SF $653 million budget deficit: Mayor Breed Asks For 7.5% Budget Cuts

On Wednesday, San Francisco Mayor London Breed announced that, due to a projected $653 million budget deficit over the next two years, all departments have to come up with up to 10% in cuts across the board.

The deficit, which had been as high as $1.6 billion earlier this year due to COVID-19, is not expected to get better in the coming years. All departments were asked to cut by 7.5%, with Mayor Breed adding the other 2.5% as a contingency should the city’s budget worsen. The 7.5% cut will be on top of the 15% cut already made across all departments earlier this year than reduced the deficit by about $1 billion.

“The challenges facing our City in the months and years ahead are significant, and we have a lot of hard choices to make to get our City back on the road to recovery,” said Mayor Breed in a statement on Wednesday. “Closing this deficit will not be easy, and it’s going to require tough choices and real tradeoffs.”

While COVID-19 has been largely been blamed, the city has also seen major shifts in funds and taxes due to an exodus of residents from the city due to high home and rental prices, Bay Area tech companies leaving the area to go out of state, previous deficit rollovers like SF schools already being $169 million in debt, the added cost of COVID-19 health measures, a rising minimum wage, and the city expanding controversial programs such as a pilot universal basic income program.

Major spending in the 2010s, major cuts in the 2020s

“San Francisco was riding high off of tech, tax money from expensive rentals, and being one of the hottest cities in America to move to,” Bay Area-based developer advisor John Norris explained to the Globe. “But the bottom fell out in 2020 and was wavering for a few years beforehand. Companies and people are leaving, which is destroying the tax base. The city has extra costs with the pandemic, and they are still approving new programs despite the Mayor begging for more cuts.”

“They honestly got too used to it and thought the good times would last forever. But now they’re stuck with a lot of expensive programs and mandates stemming from that tech bump and are falling hard. Other cities, like Los Angeles, are facing equally bad budget deficits, but their population has remained relatively stable and there hasn’t been a lot of business pullouts. But cities in the Bay Area are getting that extra loss of tax money. The Mayor asked for a contingency for a reason. They don’t know how many more people will move out or how many more companies will leave next year.”

“There’s at least light at the end of the tunnel in Central, Southern, Inland, and far Northern California. The Bay Area, not so much. And San Francisco proved that once again Wednesday.”

COVID-19 spending will remain the priority with all city budgets, with Mayor Breed noting that homelessness and mental health spending should also not be cut if possible. With regards to COVID-19 spending, experts have said that the logic behind it is not only to help quell the pandemic, but to repurpose that money for other projects in the department after the pandemic is over.

While Mayor Breed plans to release a rebalanced budget in early January, department heads don’t have to hand in their list of cuts until February 22nd. The new budget, in total, is due by June 1, 2021 for submittal to the Board of Supervisors.