Mayor Ed Lee will put his stamp on the largest component of San Francisco’s budget next year when most of The City’s labor contracts come up for renegotiation.
When unions representing nurses, gardeners, engineers, lawyers, deputy sheriffs, public works employees and others sit down for contract talks, the bottom line will affect city finances for years to come.
As the contracts for more than 24,000 workers come up for discussion, The City faces years in which government costs are expected to increase at a faster pace than government revenue. The most recent deficit projection for the next fiscal year is $350 million.
The union negotiations will likely be Lee’s biggest challenge since being elected, testing his political mettle along with his personal style as a consensus builder.
“In light of the impacts we expect from the state and federal government, the upcoming labor negotiations represent an important opportunity to bring The City’s finances into long-term balance,” Lee’s spokeswoman Christine Falvey said.
Fiscally conservative Supervisor Sean Elsbernd regards these forthcoming talks as “a golden opportunity” for The City to reduce its labor costs.
City workers’ salary and fringe benefits are forecast to increase from $2 billion in fiscal year 2010-11 to $2.6 billion in fiscal year 2015-16, according to a five-year financial report from the City Controller’s Office in June.
That projection assumed that city workers would receive annual cost-of-living increases based on the Consumer Price Index. But even allowing those 3 percent increases could become a sticking point in these tough economic times.
“There is no money to give any raises,” Elsbernd said. “Significant raises beyond CPI are next to impossible.” And even allowing for CPI increases is a “maybe,” he added.
In November, Lee worked with labor unions to pass the Proposition C pension measure, which is expected to reduce city costs by $1 billion over the next decade. Falvey said those savings will move The City “part of the way there.”
“Increasing labor costs, especially health and retirement benefits, are a major driver of budget shortfalls and the mayor will be working closely with labor partners to once again close that gap,” Falvey said. “All options for controlling costs should be considered, including changing outdated work rules that reduce efficiency and productivity.”
A more recent deficit projection will be issued this month along with Lee’s instructions to city departments about how much they need to trim from their budgets for next fiscal year.
Gabriel Metcalf, executive director of the public-policy think tank San Francisco Planning and Urban Research, said negotiating the labor contracts “will be one of his biggest challenges” since being elected, and will put his consensus-based approach to the test.
“This is the first round of labor negotiations to take place since pension reform passed, so it’s going to be an interesting dynamic,” Metcalf said. “There’s a lot of good will between labor and the mayor coming out of Prop. C.”
Firefighters and police officers are under contract until June 2015.
Opportunity to trim the budget
– $3B: Annual value of city’s labor contracts
– 24,000: City employees covered by contracts up for negotiation
– 2: Contracts not up for negotiation — police and fire contracts will last through June 2015
– $350M: Budget deficit projection for next year
– $2B: Cost of salary and fringe benefits in FY 2010-11
– $2.6B: Projected cost of salary and fringe benefits in FY 2015-16 assuming Consumer Price Index increases of about 3 percent
Source: City Controller’s Office