It's the rich, stupid

SAN FRANCISCO'S CITY budget has doubled since Mayor Willie Brown took office. That's an astonishing statistic, and it suggests – accurately – that there's been a lot of fat added to City Hall in the past seven years. The Mayor's Office has been bloated with special aides. Political friends of Brown are scattered all over town in high-paying jobs that don't exactly involve a lot of heavy lifting. The entire airport stinks of patronage. A huge river of money pours out of the city coffers every day in private no-bid contracts to companies that have political ties to the mayor.

And so, as the mayor presents a $4.9 billion budget for fiscal year 2002-03, and city departments and interest groups begin fighting over some $300 million in cuts, there's a widespread temptation to look for ways to solve the city's cash crisis by eliminating waste.

That's fine – as far as it goes. But it shouldn't be the only focus of either the Board of Supervisors or the city employee unions and community activists who try to fight to save public services in an era of relative fiscal austerity.

The truth is, not all the additional money that's been spent during the Brown administration has gone to patronage hires and bloated administrative staffing. Some has gone to fix problems created 20 years ago, when the federal and state governments began systematically dismantling aid to cities. Local agencies like Muni – which was suffering from a decade of brutal budget cuts that made it almost impossible to keep the buses running – are now funded at something resembling a reasonable level.

And in the long term, San Francisco can't possibly get its fiscal house in order without looking at the revenue side. The money Brown has spent since he took office was available not because of his skill as an administrator but because his tenure happened to coincide with a phenomenal period of economic growth in the city. Brown, of course, encouraged that runaway growth, and his ability to spread huge sums of money around to please powerful interest groups was part of his reward.

But now the boom has gone bust – and it's become painfully apparent that nobody at City Hall – certainly, nobody in the Mayor's Office – was doing anything to prepare for the inevitable downturn. So the city is back to where it typically finds itself in the years when there isn't some sort of gold-rush style cash flow: there's a gap of about $300 million between what we need and what we can afford.

And for all the fat that ought to be cut, there are legitimate programs that need additional funding, problems that the city is a long way from solving. So the only way the budget gap can be closed fairly is to raise new revenue – which means new and higher taxes. That's not something the supervisors should fear: tax hikes, properly skewed to hit the wealthy, are far more fair and equitable than the sorts of service cuts the mayor wants (which will predominantly hit the poor), and they ought to be something progressives can build a powerful political coalition behind.

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The mayor's budget was released just a few hours before we went to press, so it's impossible to do a complete analysis of what it does and doesn't contain. But from initial information, this much is clear: the mayor has cut primarily from services that reach the most vulnerable parts of the population. He's done that in part to punish the Service Employees International Union, which refused to accept the mayor's budget "deal" – a deal that would have cost some of the lowest-paid city employees as much as $1,200 a year. So $10 million worth of personnel-related cuts (mostly layoffs and unfilled vacancies) will come out of the Department of Public Health and the Department of Social Services.

What we don't see are cuts in any of the big corporate welfare programs (the so-called New Jobs Tax Credit, which have cost the city as much as $10 million a year, is an obvious example). The city's franchise agreements with Pacific Gas and Electric Co. (electricity and gas) and AT&T (cable TV) are sweetheart deals costing the city millions a year. We don't see any cuts in private contracts at all – in fact, the mayor wants to increase outside contracting by laying off laundry workers at public hospitals and outsourcing that work. And the San Francisco Police Department (which has a long record of paying too much overtime, among other budget-busting practices) actually gets a sizable budget hike.

More important, there's almost nothing in the way of new revenue – save for a few minor (and regressive) fee hikes on things like dog licenses and domestic-partnership registrations.

San Francisco is a rich city, home to plenty of millionaires. Over the past 20 years the income and wealth of those residents has risen dramatically and disproportionately, while the middle class and poor have seen real wages and purchasing power decline. Overall, property owners did fabulously well during the past decade, and renters were hammered.

Meanwhile, in tough times, low-income people need city services even more, and cuts in those services are increasingly painful. By any reasonable logic, city spending on services like public health, welfare, housing, and libraries should increase during recessions.

So anyone who wants to talk honestly about the budget crisis should acknowledge that part of the solution has to be higher taxes on the people who can most afford to pay – and although state law somewhat limits the ability of California cities to raise taxes, there are plenty of reasonable and fair options. A hike from 0.75 percent to 1.5 percent in the real estate transfer tax for properties that sell for more than $1 million would fall almost entirely on the better-off – and bring the city as much as $40 million, according to estimates from San Franciscans for Tax Justice. Raising the PG&E franchise fee from 0.5 percent to 5 percent would bring in $30 million.

The supervisors are discussing a November ballot initiative to revise the city's business tax; making that tax more progressive (that is, raising the rate on big business) would bring in millions. Requiring the biggest companies to pay both a payroll and a gross receipts tax would bring in even more. In the long term, creating a public power agency could bring hundreds of millions a year into the city coffers.

Those are just a few options; the supervisors should be looking for more. And the unions, community leaders, and activists who bemoan the current budget cuts should immediately start talking about significant new revenue sources and work to build a coalition to push the Board of Supervisors in that direction.

Tearing into waste and fraud is fine – but San Francisco should take this opportunity to create a new budget calculus that starts with the understanding that big businesses and the wealthy just aren't paying their fair share. The message can be simple: It's the rich, stupid.