Mayor's two-year budget closes $780 million gap with cuts, reserves and targeted investments

The Budget & Appropriations Committee on a June 2023 hearing reviewed the mayor's proposed two-year budget, which Anna Dunning, director in the Mayor's Office of Budget, said closes a $780,000,000 gap while maintaining critical services for San Francisco residents. "A $780,000,000 deficit while maintaining critical services for San Francisco residents," Dunning said during her overview.

Dunning told the committee the gap was closed through a combination of departmental reductions (salary savings tied to vacancies and contract cuts), project budget reductions where non-general funds would finish work, and by leveraging non-general-fund sources such as the Our City Our Home fund and opioid settlement dollars. She also said the budget includes debt savings and uses reserve appropriations including the business tax stabilization reserve and a federal disallowance reserve set aside for FEMA.

The mayor's proposal sustains targeted investments in economic recovery and small-business supports, including continuing the "first year free" program, tax credits for new office-based businesses, and a change to the commercial rent tax to eliminate a secondary tax on subleases. Dunning highlighted a $3,000,000 set-aside for neighborhood commercial corridor activations with $1,000,000 specifically for the Mission neighborhood.

Public-safety funding in the proposal includes additional overtime for the police department to preserve current deployment and allow academy classes to continue, funding for fire and emergency management needs, and non-law-enforcement alternatives such as expanded ambassador programs and eight new park rangers to increase unarmed presence in open spaces.

On homelessness and behavioral health, Dunning said the budget uses $98,600,000 from the Our City Our Home fund, reprograms general-fund dollars to expand shelter beds and housing, and proposes temporary changes to the ordinance governing RCOH allocations for flexibility. She said the proposal would add nearly 600 net new shelter beds and expand rapid rehousing, eviction prevention slots and supportive housing units. Dunning also said the city plans to leverage opioid settlement funding "to both support existing behavioral health programs as well as launch new overdose prevention and opioid treatment programs."

Education and family supports include a "student success fund" with $11,000,000 in year one growing to $35,000,000 in year two administered through DCYF, expanded childcare vouchers, and investments in early educator wages.

Dunning warned the committee the long-term outlook still projects sizable deficits and urged continued work across the mayor's office, departments and the Board of Supervisors to identify savings and new revenue sources.

Next steps: the committee forwarded the interim appropriation and salary ordinances to the full Board with positive recommendation; the interim appropriation is required by charter to permit city operations until a final budget is adopted.