55 million in the first fiscal year of the proposal.
Breed warned of consequences should labor unions not agree to the deferrals.
“I want to be very clear — if the unions don’t agree to delay their raises, then we will be forced to lay people off,” Breed said. “We will be forced to cut city services.”
She said that “I don’t think this is too much to ask” and that “we all need to do our part to share in that sacrifice.”
“I’m hopeful that our labor partners will step up and work with us in the coming weeks,” Breed said.
Labor leaders, however, have resisted the plan. They argue many workers were struggling financially even before the pandemic and note they already deferred a portion of their wage increases earlier this year.
“What the administration glossed over is the sacrifice workers have made in their response to this disaster which in addition to putting their own health at risk, also saved the city $49 million by deferring wages,” Rudy Gonzalez, executive director of the San Francisco Labor Council, said after Breed’s speech.
To close the deficit, Breed also used $340 million out of a $1 billion reserve fund set aside for economic downturns and about $421 million from department cuts and savings, including by keeping vacant positions empty.
The budget also assumes receiving nearly $200 million in state funding from the Educational Revenue Augmentation Fund.
The proposal continues to fund The City’s comprehensive response to the pandemic.
“We know the federal government won’t cover everything,” Breed said. “That’s why we are putting $93 million dollars from our general fund toward supporting our continued COVID response.”
To balance the budget, Breed is counting on voters approving a business tax reform measure on the Nov. 3 ballot that would unlock tax revenues tied up in litigation over two voter-approved initiatives from 2018 that aimed to help the homeless and mentally ill.
The measure would also infuse about $300 million into the general fund.
Funding from November’s $487.5 million “Health and Recovery” bond would also contribute to Breed’s efforts around homelessness and mental health.
“We need housing. Lots of housing,” Breed said. “That’s why this budget funds 1,500 new units of supportive housing, which is part of our Homeless Recovery Plan to move 4,500 people from hotels, shelters and the street into housing in the next two years.”
The funding will also help The City make progress toward implementing Mental Health SF, a reform of San Francisco’s behavioral health system that was approved last year by the Board of Supervisors.
The plan includes adding more mental health beds as well as expanding staffing and services at The City’s Behavioral Health Access Center, where people are connected to programs. The budget also would fund piloting special teams of paramedics, clinicians and behavioral health peers to respond to non-emergency 911 or 311 calls.
“We need to shift the burden for mental health response calls away from the police,” Breed said.
Among the notable elements of Breed’s proposal is a plan to divert $120 million in law enforcement funding to pay for programs and services assisting the Black community, including about $40 million a year from the Police Department budget.
Breed and Supervisor Shamann Walton announced their intent to cut funding from the Police Department budget in June following the police killing of George Floyd in Minneapolis, which inspired calls across the nation to “defund the police.”
The money would fund things like housing, mental health, employment and education, all based on recommendations from the Human Rights Commission with input from Black residents.
“We have to listen to the people who don’t come to City Hall because they’ve known too many broken promises made by those in this building who believe they know what is best for Black people in this city,” Breed said.
The Board of Supervisor will begin review of the proposal in August, when changes are expected.
Chair of the board’s budget committee, Supervisor Sandra Fewer, said that she and her staff “will be going through the budget with a sharp focus on waste and how we can protect the most vulnerable during this time.”
“This recession is different from past recessions because on top of an economic recession, we are also dealing with a real public health human crisis, which demands tighter, more efficient budgets from city departments,” Fewer said.
This story has been updated to include additional information.