Federal Stimulus Helps San Francisco Ax $630 Million From Budget Deficit

The Northern California city’s budget deficit is projected to shrink by hundreds of millions of dollars thanks to the support for cities included in the federal stimulus plan approved this month.

San Francisco, as seen from the Marin headlands. (Courthouse News photo / Chris Marshall)

(CN) — San Francisco officials heaped praise on the Biden administration Wednesday after a report revealed a projected deficit for the upcoming budget will shrink by $630 million thanks to the recently signed federal stimulus, legislation city officials said will help prevent layoffs and cuts to services.

The joint report issued by the city’s controller, Mayor London Breed’s office and the Board of Supervisors on Tuesday said federal stimulus, called the American Rescue Plan, provides $636 million in direct, one-time financial aid.

The report said that cash infusion, coupled with expected increases in tax revenue and reductions in costs associated with fighting Covid-19, is responsible for closing a massive chunk of the budget shortfall. 

In January, before the stimulus was signed into law, San Francisco’s budget deficit stood at $653 million. With the inclusion of stimulus funds, it will shrink to a more manageable $23 million. 

Breed said in a statement Wednesday the support from the White House was a welcome change of pace that would also help the city avoid layoffs and reductions to services.

“It’s such a relief to have a federal government that is actually interested in helping our cities succeed rather than attacking us, and I can’t thank President Biden, Vice President Harris, and Speaker Pelosi enough for their leadership during this unprecedented crisis. But just like other cities and states, our economy and our budgets have taken a huge hit that could have resulted in layoffs and massive service cuts,” Breed said. “Thanks to the American Rescue Plan, we’re now able to avoid those terrible choices.” 

The city budget is expected to be voted on in July by the full Board of Supervisors and sent back to Breed by August for her approval, according to a timeline provided by the mayor’s office.

Breed said officials should remain vigilant because the budget for fiscal year 2023-24 still has an estimated $350 million shortfall.

The city will likely face a structural budget deficit for years to come as employee and operating costs increase while the region’s economy recovers, Breed added.

“At the same time, we still have to fix the ongoing deficits that exist in future years,” Breed said. “If we’re not responsible in this budget cycle, we could find ourselves right back here again in the coming years facing the same terrible choices we have been lucky to avoid this time around.”

This time last year — as city leaders were working to boost health care capacity at the onset of the Covid-19 pandemic — officials said the budget shortfall could climb to as high as $1.7 billion thanks largely to the projected loss of tax revenue.

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