“The purity of the madness.”
One does think about pure madness a good deal here in Thompson’s old roost of San Francisco; and the first beast was like a lion, and the second beast like a calf, and the third beast had a face as a man, and the fourth beast was like a flying eagle could, indeed, be something a city resident ambles past without half a glance, while having an animated business discussion into his iPhone earbud.
We are inured to much madness in this city. And this includes the finances that undergird our city’s continued functional existence. With the fiscal year commencing this month, San Francisco adopted its biggest budget ever. It did this in spite of the fact that the post-Covid-19 work model has eviscerated the Downtown office landscape and stanched this city’s flow of revenue.
It did this in spite of the fact that no economist, neither sane nor crazy, thinks things are going to get better in the next year. The smart money is on less money; big real estate will surely be reassessed downward; things will all but certainly get worse.
By the end of this budget’s term, the city will have burned through 43 percent of its pre-pandemic reserves, and it has not used the time that money has bought to make structural changes to match the new fiscal reality: The purity of the madness.
That next year’s budgeting process will be hellish is no revelation. The Chronicle wrote a good article about this; there will be less revenue to fund the city, and the one-time tricks and reserves the city used this year cannot be deployed again. That’s bad enough, but it gets worse. Book of Revelation-worse.
Not only will the city be running aground next year during budget season, it will be doing so in a mayoral election year.
And it will be doing so in a mayoral election year in which all of the union contracts come undone and must be renegotiated.
“If I were God,” said former controller Ed Harrington, “I would’ve saved more of the reserves for next year. I thought this year’s budget was going to be much harder. We transferred the pain to next year. It’s going to be there.”
San Francisco is not run by an elected God, but in terms of the budgeting process, Mayor London Breed’s power is godlike. Definitely not the all-powerful God of the Book of Revelation, but some manner of deity for sure.
So, we can chide the supervisors for using one-time money to bail out programs in a manner that exacerbates this city’s fiscal problems. But these are penny-ante items. This is the mayor’s budget and she, by and large, decided that we should have our dessert first — which sets us up to have our next budgetary meal be a punch in the mouth.
San Francisco’s present budget relies upon no small amount of bookkeeping legerdemain and fiscal sorcery; funding imperiled programs with the interest earned off accounts formerly held in escrow; stuff like that and that kind of stuff. You can go up and down the budget and find any number of small items like this: Potential cuts that induced rancor and feverish activity in the closing stanzas of the budget process,, but represent fractions of a cent on the dollar when contrasted with the budget’s totality. These proposed cuts, and the efforts to undo them, always monopolize the attention of our legislators, community activists, and the media — while the 99-odd percent of the general fund budget set by the mayor sails through.
And that’s normal. That’s how San Francisco handles its budgeting process: “Like watching 7-year-olds playing a soccer game,” as Harrington put it last year.
This year’s budget and budget process were very normal. And that’s odd, because this city’s finances are so decidedly not normal; the city is headed toward a looming abyss, in terms of generating the revenue it requires to pay workers, clean streets, provide services — and this budget puts us on cruise control right into it.
Pushing a Civil War amputation budget next year after this year’s ice cream with sprinkles budget is perverse. But the mayor’s strategy appears to be a desire to rip off the Band-Aid in one clean jerk. The rating service Moody’s revised its outlook on San Francisco this month to “negative” and made it clear that continuing to deplete the city’s reserves could result in a dreaded bond rating downgrade, which worsens the city’s debt costs.
It’s a safe bet that, in the coming months, this letter will be used as leverage by the mayor.
But it is also a safe bet that the city’s labor unions will use the tremendous leverage now gifted to them via synching their contracts with a mayoral election. This portends a nasty situation; it is, again, perverse that the city continues to deplete its reserves to stage a pending collision — with the impact coming at a time when both the fiscal and political atmosphere will be worse.
San Francisco was never a model of good government, with exceptions, such as setting aside the reserves the city is now burning through; thank you kindly. But, yes, to forego any meaningful budget sacrifices in year one so that you’ll come back in a hyper-politicized year two and demand the sacrifice of all firstborn sons is not good government.
Is it good politics? Probably not. You don’t earn many political points with austerity, especially if that austerity involves reducing the city services people care for, and the mad and maddening conditions on the streets don’t improve. The mayor’s office is also talking about a 2024 measure to reform the city’s business tax structure, which is alarmingly dependent on several large companies. This is a solid idea. But good luck selling a measure that, by design, raises the tax burden on small and middling companies to ease the load on the richest corporations in San Francisco.
Of course, the level of political fallout depends on whether a mayoral candidate emerges whom the unions feel is viable. The mayor, it seems, is depending on that not happening.
Regardless, San Francisco is still faced with the inexorable problem of diminished revenues and burgeoning needs.
“Everywhere you look, you need more: More nurses, more cops, more this, more that,” sighs Rudy Nothenberg, a longtime former mayoral budget director and chief administrative officer. “I don’t know what the hell is gonna happen when the money for Muni runs out. There’s not enough of a business community left to tax, and we’re driving out what’s left of it. Where the hell is the money gonna come from? I’m glad I’m not there.”
This is what awaits us next year, and this is the scenario the city has chosen to intensify by putting off the tough decisions. The purity of the madness.
Standing afar off for the fear of her torment, saying, Alas, alas, that great city … that mighty city! for in one hour is thy judgment come.