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Politics & Policy

Facing $800M deficit, San Francisco mayor orders steep budget cuts

San Francisco Mayor London Breed looks on during a press conference at City Hall.
San Francisco Mayor London Breed is asking departments to tighten their belts as budget officials forecast large deficits over the next two years. | Source: Michaela Vatcheva for The Standard

San Francisco Mayor London Breed is asking departments to plan for budget cuts of 10% in the upcoming fiscal year to help close a colossal deficit.

City budget officials have projected a deficit of $800 million over the next two fiscal years, with spending expected to significantly outpace revenue. The shortfall reflects increased spending alongside high office vacancies, stagnating tax revenue, increasing disputes over business taxes and dwindling federal aid tied to the pandemic, according to the Mayor’s Office.

Breed is directing departments to propose 10% reduction in spending from the city’s General Fund and an additional 5% for “contingency,” according to a summary released by the Mayor’s Office Tuesday.

The city’s estimated $800 million deficit includes shortfalls of $245 million in the upcoming fiscal year, which ends in 2025, followed by $554 million in the following year.

The deficit is largely caused by ballooning expenditures that include a $500 million increase in salaries and benefits over a four-year period, according to the Mayor’s Office. Inflation and interest rates also appear to be a factor, with the costs of capital spending, real estate and debt expected to grow.

At the same time, the city’s revenues are projected to grow by just 2% to 3% over the next four years. By contrast, spending is expected to grow by 17% over the same period.

The budget instructions follow an unusual round of midyear budget cuts that came to light in October. On Dec. 1, the mayor detailed a number of program cuts and other budget adjustments amounting to about $75 million.

Line items on the chopping block included vacant positions in various departments and cuts to specific programs, some of which were added by the Board of Supervisors in the last budget cycle.