Courtesy photoFinancial forecasts for next fiscal year show San Francisco will face a $263 billion budget deficit -- $87 billion less than previously expected.

San Francisco budget falls short, but in a good way

You know the economy is still in the can when city officials see a $263 million budget deficit as good news.

The latest projections from Mayor Ed Lee’s office show next fiscal year’s budgetary bloodshed won’t be as bad as originally thought. Budget forecasters had originally estimated a $350 million deficit.

An unexpected increase in projected revenue from sources such as property and sales taxes — a possible indicator of a slowly improving economy — contributed to the better fiscal picture. Voter approvals for a $248 million bond to fix streets and a new pension deal with city workers also helped.

But state and federal cuts could foul up those rosier projections. Kate Howard, San Francisco’s incoming budget director set to replace Rick Wilson, said The City expects to know more about the impact of the state’s so-called
“trigger cuts” on Dec. 15.

Budgeters plan to increase The City’s general fund reserve amount, which Lee said would provide flexibility in the face of potential state and federal cuts.

The mayor said he was “encouraged” by the pension-reform savings and increased revenues, but noted that The City needs to be prepared for the worst.

The mayor has asked city department heads to make 5 percent across-the-board cuts from each of their budgets, along with 2½ percent contingency cuts over the course of the next two fiscal years. Lee wants department leaders to avoid one-time cuts and instead make lasting changes to curb long-term budget growth in order to sidestep city worker layoffs and reductions in service.

“While it won’t be easy, these reductions are achievable,” Lee said.

Budget planners said the long-term future of The City’s nearly $7 billion total budget heavily depends on negotiation of 27 more union contracts for city workers — essentially every other major labor group besides those that represent police and firefighters.

The City is looking at a $375 million deficit in 2013-14 largely because of mounting labor costs, according to a five-year financial report recently released by the City Controller’s Office. Budgeters say worker salaries make

up about $3 billion of the total city budget.

San Francisco’s budget seems large compared to similarly sized cities, and that’s partly because it’s also a county with additional services and costs such as operating a jail, for example.

dschreiber@sfexaminer.com

 

Projected deficits

$263M Fiscal year 2012-13

$375M Fiscal year 2014-15

5 percent Mayor’s request for cuts from each city department

Source: Mayor’s budget office

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