If one were forced to choose a time to stare down the barrel of a nearly $1 billion budget deficit, Mayor London Breed would probably not choose this week.
Or this year, for that matter.
On Friday, Breed is expected to release a budget that slashes spending in city departments. She needs to close a deficit amounting to about $789 million over the next two fiscal years as the city faces daunting questions over the future of its downtown neighborhood and vacant office buildings after a long stretch of sunny economic trends, a booming technology sector and hot real estate market.
It all comes at a less-than-convenient time for Breed, who could easily be booted from her job, according to the latest polling figures.
Details about Breed’s plan are still up in the air, but her opponents in the November race are ready to pounce.
“Do San Franciscans believe they have gotten $2.5 billion worth of extra spending given the conditions on our streets?” said former Supervisor Mark Farrell, one of Breed’s moderate opponents, referring to the city’s homelessness spending. “I think not.”
Nonprofit leader Daniel Lurie, another mayoral challenger, accused Breed of wasting “a decade of boom years.”
Lurie added, “That’s what happens when budgets are designed around political allegiances rather than achieving outcomes for San Franciscans.”
Last year, despite signs of growing deficits, the mayor passed a record $14.6 billion budget and patched up the shortfall through Covid-related reimbursements and reserve funds. By October, however, Breed warned that the city was quickly falling into the red, ordering midyear budget cuts.
Ted Egan, the city’s chief economist, said that this year’s budget crisis is of a very different nature than the one San Francisco faced during the Great Recession.
Though he remains confident about the future of San Francisco’s economy, work-from-home trends have remained stubbornly high, Egan said. That contributes to a troublesome new reality for the city as empty offices and a slow real estate market threaten tax revenues.
“I don’t think this city has ever been in this kind of situation,” said Egan in an interview. “We are not seeing revenue weakness because of a recession. Or even an economic slowdown. We’re seeing it because there’s been a sudden shift in the demand for office work, which has led to weaknesses in our two major revenue streams, property tax and business tax.”
This year, Breed’s task comes with heightened political risks. Polling shows she is unpopular, with voters laying much of the blame for the city’s problems at the mayor’s feet.
“It is a tough needle to thread,” said Larry Gerston, professor emeritus of political science at San Jose State University, about the mayor’s political position. “There is no easy way to do it.”
Gerston said Breed could make a number of moves to cut spending while preserving her reelection prospects. The obvious one, he said, is keeping funding for police and firefighters intact, considering how important public safety has become in recent years.
Breed could also try to push some of the more painful cuts into the second year, according to Gerston. He added that the messaging behind the budget is also crucial, and Breed could benefit from conveying that there are other cities, like Los Angeles, that are also having to tighten their belts.
Another obstacle for Breed is that two of her opponents in the mayor’s race—Supervisors Ahsha Safaí and Aaron Peskin—will play a role in getting the budget approved by the Board of Supervisors. In an often-contentious series of meetings, the board amends and approves the budget, sending it back to Breed for her signature.
Safaí has pressed the mayor to keep millions of dollars in funding for the Department of Children, Youth and Their Families intact. “If we’re really saying we’re about public safety, then we can’t skip and ignore programs like that,” he said in an interview.
Peskin’s campaign said the board president has a “track record” of leading the city through uncertain economic times.
“He believes we can preserve spending that helps those most in need by focusing on fiscally responsible savings that will enable the city to do more with less,” wrote spokesperson Kaitlyn Conway.
Jeff Cretan, Breed’s spokesperson, said in an interview that the mayor has already made progress on the budget. Cretan pointed to labor agreements with thousands of city employees that may have avoided painful strikes along with a focus on public safety that Breed’s office says has helped clamp down on crime.
“What matters is the outcomes,” said Cretan. “What the people of San Francisco care about is what she does.”
Others say Breed could use the deficit to her advantage. As the old adage goes: “Never let a good crisis go to waste.”
Longtime political consultant Jim Ross said the likely protection of public safety budgets by Breed might help paint her as the candidate who is clamping down on crime. (While public safety remains one of the top issues of the mayor’s race, data shows that crime has been trending downward.)
“I think it’s a huge opportunity for her,” said Ross. “It gives her an opportunity to constructively show that she’s a leader on that issue.” He also described the city’s deficits as relatively manageable, considering the city’s annual budget is around $14 billion.
“This isn’t ‘She has to cut a third of the city’s budget,” he said. Ross, who worked under former Mayor Frank Jordan, said the multiple years of budget cuts at the time made it hard for the city’s leader.
“This is one to two years,” said Ross. “She’ll be okay.”