For months, Mayor London Breed has been ringing the alarm about an $800 million deficit and asking city departments to plan for budget cuts. But instead of cutting overall spending, Breed’s latest budget proposal calls for a record $15.9 billion outlay next year, a nearly 9% climb from this year’s budget.
The surprising jump, announced Friday, is largely driven by increases in the city’s enterprise departments, such as the airport and Public Utilities Commission, which earn much of their own revenue by charging customers for services. However, Breed’s team was also able to avoid shrinking the general fund—the city’s main source of discretionary spending—through a combination of cuts, reduced hiring, and leveraging outside funding and rainy day reserves.
“We closed the deficit by spending less than we had planned to spend,” mayoral spokesperson Jeff Cretan said.
Broadly speaking, the mayor’s plan would preserve core city functions—like police and street sweeping. As a result, Breed would trim services seen as nonessential, such as the outreach arms of some city programs, which educate the public but do not provide a direct service.
Breed’s recommendations would push more funding for public safety agencies, while other city departments would see cuts, setting up what may become a fraught and contentious battle as the November election nears and the mayor fights to keep her job. The plan is subject to approval by the Board of Supervisors.
Under Breed’s plan, the police department, sheriff, district attorney, firefighters, and emergency management agency would receive a roughly $100 million increase in funding, a move that comes as she seeks to present herself as a savior of San Francisco’s public safety employees and a crime fighter.
The budget will also sustain investments in the city’s downtown neighborhood, which has been hit hard by work-from-home trends and questions over its economic vitality. Funding will keep flowing toward departments like Public Works, which deploys cleaning crews to power-wash sidewalks.
In a statement, Breed said the city was “making real progress” on its budget.
“In this budget, we made the tough decisions to close our deficit and those are never easy, but we also made the right decision to prioritize critical city services our residents expect and deserve,” she said. “By investing in public safety, families, our economy, and improving the conditions on our streets, we will keep moving our city forward.”
A multitude of factors are contributing to the city’s squeeze in finances, including weak performance in revenue streams like property and business taxes. San Francisco’s pocketbook is still suffering from difficulties in the real estate market, office vacancies that have remained stubbornly high, and high interest rates that have slowed down industries like construction.
Breed’s budget avoided general fund cuts by pulling back on hiring and contracts and dipping into $122 million in reserves. The budget also includes a one-time Medi-Cal reimbursement totaling over $100 million, according to the Mayor’s Office. About $300 million of the deficit is getting resolved through cuts. The budget also axes some new projects or programs, instead opting to fold that funding into core operations.
Breed’s administration also struck deals with the city’s unions, offering pay bumps of 13% to tens of thousands of city workers over the next three years. A large portion of the general fund—60%—is devoted to employee salaries and benefits as health care and retirement costs have risen, according to city officials.
That will come at the cost of hiring, however. The budget includes funding for salaries and benefits for 33,285 employees, a small reduction from this year. Breed’s proposal would shut down recruitment almost across the board, except for frontline workers like police, nurses and dispatchers. No city employees would be laid off under the mayor’s plan.
Other cuts will involve reducing funding for certain community-based contracts.
City officials said core programming that generally provides food or housing would be kept intact, while lower-priority services like workforce development and outreach initiatives would be slashed.
For example, the city takes in about $10 million each year in soda tax revenue and has historically used about $3 million of that funding for nutrition and health education. Breed is proposing cutting those education efforts, and instead, use that money to save programs that provide people with vouchers to buy healthy food at farmers’ markets and deliver meals to senior citizens.
Breed’s plan is likely to spur intense debate and discussion this summer and comes as the mayor—along with two supervisors and another two City Hall outsiders—seek the city’s top job in November.
Breed’s challengers are already casting her as having squandered years of bright economic growth—and a moderate versus progressive fight is almost certain in the coming weeks over at least some of the mayor’s spending priorities.
Last year, Breed was able to plug up a similarly large deficit through the use of Covid-related reimbursements and reserve funds. But by October, Breed warned that cuts were coming and directed city departments to make 10% reductions to their budgets.
San Francisco’s supervisors will propose their own tweaks to the mayor’s budget proposal before sending it back to her for a final signature by the end of July.