Big state windfall lands in S.F.’s lap
Mayor and supes to decide how to spend $181 million
San Francisco is getting an unexpected $415 million windfall, and the mayor and supervisors already have plenty of ideas on how they might use it.
More than half the money, which is coming from excess revenue in a county education fund, must go to budget reserves, the Municipal Transportation Agency, public libraries, tree maintenance, public schools and child care and youth services under rules set by the City Charter.
Left over will be $181 million that Mayor London Breed and the Board of Supervisors may spend.
“This is an extraordinary event,” said city Controller Ben Rosenfield. “I’ve worked on 20
budgets here ... and this is the most significant windfall I’ve seen.”
Breed said she wants to use the money to meet the goals of Proposition C, the November ballot measure, which she opposed, that would raise $300 million in taxes from the city’s largest businesses to fund homeless services. The measure passed by 61 percent, but is facing possible legal challenges that could hold up the money for months or even years.
“We can get to work now on meeting the goals of Prop. C while we deal with the legal uncertainty of our voter-approved funding on homelessness,” Breed said in a statement. “The voters have been clear that this is a top priority for our city, and I am committed to investing in effective solutions that will help people to move off the streets and into housing.”
The sudden influx of cash is coming from the Educational Revenue Augmentation Fund, or ERAF, a state program that shifts a portion of local property taxes to public school systems in each county. When county auditors determine the fund has enough money to meet the minimum state funding requirements for its public schools and community colleges, the remaining funds are returned to the local governments, with few restrictions on how they’re spent. ERAF money never leaves the county.
This is the first time San Francisco is receiving excess ERAF funds, Rosenfield said, and it is an exceptionally large amount. The money — the exact figure is $414.7 million — includes excess ERAF for both the previous and current fiscal year. The controller’s office detected the extra money as it was closing the books on the last fiscal year.
Since excess ERAF funds are typically indicative of high property tax values and a low student enrollment — two factors San Francisco has had for years — Rosenfield said his office is working with the state controller’s office to determine if the city is owed excess ERAF funds from previous years. In San Francisco, the property tax roll has grown by 20 percent in the last two years, Rosenfield said.
Four counties typically receive excess ERAF each year: Marin, Mono, Napa and San Mateo, according to the Legislative Analyst’s Office. Santa Clara also received ERAF funds last year. Still, the amount the counties got last year pales in comparison to how much San Francisco is getting.
San Mateo County received $178 million, the highest amount in the state, while Mono County received less than $1 million, the lowest.
The windfall comes at an opportune time for Breed, who felt political backlash before the November election for refusing to support Prop. C, which she assailed as wellintentioned but ill-conceived. During the campaign, she said the city should first complete an ongoing audit of what it is already spending on homelessness before effectively doubling that figure.
The measure ended up passing with more than the legally required 50 percent approval — but it did not get the two-thirds it needed to avoid legal challenges from parties that contend it must meet that threshold. Breed introduced an ordinance last week to help ensure the measure becomes law.
Now that the city suddenly has an extra $181 million to spend, however, Breed said she wants to use the bulk of the money to jump-start her ambitious goal of adding 1,000 shelter beds by the end of 2020. She is also interested in using the money to conduct a performance review of the city’s existing homelessness programming.
Breed said the city must treat the money as a one-time funding source, instead of using it for long-term and ongoing commitments.
“This funding is new to the city, and due to legislative risk, we simply don’t know if the funding will be there as ongoing support in the upcoming years or at what level it might be available, so we should be cautious in making long-term, ongoing commitments,” she said. “That means making one-time investments or shortterm funding commitments that serve as a bridge to more sustainable funding sources like Prop. C that may be implemented soon.”
Allocating the money will be one of the first tasks of the new Board of Supervisors, which will take shape right after New Year’s.
Supervisor Malia Cohen, current board president and chair of the Budget and Finance Committee, who will term out in January, said a “process to develop a spending plan will begin immediately.”
“It will take an appropriation ordinance to allocate the funds,” she said. “I will start the process this month; however, it won’t conclude until January or February.”
On Thursday, as many of the board members were still processing the news of the sudden flood of cash, some had similar goals as Breed on how they would like to see the money spent.
Supervisor Catherine Stefani said she will “push for smart, targeted investments in shelter, mental health and substance abuse beds, and public safety.”
Supervisor Sandra Lee Fewer similarly said she would like to see the money go toward small-site acquisitions to prevent eviction and preserve affordable housing and create more shelter beds.
Aside from spending the money on housing and homelessness initiatives, Supervisors Hillary Ronen and Norman Yee also proposed using the money to help cut San Francisco’s reliance on Pacific Gas and Electric Co. and to help meet some of the goals of June’s Universal Childcare for All ballot initiative, which is wrapped up in a lawsuit.
Overall, Supervisor Aaron Peskin said, using the money to help alleviate the city’s homelessness crisis seems to be at the top of many of his colleagues’ lists.
“There seems to be an emerging consensus that this should be what we’re all euphemistically calling the ‘Prop. C bridge money,’ ” he said. “It is an extraordinary amount of money, and a lot of good can be done with it.”