Supes dip into reserves to close deficit
San Francisco Mayor London Breed expressed “deep concerns” about the spending plan passed by a Board of Supervisors committee early Thursday morning, saying their proposal to pull $59 million from reserves will further destabilize a city already in economic turmoil.
But the negotiations around how City Hall will close a $1.5 billion budget shortfall, largely caused by the coronavirus pandemic, are far from over. Lurking in the background is the possibility that if voters do not approve a number of tax measures in November, the city will be forced to cut several hundred million dollars more, likely through layoffs and service cuts.
“This is going to go on for a while,” said Supervisor Rafael Mandelman, a member of the board’s Budget and Appropriations Committee. “It is just one act in a multiact drama.”
At issue is a precariously balanced $13.7 billion budget, proposed by Breed in July, which was based on some key assumptions. Among them: that the city’s labor unions would agree to defer $250 million in raises over the next two years, that voters would pass a sweeping business tax overhaul in November, and that the federal government would continue to reimburse San Francisco for at least part of its pandemic response.
But after weeks of negotiations and a tense standoff between the mayor and the city’s labor unions, the board’s Budget and Appropriations Committee agreed around 2 a.m. Thursday to use $59 million from business tax reserves to fund a portion of their raises, among other things.
While city workers will receive their first round of 3% raises, or $36.9 million, it is unclear what will happen in the next fiscal year. The 3% bump that will show up in city’s workers paychecks in December includes a costofliving increase. The remaining $22 million will go to causes such as nonprofit worker emergency relief and investments in programs aimed at
helping the Black community.
The board also cut $50 million from the general fund spending that the mayor proposed, and reallocated it to other causes ranging from housing vouchers and rental assistance for homeless youth to overtime pay for City Hall legislative aides who do administrative work.
If this spending plan is approved, San Francisco will still have $750 million left in reserves, said Chelsea Bollard, an aide to Supervisor Sandra Lee Fewer, chair of the committee.
“This was an option for us to identify a funding source and make sure we are taking care of year one (of the raises),” Bollard said. “In doing so we understand, and labor understands, that there is no guarantee of what happens after that.”
Breed did not include the raises in her original budget proposal. She asked San Francisco’s 35 unions — which represent 37,000 city workers ranging from City Hall legislative aides to nurses at Laguna Honda — to postpone their raises so the city could avoid layoffs and more painful service cuts. Funding even just a portion of the raises, she said, would be a fiscally irresponsible move amid so much economic uncertainty.
The mayor said she will “use all of my discretion and authority to protect this City from any additional financial risks.”
“As mayor, I have a responsibility beyond this budget to ensure we can continue to deliver for the residents of San Francisco not just today, but tomorrow, next month, and in the years ahead,” she said in a statement. “I cannot support the Board's decision to appropriate additional funds from our reserves that threatens our ability to do so.”
If the November tax measures do not pass, officials will need to dig deeper to find budget savings. One of those measures would reform the city’s businesstax structure and would unlock up to $300 million for homelessness, mental health and other city services.
Fewer, chair of the budget committee, who led the negotiations, could not be reached for comment Thursday.
The board will not vote on the final spending plan until the end of September, and then the mayor still must sign it. That leaves plenty of time for amendments and political jockeying over the spending plan.
Still, the clash over the raises puts the mayor and the board in a tricky political position just as six supervisorial seats are up for grabs, including four incumbents running for reelection. It also potentially pits the mayor against the city’s politically powerful labor unions.
Union officials were furious over the mayor’s request to defer the raises, saying they have already made plenty of sacrifices. Not only are they doing the perilous work of taking care of the homeless, sick and vulnerable during the pandemic, they said, but a contract signed last year also said they would delay increases for six months if the budget deficit exceeded $200 million.
That means a 3% pay hike that was supposed to kick in this summer was deferred until the end of December.
Theresa Rutherford, a nursing assistant who works at Laguna Honda and vice president at SEIU 1021 — which represents thousands of San Francisco workers — said it was unfair that the mayor asked the labor unions to take the possibility of raises off the table for the next two fiscal years regardless of what happens to the city’s economy.
But on Thursday, she said that she was pleased with the board’s proposal, even though it came with much uncertainty for the future.
“There are times when you have to go step by step,” she said, adding that labor will use all its political power to support the bonds, taxes and fees on the November ballot.
The funding for the raises does not include police officers who agreed to defer their raises for two years. The board plans to vote on another agreement with the police after it approves the budget this fall.
Meanwhile, some the city’s nonprofits who also do critical frontline work were hoping for a costofdoingbusiness increase this year to help them cover expenses like rent, insurance and employee salaries. While the mayor did not include the costofdoingbusiness increase in her budget, the board added about $14.7 million in emergency relief funding through the budget reserves.
The onetime funding is not guaranteed in the next fiscal year. Debbi Lerman, administrator of San Francisco’s Human Services Network — which represents about 110 communitybased nonprofits — said it was “better than nothing,” but it won’t help much in the long run.
“We are completely hanging in the balance at this point,” she said. “This whole budget is risky and we understand that. But at the same time, the city is relying on the nonprofit sector for essential services.”