sarah@sfbg.com
San Francisco’s top budget advisors are predicting that dollars from President Obama’s stimulus package will help reinvigorate the economy over the next three years. But they also warn that the recovery will be slow, and that deficits will be part of political life for some time to come.
The findings are contained in a three-year budget projection report jointly compiled by the Mayor’s Office, the Controller’s Office, and the Budget Analyst’s Office and released to the news media at a hastily announced March 31 roundtable.
During the roundtable, Mayor Gavin Newsom announced that the city faces a "staggering" $438 million budget shortfall in fiscal year 2009-10 — a deficit, financial experts warn, that could balloon to $750 million by fiscal year 2011-12 if cuts and wage concessions aren’t made and structural reform and revenue creating measures aren’t undertaken.
Those future numbers are scary — and a bit apocryphal. Nobody seriously thinks the city will simply ignore this year’s problems and put them off until next year, which means future deficits should be smaller.
But the decisions that will have to be made to keep the red ink under control have been the subject of intense speculation since December, when Newsom announced that the city was facing a deficit equal to cutting every other dollar in the city’s discretionary general fund.
REFORMS? WHAT REFORMS?
In January newly elected Board of Supervisors President David Chiu sought to address the anxiety crashing over the city’s business and labor leaders by inviting stakeholders, including Newsom, to budget meetings at City Hall. But Newsom only agreed to get involved once the youthful board president’s other bright idea — a special election that combined cuts, revenue generating measures, and structural reforms to save as many jobs, programs, and services — was off the table.
And with only two months to go until he submits his 2009-10 budget proposal, Newsom still has not clarified what budgetary reforms he will support this fall, even as the labor unions are being asked to give back $90 million in promised benefits, and the Board of Supervisors gets ready to prepare an annual appropriations ordinance by the end of July.
Newsom did announce last week that he will be is asking some, but not all, departments for 25 percent cuts in the coming fiscal year. Human Services Director Micki Callahan confirmed that 730 pink slips have been sent out since July 2008.
Yet the actual cuts remain a mystery. "I will not be accepting 25 percent cuts from some departments, but from others, I will," Newsom said. "I don’t believe in across-the-board cuts."
Asked which departments he would accept 25 percent cuts from, Newsom told reporters: "You’ll find out when you read my budget."
Within days of Newsom’s statement came news of a deal between the Mayor’s Office and Service Employees International Union Local 1021, the largest city-workers union.
"The goal of this tentative agreement is to protect vital services for San Franciscans, minimize layoffs to employees, preserve the integrity of the collective bargaining agreement, and assist the city with its economic recovery," read a joint public statement.
As of press time, SEIU’s 1021’s Robert Haaland told the Guardian that the two sides are still in negotiations, but confirmed that the union is discussing giving up about $40 million over 16 months, including furloughs and other benefits.
"At the end of the day, our members recognize that they need to share the pain," Haaland said. "The idea is to save jobs and programs."
These givebacks from SEIU are part of the $90 million in concessions the city hopes to get from unions, including those that represent police, firefighters and nurses.
THE PERILS OF TWO-YEAR BUDGETING
As it becomes clear that givebacks and cuts won’t be enough to solve the city’s fiscal crisis, there is talk that the mayor wants to switch to a two-year budget process. Critics say that could represent a massive transfer of power to the Mayor’s Office, unless the Board of Supervisors also gets the power to approve the mayor’s midyear cuts.
"As it is right now, we have power through the Board of Supervisors for one month of the year," said one community organizer, who asked to remain anonymous. "The rest of the time Newsom moves his own agenda through his midyear cuts."
A summary of a March 16 Controller’s Office "budget improvement project" recommends that "the board’s add-back process should require that program restorations and enhancements be reviewed and analyzed by department staff and the board’s budget analyst;" that the "mayor and board should outreach to the general public regarding budget priorities;" and that the "city should adopt a two year budget process consistent with the city’s financial plan."
Sup. Chris Daly said he thinks this year’s grim three-year budget projections make a strong argument against a two-year budget process. "Projections are never right," said Daly, who used to chair the powerful budget committee. "Two years ago we weren’t projecting how bad it was going to be. We can’t do budgets for years out past the current fiscal year. It just doesn’t work."
Sup. David Campos, who sits on the current budget committee, said he wants to see the increased Federal Medical Assistance Percentage (FMAP) funding being provided to the city’s public health and human services departments used to restore proposed cuts, jobs, and services.
Much of the federal money will be earmarked for non-General Fund infrastructre projects at the Municipal Transporation Agency, Housing Authority, airport, and San Francisco Public Utilities Commission.
"We’re saying that if FMAP is coming in so that revenue cuts are not made in the public health area, then why not use these monies to fill gaps, replace cuts, restore funds, preserve programs?" Campos asked.
Campos also wants the mayor and the board to sit down and talk about the November ballot. "I don’t think the budget hole is going to be closed on backs of labor alone," Campos told us. "We’re focused on cuts, elimination of programs, layoffs … But why aren’t we talking about what revenue measures we are putting on the November ballot?
Chiu said he thinks Newsom is committed to some form of tax-based revenue measure. "Just as we can’t solve our budget deficit by taxing our way out of it, so we can’t solve it by cutting our way out of it either," Chiu said. "None of our tax or revenue-generating options would come close to filling 25 percent of that gap."
Noting that business is "more open to taxes that share the burden of who pays," Chiu observed that "it’s important to balance the cuts so it’s not just social services and the health department taking the burden."