As Mayor of San Francisco, I’m tasked with presenting and signing a balanced two-year budget every year for the City. While the budget is the most important legislation that we take up every year, it often does not receive the attention it deserves. That’s not surprising, however, because it is an incredibly complicated process and an incredibly complicated document.
This year, with the COVID-19 pandemic drastically impacting our economy, we faced a $1.5 billion shortfall. In the budget I released on July 31, we closed this shortfall while also making key investments in the most pressing issues facing our city, including protecting public health, addressing homelessness, providing support for people suffering from mental health issues, and reinvesting in our Black community that has been underserved for generations.
This budget charts the course for the next two years for our city, and it’s important that we’re transparent about how we are spending our tax dollars, what we can expect from that spending, and how it will improve San Francisco.
That’s why I have asked my budget team, led by Acting Director Ashley Groffenberger, to prepare an overview of how our budget works, the assumptions that go into this year’s budget, where we are prioritizing funding, and responses to common questions that we are hearing.
How San Francisco’s Budget Works
In a normal year, the City’s budget process begins in December and concludes by August 1. This year is not normal. The COVID-19 emergency and the economic impacts that followed made the future of the City’s finances uncertain during the spring when key figures are being finalized.
The Mayor and the Board of Supervisors agreed to an updated schedule for the budget process to extend the process by two months. Under this new time frame, the Mayor introduced her budget on July 31st. Following the Board of Supervisors’ review, the budget will go to the Mayor for signature and final adoption by October 1, 2020.
Every year, the City adopts a budget for the next two years. That means that this year, the Mayor has proposed a budget for both Fiscal Years (FYs) 2020–2021 and 2021–2022. We do that in order to allow for Departments to have an idea of what funding will be there next year and to prepare accordingly. That also means that each year we are adjusting from the previously passed budget for the current year.
For example, in August of 2019 the Mayor signed a budget for FYs 2019–2020 and 2020–2021. The second year of the adopted budget becomes the starting point for the first year of the following year’s budget. This year she will sign a budget for FYs 2020–2021 and 2021–2022. This means that in the budget she’s proposing this year, she’s adjusting the new proposal for FY 2020–2021 from an approved budget last year.
Total Budget vs. General Fund — Alike, but not the Same
Another important distinction is to understand the difference between the General Fund and spending that is not a part of the General Fund. Essentially, the General Fund is the money that the Mayor and the Board of Supervisor have control over spending. While you hear that San Francisco has a $13 billion budget, only $6.2 billion of that is in the General Fund.
Why? Two reasons:
Enterprise Departments: That’s because there are massive organizations known as enterprise departments, that have their own budgets and their own revenue streams, such as the Airport, the Public Utilities Commission, the Port, and the SFMTA. These organizations represent $7.5 billion of the San Francisco budget.
Baselines and Set-Asides: Additionally, the voters of San Francisco have passed a number of ballot measures, known as set-asides, that require a certain level of funding for everything from parks, to transit, to street trees. Of the $6.2 billion in the general fund, only about $2.3 billion of that is truly discretionary, with the other $3.9 billion restricted by state and federal reimbursements and voter-mandated baseline and set-aside spending.
Mayor Breed’s Proposed Budget for FY 2020–2021 and 2021–2022
Last week, Mayor Breed announced her two-year budget proposal, which includes new investments to prioritize racial equity and reinvest in the African-American community, continue making progress on homelessness and behavioral health, and maintain the City’s response to the COVID-19 pandemic. The budget proposal makes these important investments while also balancing the two-year $1.5 billion deficit with a responsible use of reserves, preserving jobs and with minimal impact to City services.
The annual budget for FY 2020–21 is $13.7 billion and $12.6 billion for FY 2021–22. The proposed budget for the first year is higher primarily due to one-time expenditures to respond to COVID-19, and which go away in the second year of the budget.
How We Closed the Budget Deficit
A $1.5 billion deficit is unprecedented in recent history, and balancing our budget requires a few different assumptions to make that happen. These assumptions include a new revenue measure and spending reductions.
New Revenue: In November, voters will have the chance to approve a Business Tax Reform measure that updates the City’s tax code, and unlocks over a billion dollars in dedicated revenue over the two-year budget for homelessness, behavioral health, and child care that is currently tied up in litigation. The measure would also allow the City to unlock approximately $300 million of one-time money for the General Fund to repay itself for prior year advances.
If the revenue measure is not successful, we will have to revisit our proposed budget and make significant changes.
Spending Reductions: The Mayor asked all Departments to propose cuts ranging up to 15% as part of the budget process. Some of these cuts were accepted, some were not, but reductions were significant. The Mayor has prioritized City workers, none of whom lose their jobs in this proposal despite the massive deficit we face. This is contingent, however, upon the City reaching agreements with labor unions to defer scheduled raises for City workers. If the City is unable to reach these agreements, we will have no other option but to have layoffs, which would hurt both the workers and the City’s ability to deliver services.
This year more than ever, the uncertainty caused by the COVID-19 pandemic has made predicting future revenues and expenditure even more difficult, and so we will need to continue to be flexible moving forward to adapt as the situation changes.
Major Investments and Focus of this Budget
Redirecting Funding to the African American Community and Prioritizing Equity
The Mayor’s proposed budget acknowledges the structural inequities impacting the city’s African American community, resulting from generations of disinvestment. The proposed budget redirects $120 million in funds over two years from law enforcement towards efforts to repair the legacy of racially disparate policies on health, housing, and economic outcomes for African Americans.
