San Francisco’s proposed $13.7B budget can’t be balanced without your vote

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It’s time to play the music,
It’s time to light the lights …

Even with the gaudy dollar totals involved, San Francisco’s rather episodic budget process really can resemble a somewhat more profane version of The Muppet Show.

No, Rita Moreno or John Cleese aren’t dropping into committee meetings or popping by City Hall at 1 a.m. with a pizza. Rather, it’s that the real show is what’s taking place behind the scenes and out of public view.  

San Francisco is a city with a major-league budget, and there is always a major-league display of politics involved in crafting it.

This year that was the case right from the get-go. The mayor delivered the Board of Supervisors a budget balanced by assuming deferred raises from city workers – without any agreement to do so from city workers. 

So that budget proposal wasn’t really balanced at all. It harked to San Francisco Municipal Transportation Agency budgets of yore, which balanced themselves, on paper at least, by assuming wildly lucrative sales of taxi medallions.

Regardless, the mayor’s move this year was a neat trick — “politically clever,” conceded a labor leader. Only the mayor’s office can negotiate and ratify a deal with labor, and the mayor deftly stuck the board with the political heavy lifting necessary to come up with these funds. That may not be good government, but it’s great politics. 

Meanwhile, the mayor’s office did manage to negotiate a two-year deferral of pay raises in a tentative agreement with the police and fire unions. 

So, if the Board — driven by elements of the city who’d urge a defunding and metamorphosis of law-enforcement — sees fit to reject the tentative agreement to offer cops and firefighters raises down the line, it’ll instead owe them raises now, per the extant contract.

And the budget crafted by the Board doesn’t set aside any money for that. 

So, it sure looks like the cops are getting raises. The earnest young folks picketing supervisors’ houses and marching through the streets figure to be disappointed. 

But disappointment will be near-universal if things don’t go the way the mayor and board are hoping in the forthcoming election — separate and apart from the looming presidential contest. 

Pay raises or no, the city’s budget is on schedule to be signed, sealed, and delivered by month’s end. But without voters’ approval of key November revenue measures, it will be vaporized. 

The mantra of J. Wellington Wimpy from Popeye cartoons, “I would gladly pay you Tuesday for a hamburger today,” apparently dates from 1932. But some things never change, and it’s extremely relevant in San Francisco of 2020. 

As such, it’s hard to overstate how big a deal it would be if voters in November reject revenue measures that the nascent budget assumes will pass. Of note, if Proposition F, the consensus “business tax overhaul” fails, it blows an immediate $300 million hole in the budget— which would lead to reduced services, deferred maintenance, layoffs, and other unpleasant outcomes.

The city has already appropriated money from a reserve fund stocked with money the city assumes will become available upon passage of Prop. F. Yes, a reserve fund drawing from dollars that only materialize if voters pass a revenue measure. That’s J. Wellington Wimpy economics on a fairly grandiose scale. 

This is traditionally a fraught period in budgeting, as the mayor and board jockey over pet causes with add-ons and take-backs. The ill-will engendered here can, at times, bubble over into full-on sideshow territory. Some of you may recall Supervisor Chris Daly in 2007 bandying about allegations that Mayor Gavin Newsom was a coke fiend (fewer of you may recall this was prompted by Newsom moving to slash drug treatment funds — proving, once again, the retaliation is always called more severely than the initial hit). 

This year, however, all parties —the mayor, the board, and labor — are highly incentivized to present a united front and get those revenue measures passed. 

Most of the taxes on this ballot fall on someone other than the average voter – high-revenue companies, companies with high-earning CEOs, sellers of $10 million properties, etc. And San Francisco’s electorate is famously generous. And yet, with a ballooning unemployment rate and an ever-growing divide between the haves and have-nots, it remains to be seen how magnanimous the voters are, come November.  

And, even if the electorate gives the city everything it wants, after election day the budget could still careen off the rails. That’s because, in addition to baking in assumptions that revenue measures will pass, this year’s budget also depends on moderate economic growth during an ongoing pandemic. 

That’s a risky bet, and this budget may have to be changed on the fly – repeatedly. The mayor has extraordinary strength and leeway in San Francisco’s budgeting system, and can, unilaterally, opt to not spend allocated funds, regardless of how many supervisors voted to spend them. 

We may be seeing a lot of that as 2020 turns to 2021, and we may be seeing the board reacting. We will, God willing, avoid accusations of heavy cocaine usage. But the terms “de-appropriation” and “supplemental” might themselves come into heavy usage. 

And that’ll especially be the case if this money-saturated city runs dry. Which could happen. 

San Francisco is a city in large part powered by property taxes, office development and occupancy, and tourism and hotel occupancy. What’s more, our ground-floor economy is dependent not only on worldwide travelers but everyday commuters heading in from the outer Bay Area counties and buying salads and coffees and whatnot. 

Well, none of that is happening anytime soon. So, that’s a problem. 

All of these once-lucrative revenue sources abruptly evaporated with the onset of the pandemic. How quickly they recover remains to be seen, but one needn’t possess a crystal ball to know things are going to be rough for the immediate future. 

San Francisco is still coasting on the capital it built up during the good times, and the city is sitting on hefty reserves it socked away. Things are worse now than before, but we’re better prepared than after the dot-com bust or Great Recession.

So, that’s the good news. But the bad news is just about everything else. 

It’s difficult to conceive of what’s to come for San Francisco’s future economy — and the connected matter of its city budget. Your humble narrator spoke with more than a dozen well-placed city business or political figures for this story. All of them uttered something akin to the pithy line from Clubber Lang in Rocky III: 

“Prediction? Pain.” 

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