Mayor Ed Lee divided up a smaller than expected pot of new revenue for city government on Thursday, backing street tree maintenance but cutting homeless services and jeopardizing what may be City College of San Francisco’s best chance to rebound.
His decisions came with sacrifices that have only further stoked a budget fight at City Hall.
In some ways, the mayor and the Board of Supervisors brought the hard decisions on themselves when they balanced the current two-year budget based on assumed tax revenue from a ballot measure. Voters resoundingly rejected the sales tax hike, which would have funded annually $50 million in homeless services and $100 million in transportation.
Adding to the tensions, the mayor ordered city departments Thursday to slow the growth of city government following several years of rapid expansion in The City budget as the local economy soared out of a recession due to the tech boom.
The mayor directed every city department to cut spending by three percent and stop hiring new positions for the fiscal year beginning July 1, as The City’s top financial advisors say revenues are slowing down. This comes after the mayor grew the workforce by 4.1 percent for the current year for a total of 30,750 government employees.
Though the mayor-backed sales tax increase failed, The City has a surge of new revenue from another voter-approved tax hike on sales of high-end properties, called Proposition W, as well as from Medi-cal waiver funding.
Using this pot of money, the mayor announced he would fund half of the new homeless services that were previously budgeted and also provide funding for nonprofits to provide legal defense for undocumented immigrants in response to threats of mass deportation made by President-elect Donald Trump.
The most contentious part of the the mayor’s plan is partially funding free tuition for CCSF students.
In all, the mayor announced $8.5 million in spending changes for the current fiscal year and $39.85 million in each of the next two fiscal years.
“I am proud of the balanced thoughtful approach we have taken that embraces true San Francisco values,” the mayor said in a letter Thursday.
But Supervisor Mark Farrell criticized the plan for not prioritizing homeless services and instead delivering a 50 percent cut. That reduction means less funding for mental health services and no funding for more than four Navigation Centers.
“I simply don’t agree with cutting our homeless budget in order to fund free City College,” Farrell said. “I view getting our homeless off the street as one of our city’s biggest priorities, and believe that’s where we should be spending our dollars.”
The mayor will also implement voter-approved Proposition E, which requires The City to take care of street trees instead of private property owners.
Supervisor Aaron Peskin, however, said The City promised voters to pay for a free CCSF along with street trees and when voters rejected the sales tax hike, they rejected what it was supposed to fund. Peskin said that while he appreciated seeing the mayor keep the “promise” of Prop. E, “this can’t be a half a promise or a quarter of a promise.”
In the wake of an accreditation crisis, the college has struggled to increase its enrollment. CCSF lost a third of its students since 2012 and would have lost the state funding that came with them if legislators had not designated additional funds for the struggling institution.
But when those funds end next year, the school will lose $35 million out of an overall budget of some $200 million.
Leading up to November’s election, supporters rallied behind Prop. W under the pretense that it would make tuition free for CCSF. But the Mayor’s Office notes that using Prop. W funds for CCSF was never legally mandated in the ballot.
The mayor’s funding plan for CCSF falls well under the $13 million backers of the effort say is needed annually. The mayor’s plan is to spend just $500,000 in the current fiscal year to hire staff and improve a college database, and $4.25 million on the college in each of the next two fiscal years.
The mayor’s funding represents a phased-in approach to making the college free — or a hybrid free system, rather than free tuition for all. The mayor said he is convening an advisory group to develop a plan within 90 days to “assist” students next school year.
“Free City College could be a very important part of building our enrollment and maintaining our programs,” CCSF Board of Trustees President Rafael Mandelman said. “If we can’t rebuild our enrollment, we’re facing a pretty radical downsizing of the college.”
The mayor’s revised spending for the current year doesn’t require approval by the Board of Supervisors, although members could counter with legislation allocating funding — which some already are.
Meanwhile, the mayor’s announced funding plans for subsequent years would require approval by the board through the usual budget process. Still, the plan indicates what the mayor is committed to funding.
The first test for the mayor’s budget plan is expected to come as early as next week when the Board of Supervisors is scheduled to vote on a $9 million allocation proposed by Supervisor Jane Kim for the current fiscal year to make CCSF free next school year.
Kim, who placed Prop. W on the ballot to fund free CCSF, said the mayor’s plan falls short.
“We can and we should keep our promise to the voters,” Kim said.
The San Francisco Labor Council has called for a Dec. 13 rally to support Kim’s proposal. “Thank you for your pledge to fund Free City with Prop W monies — don’t abandon that promise. Send $9 million to to the Free City College Initiative NOW to seed the fund for Fall 2017!” the call for action states.
Meanwhile, Supervisor John Avalos plans to introduce legislation Tuesday that would lay out other funding options and set up the board for another budget battle with the mayor, which he won’t be present for after his term ends next month.
Avalos said the mayor should make cuts elsewhere in the budget.
“We have to have an approach that looks at some other things that we have to forgo in the budget, not things that have huge support in the public,” Avalos said. “We can’t take homeless services from City College.”
While the failed sales tax hike has city officials bickering over new spending, The City is being forced to make cuts elsewhere as government spending outpaces revenues.
The City projects a deficit of $119 million next fiscal year and $283 million in the subsequent fiscal year, driven largely from labor costs (both pension and wages).
All labor contracts, except police and fire, are currently up for negotiation for next fiscal year and the deficit assumes a wage increase based on the consumer price index.
The mayor’s plan for next fiscal year includes using $27 million of Prop. W’s property transfer tax revenues to help fund an increase in homeless services at $19.85 million, street and tree care at $12.75 million, the free CCSF effort at $4.25 million and legal nonprofit services at $3 million.
The total commitment is $39.85 million. The additional money comes from from medi-cal waiver related funding.
The mayor must submit his balanced city budget proposal to the Board of Supervisors for approval by June 1.
The mayor’s budget plan does not address the loss of the $100 million for transit. He has assembled a task force to find other funding options. There is no election scheduled until 2018.