San Francisco, CA — Mayor London N. Breed today issued Budget Instructions to department heads to guide the budget process for Fiscal Years 2023-24 and 2024-25. This is the first step in the budget cycle, with Departments scheduled to submit proposed budgets in late-February 2023.
Over the next two years, the City is projecting a budget shortfall of approximately $728.3 million with a $200.8 million deficit in the first year and $527.6 million in the second year. This is out of an annual general fund budget of approximately $6.8 billion. The shortfall is the result of slowed revenue growth, specifically the City’s largest tax revenues that include property and business tax, and loss of temporary federal COVID-19 funding.
To help address this shortfall, the Mayor instructed departments to propose reductions of approximately 5% in the first year and 8% in the second year from their General Fund budgets. Additionally, she directed department heads to prioritize filling vacant positions for core City services that will support San Francisco’s recovery. The last time the City projected a shortfall around this size was two years ago, a year after the pandemic hit. Prior to that, the two-year deficit has not been over $600 million since around the time of the Great Recession over a decade ago.
“We know the challenges facing San Francisco are significant and we have a lot of work ahead of us to maintain the City’s recovery efforts,” said Mayor Breed. “As we work to close this deficit, it will require tough choices and real tradeoffs. The continued impact brought on by the pandemic certainly has slowed our recovery, but we are making progress. I know we can do the hard work to keep this City moving forward.”
The Mayor’s Budget Instructions direct departments on how to prioritize their proposed budgets for the upcoming two-year budget process. The Instructions are informed by the estimated two-year deficit for the upcoming budget cycle and delivered by the Mayor annually in December. The two-year deficit is based upon the five-year budget forecast, which is projected for long-term financial planning by the Mayor’s Budget Office, the Controller, and the Budget and Legislative Analyst’s Office. The detailed full Five Year Financial Plan report will be available in early January 2023.
Mayor Breed directed City departments to continue to focus on top priorities like public safety and police staffing shortages, the City's downtown economic recovery, and supporting homelessness and mental health investments. To help meet these needs while also addressing the deficit, the Mayor also directed departments to:
- Propose ongoing reductions of 5% of adjusted General Fund support, and an additional 3% in the second year;
- Prioritize filling or reclassifying vacancies for core departmental functions and Mayoral priorities; and propose remaining vacancies for budget savings;
- Maintain Mayoral initiatives and recommend ways to fund them more efficiently;
- Prepare for outlook to worsen and instructions to be revised given the uncertain economic outlook
Budget proposals from departments are due on February 21. Following submission of the budget proposals, the Mayor’s Budget Office will evaluate the requests and develop the Mayor’s proposed balanced budget to submit to the Board by June 1, 2023. At that point, the Board of Supervisors then considers the budget and must send a balanced budget back to the Mayor for signature by August 1, 2023.