Mayor Daniel Lurie released his nearly $16 billion budget proposal Friday, showcasing his master plan to close San Francisco’s $782 million deficit.
Many services will keep their funding at the current levels: the San Francisco Police Department, the public defender’s office, the district attorney’s office, street cleaning crews, and homelessness services. Other city agencies will likely lose funding.
Lurie wants to cut roughly $185 million in contracts and nonprofit spending over two years, though the specifics of those reductions were not immediately available. He has also proposed eliminating approximately 1,400 positions from the city’s job rolls, mostly vacancies and retirements. More than 100 of those cuts could come from layoffs.
Under Lurie’s proposal, the city’s total budget amounts to $15.9 billion in fiscal 2026 and $16.3 billion in fiscal 2027.
In an address Friday morning, Lurie said the cuts are needed to right-size San Francisco’s habit of spending beyond its means, starting with the tech boom in the 2010s and continuing into the pandemic.
“Here’s the bottom line: We have to stop spending more than we can afford,” Lurie said. “The era of soaring city budgets and deteriorating street conditions is over.”
Despite Lurie’s talk of fiscal austerity, the majority of city departments would receive a budget bump under his proposal. The Department of Emergency Management, home of the 911 dispatch center, gets a 15% increase, the largest in the city. Budgets for the Juvenile Probation Department, the City Treasurer and Tax Collector and the Board of Supervisors would also shoot up by over 10%.
Discounting so-called enterprise departments, or agencies that are largely self-sufficient with independent budget processes, Human Services is set to pull in the largest overall windfall, with an $81 million increase. The police, fire, and sheriff’s departments would each get a more than $22 million bump.
But 21 departments do lose out in Lurie’s proposal: the Homelessness and Supportive Housing department is set to lose nearly $104 million; the Economic and Workforce Development Department faces a $57 million cut; and the Department of Public Works could lose $26 million trim.
Other departments that are set to lose large shares of their budget include the Ethics Commission, Human Rights Commission, and the Arts Commission.
Lurie closed the massive two-year deficit in his budget proposal partially through cuts but also by factoring in better-than-expected estimates for revenue in coming years.
Despite delivering a balanced budget proposal for the next two years and taking an estimated $300 million chunk out of the long-term deficit, the mayor acknowledged that the structural deficit will persist in the following years. The mayor’s office confirmed that in balancing the budget, it tapped into $40 million in reserve funds to pay for new equipment across city departments.
While other departments are facing layoffs, the administrative budget of the mayor’s office will get a bump due to negotiated wage increases, officials confirmed.
The mayor’s proposal kicks off negotiations with the Board of Supervisors before the final budget deadline of July 31. Public hearings will begin next month, allowing departments to request more funding.
“As we move through the board’s budget process in the month of June, it is clear that we have no good options,” said Supervisor Connie Chan. “As budget chair, I will work with Mayor Lurie and my colleagues on the Board of Supervisors to invest our public dollars in protecting San Franciscans and our values.”
Uncertain times
The financial threats to the city’s coffers are twofold.
San Francisco has struggled more than many U.S. cities in its economic recovery from the Covid pandemic. Downtown office vacancies skyrocketed at the start of the pandemic, throwing a critical component of the city’s economy into disarray. Those vacancies remain above 30%.
Meanwhile, President Donald Trump has threatened to withhold billions of dollars in federal funding to San Francisco and other sanctuary cities that don’t comply with his hard-line immigration policies. The president’s budget plans include gutting tens of millions of dollars for low-income housing and homeless-prevention strategies. Republicans in Congress have also proposed cuts to programs for low-income residents, such as Medicaid, which would similarly impact city revenue.
The city has responded with federal lawsuits to block those efforts and protect funding streams for critical services.
Also at risk is hundreds of millions of dollars in Federal Emergency Management Agency funding that the city used for emergency shelters for homeless people during the height of the pandemic. City officials now fear they will not be reimbursed for those funds.
Lurie confirmed Friday that the federal agency had notified the city of plans to claw back $140 million in funding it has already provided.
The city also receives $1 billion in federal funding each year for Medicaid and housing, among other services. But there are increasing worries among city leaders that the money will not come through under Trump’s administration. Lurie is therefore proposing a $400 million reserve fund as a way to “deal with that uncertainty.”
When asked what will happen if those safety funds are not sufficient, Lurie told reporters at City Hall that he hopes the city’s economic recovery, predicated on increased tax revenue, will cover for the missing funds.
Critics decry budget cuts
Socking that money away, however, has put more pressure on an already buckled budget.
One of Lurie’s most controversial proposals is to redirect large portions of the Our City, Our Home fund, which voters approved via a 2018 ballot measure. The money was intended to boost transitional housing for younger residents, along with mental health services and additional shelter beds. Lurie instead wants to broaden the pool of San Franciscans the fund would help, raising concerns that there will be less money for the youth whom the ballot measure was intended to serve.
The proposal, which is likely to meet fierce opposition from supporters of homelessness nonprofits, would require a supermajority of the Board of Supervisors to approve.
Swift condemnation from local unions came as Lurie was in the middle of his budget address. In addition to criticizing proposed layoffs, labor groups decried tech companies such as Airbnb that have sued the city to recoup tax money they allege was overpaid.
Lurie declined to comment on the Airbnb lawsuit but said he welcomes more businesses to San Francisco.
“We want businesses here so that we can bring that tax revenue, and we can bring jobs back to San Francisco,” Lurie said.
“This is ridiculous. [Lurie] said this is a new era of accountability,” Anya Worley-Ziegmann of the People’s Budget Coalition, which advocates for nonprofits, community groups and unions, said Friday at City Hall. “Where’s the transparency? Where’s the budget?”
Service Employees International Union Local 1021 President Theresa Rutherford, whose union represents many city healthcare workers, said in a statement she was “deeply disappointed” in Lurie’s budget plans.
Rudy Gonzalez of the San Francisco Building & Construction Trades Council said, “Layoffs are totally unnecessary. We can find the funds to save jobs and uphold San Francisco values.”
In response to the unions’ criticism, Lurie said, “I take no joy in this. I was elected to make hard choices.”
Aside from union leaders, some city officials were dismayed by the proposed budget cuts. Patrick Ford, executive director of the San Francisco Ethics Commission, which monitors campaign finance issues and other matters, said despite Lurie’s promises on the campaign trail to fully fund the department, up to four positions in the 28-person city agency could be affected by the mayor’s layoff plans.
“Based on what I know so far,” Ford said, “the rhetoric and reality are pretty different when it comes to the mayor’s support for ethics.”