Mayor Daniel Lurie said Friday that his office will pare back city functions during next year’s budget cuts and focus on “core” services like public safety, clean streets, and transit in a bid to shave some $400 million and continue addressing the deficit.
The mayor’s office said departments are being instructed to reduce the total number of funded programs and services, stop new hiring, review all contracts for potential savings and reduce administrative costs.
The cuts could include layoffs, with Lurie’s office telling departments that it will work with them to assess how downsizing will affect services.
That leaves broad swaths of city programs, like arts and culture spending, event funding, youth and elder enrichment programs, and advocacy work potentially on the chopping block next year, even after Lurie cut some $260 million this summer.
The city is still spending more than it’s taking in. Lurie’s office projected a $936 million deficit in the next two fiscal years if expenditures don’t come down. That would become $1.2 billion by fiscal year 2029 to 2030.
The mayor also directed departments to reduce the amount they charge each other for interdepartmental work by 10 percent.
“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 wrote in a statement. “We aren’t simply going to do everything we were doing a little less well.”
The cuts, the mayor’s office said, will focus on changing how city services are delivered and include elimination of certain programs.
The mayor’s budget team will be sitting down with department representatives to decide which programs to keep and which to cut. That’s a departure from the budgetary planning process of 2025, when every department was told to come up with its own ways to cut 15 percent from its existing budget.
Last year’s cuts, which mostly came from the city’s contracts with nonprofits, ultimately netted about $260 million in savings but cuts to programs like youth resource centers, street ambassadors, and outreach to tenants in substandard housing.
Public safety departments, like the district attorney’s office and the police department, however, declined to offer any cuts and, in the end, walked away with larger budgets.
Today’s announcement is structured around a list of “core” priorities: affordability, strengthening the social safety net, safe and clean streets, public transit, health and homelessness, and the city’s economy. If programs don’t serve those priorities they may be phased out, the mayor’s office told departments.
The city has been running a deficit since the pandemic, when declining population and a high vacancy rate in commercial buildings decreased the city’s revenue. Its fiscal situation has gotten worse as COVID-era subsidies expired.
The federal budget (also known as the HR-1 Bill, or the “Big Beautiful Bill”) will also hit the city hard.
The Department of Public Health, for example, expects to lose $90 million to $180 million a year starting in fiscal year 2027-28. The Human Services Agency could lose $26 million a year, now that the federal government has reduced its share of administrative costs for CalFresh from 50 to 25 percent.
To staunch the hemorrhaging, departments like these may need to actually spend more on staff to help residents with new, more onerous paperwork required for MediCAL and CalFresh benefits.
One spot of good news: Fueled by the AI boom, the city is now projected to earn an additional $277 million from gross receipts taxes, which are collected when a business sells a good or service.