Mayor Daniel Lurie on Friday directed city departments to slash expenditures by $400 million in preparation for another tough budget year spurred by a growing deficit.
The requested cuts will kick-start the second consecutive year of challenging negotiations between the mayor’s office and dozens of city agencies over how to close a shortfall of $936 million, a tug of war that will last into the first few months of 2026. The mayor is asking departments to reduce services, eliminate vacancies, and curtail hiring.
Lurie in recent weeks has warned of a worsening fiscal outlook next year, which he has blamed in part on President Donald Trump’s One Big Beautiful Bill Act. The federal legislation is expected to blow a $220 million hole in San Francisco’s coffers, according to an updated projection from the mayor’s office.
“My administration will work closely with department leaders, the Board of Supervisors, community partners, and labor to deliver a responsible budget that prioritizes core services — clean and safe streets and a durable recovery that benefits all San Franciscans,” Lurie said in a statement. “We aren’t simply going to do everything we were doing a little less well. Together as a city, we are going to decide what we want to prioritize and deliver world-class services.”
The city’s budget is measured in two-year intervals. The 2026 deficit is estimated at $296 million, while the 2027 deficit is projected to be $640 million.
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Lurie has experience working with red ink. The 2025 budget, his first as mayor, totaled $15.9 billion and required closing a $782 million shortfall via sweeping cuts to nonprofit budgets and a small number of layoffs.
That process began a month before Lurie took office in January, when former Mayor London Breed requested a 15% reduction from departments. Lurie has criticized his predecessor’s reliance on one-time sources to cover fiscal holes and pledged to be a better steward of the city’s finances.
Lurie is taking a different tack in navigating next year’s budget. Instead of across-the-board percentage trims by departments, the mayor is asking for a citywide general reduction of $400 million.
City officials recently projected good news for the budget, with an estimated $277 million in additional gross-receipts tax revenue over the next two years. However, according to updated estimates from the mayor’s office, much of that extra cash will be consumed by rising costs and earmarked expenditures.
While the mayor’s guidance suggests that budget challenges are inevitable, an upcoming joint report from his office, the controller’s office, and the board’s budget and legislative analyst is expected to provide a clearer picture of the financial crisis.
Lurie’s request portends a battle between his office and the city’s politically powerful unions and nonprofits over potential layoffs and cuts.
Lurie’s initial budget this year called for cutting 1,000 jobs, about 90% of them vacant positions, from the city’s payroll. That sparked a fierce union-led opposition campaign over the summer, with a June protest at City Hall resulting in arrests (opens in new tab). In deliberations with progressive Supervisor Connie Chan, who serves as the board’s budget chair and is an ally of labor, Lurie reduced the number of layoffs and ultimately cut about 40 filled positions.
Friday’s instructions from Lurie did not explicitly mention layoffs, although the worsening state of the budget leaves the possibility open.
Department heads will spend the rest of the year and the first quarter of 2026 crunching the numbers and crafting their responses to Lurie’s instructions. Though the mayor requested the cuts, city agencies are not required to follow directions: Nearly two dozen departments this year failed to tighten their belts in response to the mayor’s demands.
Some agencies are in a better negotiating position than others. Lurie has retained — and, in some cases, increased — the budgets for public safety departments, including police, fire, and the district attorney’s office, asserting they are critical to the city’s economic recovery and his administration’s crackdown on crime and drug issues.
Other efforts are underway to boost the city’s revenues. In October, a coalition of labor groups filed paperwork to initiate a June ballot measure (opens in new tab) that would increase taxes on CEOs’ salaries in the hopes of raising more than $200 million for the city’s general fund.