Even with a recovering San Francisco economy, The City’s operating costs will “steadily outpace” revenue increases for years to come, according to a new report released Tuesday by Mayor Ed Lee.
The gap between revenues and The City’s spending will increase from next fiscal year’s projected $283 million deficit to $829 million in five years, according to the first ever five-year financial plan.
The five-year plan was mandated by 2009’s Proposition A, a measure placed on the ballot by the Board of Supervisors and then-Mayor Gavin Newsom as a way to improve The City’s budget process by projecting deficits in years to come and not just the short-term shortfall.
The plan advises The City to reduce employee costs and to look for ways to boost revenues, noting that there are two elections — November 2012 and November 2014 — when a tax increase could be approved with a simple majority of the voters.
It’s not surprising that employee-related costs are one of the main reasons for The City’s fast-increasing spending.
“Employee pension costs, wages and other benefit growth are the single largest driver of cost growth and imbalance between revenues and expenditures, growing by $648, or 32 percent, during the five years of the plan,” the report said. Benefits costs will increase by 62 percent in five years, while city revenues will grow by 11 percent, or $416 million.
“These are obviously very serious and significant challenges,” Board of Supervisors President David Chiu said. The plan offers a number of “ambitious but achievable” strategies on “how we can get our fiscal house in order,” Chiu said.
Among them, the plan calls for a reduction in employees’ pension, health and wages.
“There is no way around the fact that successful pension and benefits reform must be a cornerstone of any plan to bring The City’s budget back into structural balance,” Lee said.
The City’s first-ever five-year financial plan has clear guidelines to solve the budget imbalance:
Restructure debt and capital programs
Control employee wage and benefit costs
Seek additional tax, fee and other revenue
Limit the use of one-time revenue
Establish goals for expenditure reductions in city departments
Source: Five Year Financial Plan for Fiscal Years 2011-2012 through 2015-2016