Mayor London Breed is expected to direct city department heads to cut their spending to make up for a projected budget deficit caused by the coronavirus pandemic and shutdown. (Kevin N. Hume/S.F. Examiner)

Mayor London Breed is expected to direct city department heads to cut their spending to make up for a projected budget deficit caused by the coronavirus pandemic and shutdown. (Kevin N. Hume/S.F. Examiner)

SF will need to make ‘tough choices’ to close a $1.7B two-year budget deficit

Breed warns cuts will impact city services

San Francisco is projected to have a $1.7 billion budget deficit over the next two fiscal years due to the impacts of the coronavirus pandemic and will need to make budget cuts, city officials announced Wednesday.

Mayor London Breed will tell department heads next week how much they need to reduce their spending.

“We are in for a long, hard road,” Breed said in a statement. “This is going to require a lot of tough choices and creative solutions.”

During a press conference Wednesday, Breed said that closing the budget deficit will mean “hard decisions, hard cuts, impacts on services.”

Breed will direct department heads next week to come up with cuts to solve for the most recent budget deficit projections, according to the Mayor’s Office. City officials have not yet said by what percentage they will have to cut their budgets.

Before the pandemic hit, departments were told to come up with 7 percent in cuts over the next two years to a $419.5 million general fund deficit and they submitted their budget proposals by Feb. 21.

But now they have to go back to the drawing board.

“The City’s financial outlook has taken a sharp turn for the worse, and while our financial preparation in recent years will soften the blow, extremely hard choices lie ahead,” City Controller Ben Rosenfield said in a statement.

The City must close a $250 million shortfall in the current fiscal year and a projected shortfall of $1.5 billion over the next two fiscal years, according to the latest budget projections released Wednesday by city officials.

Kelly Kirkpatrick, Breed’s budget director, said Wednesday that when it comes to closing the $250 million deficit in the current fiscal year, which ends June 30, they don’t expect to make service cuts or layoffs but instead look for savings elsewhere, such as by pausing any programs that haven’t started yet.

The pandemic has also changed the normal schedule by which the mayor would submit a proposed two-year city budget to the Board of Supervisors for review and adoption.

Ordinarily, Breed would submit the city budget proposal to the board for review by June 1. But with the impacts of the pandemic, The City has postponed that submission until Aug. 1. The board will review the budget proposal and approve it by Sept. 30, under the new timeline.

Breed will still submit an interim city budget to the board by June 1.

The City has spent $375 million as part of its emergency response to COVID-19, of which a portion will be reimbursed by the state and federal governments. The deficit projections do not assume future emergency response costs.

The coronavirus pandemic has dealt a significant blow to the economy and it remains unclear when it will begin to recover, although the latest budget assumptions “assume a slow recovery beginning in late 2020.”

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