San Francisco’s dwindling coffers haven’t given us much to celebrate this holiday season — until now.
Amid a projected $1 billion budget deficit next year, city officials said Tuesday they are expecting $277 million more in gross receipts tax revenue over the next two years than initially estimated — giving Mayor Daniel Lurie a little more wiggle room in how he closes the gap.
The city’s gross receipts tax charges businesses based on revenue generated. The city controller’s office initially projected next year’s revenue at $1.29 billion but now estimates it at $1.38 billion. Similarly, the initial 2027 forecast was $1.23 billion, while the latest assumes $1.42 billion.
The increase could help offset some of the more severe cuts that Lurie and city officials have warned might be necessary amid the financial impact of President Donald Trump’s One Big Beautiful Bill Act, which is expected to deprive the city’s budget of hundreds of millions of dollars and force tens of thousands off Medi-Cal.
Lurie, a moderate Democrat, won the 2024 mayor’s race in part on his pro-business agenda and has made the city’s post-pandemic economic recovery one of his top priorities. His strategy has included overhauling the permitting process to attract more businesses to the city.
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He touted the updated numbers as evidence of that focus and attributed the forecast to his administration’s focus on cleaner streets and public safety priorities.
“Businesses are coming back to San Francisco, our economy is recovering, and that recovery is providing the revenue we need to pay for essential services for San Franciscans,” Lurie said in a statement. “I’m clear-eyed about the challenges that remain, including the changes at the state and federal level that pose a real threat to our residents and our budget.”
More details on the extent of San Francisco’s budget woes will become available over the next several weeks. Some of that will come when Lurie releases instructions this month to city departments about how much they must cut their budgets. Additionally, the city controller’s office will publish fiscal projections in the coming weeks.
Even with Monday’s good news, a possible $1 billion deficit could force Lurie to make another round of tough cuts in 2026. This year, Lurie faced a $780 million deficit that required shaving about $185 million from nonprofit contracts and spending and laying off about 40 city staffers. The city measures its deficit in two-year intervals.
It’s unclear how deep cuts may be next year, but Lurie has said the city needs to brace itself. “Last year was bad,” he said last week as part of a discussion with Wired magazine. “This coming year is gonna be worse.”
The austerity measures this year sparked conflict with the city’s nonprofit community and politically powerful unions, many of which are likely to use the updated projections to lobby the mayor against trimming City Hall’s workforce or slashing department budgets.
David Harrison, public policy director at the San Francisco Chamber of Commerce, described Tuesday’s figures as “really good news.”
“More revenue means that we have more flexibility come budget season,” said Harrison. “My gut is that it is [from] a mixture of good economic trends through things like AI, including also good fiscal policy.”