Mayor Breed’s budget recognizes that the African American community must continue to be involved in determining the specific allocations of the funding. On Monday, July 27, Mayor Breed and Supervisor Shamann Walton released a report from the Human Rights Commission that summarizes the findings of initial community engagement and provides a framework for ongoing conversations and decisions to reinvest in San Francisco’s Black community.
Based on the initial input from the community, Mayor Breed has proposed that 60% of the funding be directed for mental health, wellness, and homelessness, and 35% be directed to education, youth development, and economic opportunity. The disbursement of funds will be discussed, tracked, and evaluated on an ongoing basis through the Human Rights Commissions’ continuing process of community engagement.
The remainder of the redirected law enforcement funds in the Mayor’s proposed budget will be allocated for a thorough planning process in FY 2020–21 to divert non-emergency, low priority calls for service away from the Police Department to non-law enforcement agencies.
The Mayor’s proposed budget also invests:
- $15 million in one-time funding for the San Francisco Unified School District to support San Francisco’s public school students most disparately impacted by COVID-19 and the resulting school closures.
- $12.5 million to extend stipend programs for SFUSD teachers in high turnover schools and for educators in the City’s early care and education system.
- $5.5 million over the two years to extend the Opportunities for All (OFA) pilot, a youth internship program initiated in last year’s budget.
- $4 million over two years to be distributed by the Office of Racial Equity within the Human Rights Commission, to maintain and prioritize ongoing community involvement and responsive programming.
Homelessness and Mental Health
To continue to address the homelessness crisis and help people suffering from mental illness and substance use disorders, Mayor Breed’s proposed budget includes funding to maintain investments in behavioral health beds, rental assistance and subsidy programs, and other critical mental health and homelessness programming. The proposed budget also makes new investments to pilot a new crisis response model and seeds funding for the Office of Coordinated Care in the Department of Public Health.
Mayor Breed’s proposed budget will be used in part to implement the City’s Homelessness Recovery Plan, which Mayor Breed announced earlier this month. Through the Homeless Recovery Plan, the City will continue emergency homelessness response initiatives in the short-term and make 6,000 placements available over the next two years for people experiencing homelessness.
In addition to the permanent supportive housing included in the Homelessness Recovery Plan, the budget funds a significant expansion of newly constructed permanent supportive housing units through the City’s Local Operating Subsidy Program and the 833 Bryant project. Additionally, the budget adds $6.6 million in funding to continue emergency shelter and eviction prevention pilot programs.
The Mayor’s proposed budget supports the implementation of the first phase of Mental Health SF, a comprehensive overhaul of San Francisco’s mental health system. Notably, the budget will fund the creation of an Office of Coordinated Care within the Department of Public Health, pilot a non-law enforcement Crisis Response Team for engaging people on the street experiencing mental health or substance use-related crises, and increase the City’s capacity for mental health and substance use treatment beds.
These investments would be supported by approximately $66.5 million over two years, should the Business Tax Reform measure pass in November. Mayor Breed’s budget includes $5 million from the General Fund to accelerate the implementation of the Office of Coordinated Care and the Crisis Response Team, so that work can begin regardless of the outcome of the November 2020 ballot measure.
COVID-19 Ongoing Response and Recovery
In total, the Mayor’s proposed budget allocates $446.1 million to ensure the City has the financial resources to meet the citywide priorities set forth by the COVID-19 Command Center, the centralized emergency operations center coordinating the response across City departments. The Mayor’s budget assumes the City’s General Fund will support $93 million of that total amount, and that the remaining amount will be covered through federal support like FEMA and the CARES Act.
This funding will be directed to three main categories: health and human services; housing and shelter; and emergency communications and coordination. The Mayor’s budget ensures there is adequate funding for COVID-19 testing, personal protective equipment, expanded capacity at hospitals and skilled nursing facilities, outbreak management, and contact tracing, among other expenses. Throughout COVID-19, addressing food insecurity has remained one of Mayor Breed’s and the City’s top priorities. The Mayor’s proposed budget includes $45.7 million in new expenditures for food programs. Lastly, the budget includes investments to address the needs of San Francisco’s unsheltered residents in the COVID-19 environment with shelter, food, and medical care.
Community based organizations have been an integral part of the City’s ongoing response to COVID-19. Mayor Breed’s proposed budget includes funding to ensure that community partners can continue to work with the City to provide community-based and multi-lingual outreach and education during the COVID-19 pandemic.
Frequently Asked Questions
Below is a running list of questions we’ve heard since the Mayor’s budget was released last Friday. If you have a question you’d like answered, you can email it to MayorLondonBreed@sfgov.org and we’ll do our best to answer it here.
Q: It was announced that the Mayor is redirecting $120 million from law enforcement to redirect to the programs that support the Black community, but I’ve seen others saying that the reduction is only $18 million. How is this being calculated?
A: As we mentioned above, San Francisco passes budgets in two year increments. So last year, in 2019, we passed a budget for FYs 2019–20 and 2020–21. This year, we will pass a budget for FYs 2020–21 and 2021–22. The Mayor’s proposed budget takes the budget that was approved last year for FY 2020–21 and reduces roughly $60 million from law enforcement agencies for the new FY 2020–21 budget. That redirection of funding is maintained for next year as well, so for the two-year budget, that represents $120 million that was scheduled to go to law enforcement that is now being redirected to support equity initiatives.
Q: The Ethics Commission’s budget in FY 2019–2020 was $11.6 million, but the proposed budget provides only $4.65 million for the Ethics Commission. Is this a cut?
A: No! The Ethics Commission has a lower expenditure in FY 2020–21 than in FY 2019–20 because last year a large expenditure was made to fill the fund used to disburse public financing to political campaigns. That fund is now fully funded, so no contribution is needed to it this year. The operating budget of the Ethics Commission remains unchanged.