The conclusion of endless public hearings and late closed-door budget negotiations should be met with a collective sigh of relief.
But this year, the respite might be brief.
Despite closing a massive deficit as they finalized a $14.6 billion budget, city leaders punted on making harsh cuts this year, leaving the coming years looking especially grim.
The Board of Supervisors budget committee capped off a month of negotiations with Mayor London Breed last week, closing a $780 million deficit over the next two years without slashing critical city services.
Assuming the budget is approved by the full Board of Supervisors this month and signed by Breed, the deal includes sizable investments in public safety and efforts to revitalize downtown, despite the souring economy that has wrought fiscal constraints on The City.
“This is a relatively status quo budget. All things considered, and if I am at a high level to take exception to this budget, it’s actually that we’re stalling harder decisions that will be compounded for a future date,” Board of Supervisors President Aaron Peskin told The Examiner last month. “Next year, and the year after, are going to be significantly tougher.”
By sparing the hatchet, legislators and Breed are, in essence, betting on the future of San Francisco. The City’s structural deficit is expected to exceed $1 billion before the end of the decade — unless it can turn its economy around.
“We’re in this precarious situation,” Jeff Cretan, a spokesperson for Breed, told The Examiner. “We are trying to both address the deficit while also supporting the city as it’s still coming back from a pandemic and the economic repercussions of that. There’s got to be a balance in your decision making.”
Cutting services while trying to restore a beleaguered downtown could backfire and perpetuate its decline, Cretan argued.
“The hope is that in the long run, San Francisco is a city that does bounce and is an economic center,” Cretan said.
Budget season began in earnest earlier this year when Breed ordered department heads to plan for cuts of 5%. Her final proposal, released on May 31, came in at $14.6 billion, an increase of a bit more than 4% over last year’s budget.
The highlights included increased funding for the police department and continued funding for The City’s multiple community ambassador programs.
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It closed a $780 million two-year deficit — the largest The City has faced since the Great Recession — through myriad measures rather than one sweeping cut.
The budget pulls significantly from the reserves The City has built up since the last recession, including $90 million that was previously allocated but unspent and $76 million in new reserve spending.
The budget also postpones a previously planned $30 million increase in investments in capital projects, such as repairs to roofs and HVAC systems in public buildings.
This is not to say that there were not very real consequences at stake in this year’s budget.
Breed’s initial proposal would have slashed early child-care funding to fund efforts like food assistance, prompting child-care providers and parents to pack the Board of Supervisors chambers and voice their disapproval.
Ultimately, legislators and Breed struck a deal allowing Breed to use up to $30 million of the interest accumulated in The City’s dedicated child-care fund. That compromise allowed Breed to cover her priorities but ensured the fund would not be mined for other purposes in the future.
Breed also proposed redirecting some of the Our City, Our Home fund earmarked for young adult and family housing into an expansion of The City’s network of emergency homeless shelters.
As with the child-care proposal, advocates flooded City Hall to object to Breed’s plan. And also as with the child-care proposal, supervisors limited Breed to spending the interest in the Our City, Our Home account for homeless and mental health services.
But as far as budgets go, this one was hammered out with relatively little acrimony. Even with homeless funding, Cretan pointed out that there was broad agreement that both shelter and housing needed to be funded; the outstanding question was how to make it happen.
“That’s a normal disagreement to have,” Cretan said.
But come next year, things may not be so normal. Because if this year was bad, it’s only downhill from here.
Breed’s office projects a deficit of $745.5 million in 2025, $991.6 million in 2026, and $1.2 billion in 2027.
