Budget Deep Dive: Here’s What SF’s Near $15 Billion Budget Funds

After three years of economic growth and historic federal pandemic relief, local budgets in the Bay Area are looking a little different this year. Much of that federal aid has been spent, and cities are grappling with the economic fallout of a rise in working from home and empty downtown office buildings and storefronts. Elected officials often say that budgets are “statements of values.” So KQED is checking the receipts of the spending plans recently passed in San Francisco, San José and Oakland to see how leaders in the region’s three largest cities are prioritizing taxpayer dollars.

On July 26, San Francisco Mayor London Breed signed a $14.6 billion budget, after weeks of negotiations with the San Francisco Board of Supervisors over how to address a projected $780 million two-year deficit.

While that’s an eye-popping number compared to the budgets of San José and Oakland, it’s helpful to remember San Francisco is a county, as well as a city, and therefore funds additional expenses that Oakland and San José do not.

The biggest budget battle in San Francisco centered on redirecting permanent housing funds to homeless shelters and temporary housing, similar to a controversial budget proposal in San José over homelessness spending. Breed proposed using $60 million earmarked by voters for permanent housing to fund her plan. Similarly, she also proposed dipping into a voter-approved tax that funds early childhood education and child care.

The Board of Supervisors tussled with the mayor’s office over those proposed changes in negotiations for weeks. Ultimately, they reached a compromise using money they only later realized was available, using accrued interest from those two tax measures.

Like San José, San Francisco’s budget also includes funding to increase the city’s police force. The police department budget grew by 8.5%, enough to hire 220 officers in the coming years. Public pressure to address a feared rise in crime prompted most lawmakers to back the mayor’s plan to increase the police department, one of the largest expansions in San Francisco’s spending plan, even as other departments were asked to take a cut.

San Francisco’s shrinking daytime population and vacant office space blew a $780 million hole in San Francisco’s budget. Escalating health insurance costs and pensions contributed, as well.

But the way lawmakers plugged that hole won’t hold for long. The city’s two-year budget was balanced using nearly $1 billion in one-time funds.

This funding comes from a number of sources, including an opioid lawsuit settlement against Walgreens, FEMA reimbursements for emergency pandemic spending and various reserve funds.

The use of one-time sources to meet a budget need isn’t unheard of. And according to the City Controller’s Office, the use of one-time funding falls within the city’s legally mandated limits. But in a budget briefing letter, the controller also warned, “The use of one-time or nonrecurring sources to support ongoing operations creates a future budget shortfall, requiring expenditures to be reduced or replacement resources identified.”

That means it’s the budget equivalent of using chewing gum to plug a leak. If downtown doesn’t boom like a Gold Rush in the near future, then San Francisco lawmakers will need to make drastic cuts in future budgets.

The two-year budget is often revised in its second year so lawmakers can adjust it to the realities of tax revenue projections. If the projections don’t hold, Breed can look forward to a bitter fight over what departments to cut during her mayoral re-election bid.

This year’s budget process didn’t turn into the bloodbath many predicted it would. But that could happen soon.

A five-year estimate issued by the City Controller’s Office, Mayor’s Office and Board of Supervisors’ Budget and Legislative Analyst foresees growing budget shortfalls in the coming years, starting at $488.9 million in 2024–2025 and reaching $1.3 billion in the 2027–2028 budget.

In some good news for the city, San Francisco’s tourism tax dollars are already rebounding. But it’s not enough money to offset a shrinking tax base from a massive dip in office use. A variety of taxes are tied to how many people work in San Francisco, from property taxes to various business taxes, and all of those have taken a hit post-pandemic.

Seeing this all coming down the pike, Mayor Breed and Board of Supervisors President Aaron Peskin passed legislation to foster economic growth downtown. Much of that was supported in this year’s budget, including a program to waive city fees for small businesses in their first year of operation, and the “vacant to vibrant” program which will help artists beautify empty ground-floor spaces, and give grants to business owners to fill those storefronts.

Studies have cited San Francisco’s reliance on the tech industry and the outsized impact of work-from-home as a major factor in its slow recovery from the pandemic. Now the city is trying to attract new businesses downtown to generate more city revenue.

When the mayor and Board of Supervisors clash over the budget, it’s actually over a very small slice of the overall $14.6 billion pie. Ultimately, the Board of Supervisors reallocated $70 million after their weeks-long negotiations with the mayor.

To put that into perspective, that’s less than 1% of the budget.

And while it may be a small piece of the pie, the impact on the people and programs who need it is incalculable. Here are some of the program investments that caught our eye:

Sisterhood Gardens near the Ocean View neighborhood received $115,000 to continue operating a community garden that serves the area’s large population of seniors and monolingual immigrants.

Another $4.8 million went to the SRO Collaborative to keep up its code enforcement efforts in single-room occupancy hotels. The program helps SRO tenants, many of whom are monolingual immigrants, negotiate with landlords over housing disputes.

Nature programming at Golden Gate Park’s Stow Lake netted $15,000, ensuring plenty of families can still enjoy a sunny (or foggy) day at the scenic lake. An additional $250,000 will keep the music playing at the Jerry Garcia Amphitheater, and $1 million will go toward an expansion of a homeless navigation center on Hyde Street for young adults, aged 18–24.

For a full list of programs the supervisors added back into the budget, click here (PDF).