San Francisco Faces Potential $1.7B Budget Shortfall From Pandemic

SAN FRANCISCO (CN) — As city leaders focus on boosting health care capacity and helping workers and businesses survive a shelter-in-place order, another pandemic-related crisis is emerging for San Francisco in the form of a potential $1.7 billion budget shortfall.

San Francisco, California. (AP Photo/Eric Risberg)

A joint report issued by the city’s controller, mayor’s office and Board of Supervisors Tuesday predicts a significant loss of tax revenue which could swell the city’s projected budget deficit from $420 million to $1.7 billion over the next two fiscal years.

“The economic impact that is already hurting our residents and businesses is also going to require difficult decisions by the city moving forward,” San Francisco Mayor London Breed said in a statement Tuesday.

In the best-case scenario of a limited emergency and recovery period, the report predicts losses of $167 million this fiscal year, which ends June 30. That would be followed by losses of $528 million in fiscal year 2020-21 and $444 million in fiscal year 2021-22.

In the worst-case scenario of a longer emergency and recovery phase, the city would lose $287 million this fiscal year, followed by losses of $779 million and $612 million in the following years.

Those figures do not include additional emergency response costs the city is incurring right now.

Despite the gloomy prognosis, Breed says now is not the time to be primarily focused on dollars and cents. The city’s main agenda will remain helping people stay in their homes, ensuring basic needs are met and helping businesses survive as the city seeks aid from the state and federal government to address the looming budget crisis.

“Over the coming weeks and months, we will be focused on supporting our residents who have their jobs or their business while continuing to advocate for more state and federal support,” Breed said. “We all need to work together to and make the hard choices to get through this and to get San Francisco back on the road to recovery.”

City budgets are usually approved by the end of June, but the city has pushed that timeline back two months to focus on responding to the pandemic. San Francisco Board of Supervisors President Norman Yee said the board will shorten its summer recess and meet throughout August to approve next fiscal year’s budget.

“At this moment, we must focus our time and resources to the pressing health emergency and the impacts that are unfolding before us,” Yee said in a statement.

Mayor Breed sent a letter to department heads Tuesday ordering them to find ways to cut costs and curb spending to offset the “significant financial losses” to come. She ordered departments to only hire essential workers, pause nonessential capital projects and halt new programs that have not yet started. She will also require that all requests to fill positions be approved by her office.

Breed said her office will work over the next month to develop a plan to bring costs in alignment with lower projected revenues.

The mayor plans to submit an interim budget proposal by June 1. She will submit a full budget proposal by Aug. 1, and the fiscal year 2020-21 budget will be approved by Oct. 1.

“We will undoubtedly have difficult budget decisions ahead of us in the coming weeks and months, but I know that my colleagues and I are ready to work with the mayor for a comprehensive city budget that will maintain essential city services and protect our most vulnerable residents,” said Supervisor Sandra Lee Fewer, who chairs the board’s budget committee.

The mayor also announced a number of steps taken Monday to support city employees during the state of emergency. The city will offer paid leave to city employees through May 1, provide an extra 80 hours of paid sick leave to each employee, increase compensatory time off for extra hours worked by essential employees, allow essential employees to earn extra floating holidays, and establish a paid administrative leave program for essential employees that are required to come to work but are diagnosed with Covid-19 or have confirmed symptoms.

The Board of Supervisors is expected to discuss the fiscal impact of the Covid-19 pandemic at a remote videoconference board meeting Tuesday.

San Francisco and five surrounding counties have been under a shelter-in-place order since March 16 that directs nonessential employees to stay at home except for essential outings. On Tuesday, the shelter-in-place was extended through May 3.

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