Mayor Gavin Newsom announced Wednesday that The City is facing a projected $229 million budget shortfall next fiscal year and ordered department heads to cease hiring new employees and start looking at ways to trim their budgets by as much as 13 percent.
Despite revenue growth and a strong local economy, Newsom, in a 10 a.m. meeting with department heads "called for some serious belt tightening," Newsom’s spokesman Nathan Ballard said.
The mayor requested an immediate hiring freeze and told department heads that by Feb. 1, budgets should be submitted for the upcoming fiscal year with 8 percent reductions — including 5 percent of ongoing costs and 3 percent of one-time costs — as well as a contingency cut of 5 percent.
Department heads were also advised to start cutting back on spending as early as January.
"Although he wants to trim the fat, the mayor made it abundantly clear that he didn’t want reductions in people sweeping the streets or police walking beats," Ballard said.
The $229 million deficit projection is expected to fluctuate as The City moves closer toward finalizing a balanced city budget for the fiscal year beginning July 1.
Newsom must submit his proposed balanced city budget by June 1 to the Board of Supervisors for approval. The board can vote to make changes to it.
The Mayor’s Office is projecting the deficit based on a number of factors, including new hires, salary bumps and voter-mandated spending requirements.
Next fiscal year, The City will be paying out $111 million more in salaries and $22 million more in health and other benefits — an increase due in part to the hiring of about 700 new employees this year. Voter-mandated spending will increase by $72 million. Additionally, this November’s passage of Proposition A sinks about $28 million of operating budget dollars into Muni next fiscal year.
"It’s not the end of world, but it certainly is a significant number," Controller Ed Harrington said of the projected deficit. He said The City’s revenues are healthy, forecasted to increase by 5 percent, which is the historical average.
Deputy Controller Monique Zmuda said "expenditure reductions are going to be very difficult because the Mayor’s Office is trying to increase the size of the police workforce."
"A big chunk of [the projected deficit] is to pay for additional nurses and additional police officers that were added in the current year," she said.
The Mayor’s Office projection does not include possible reductions as a result of the state moving to close an estimated $10 billion shortfall for next year.
"We expect the state budget will make this even worse," Harrington said.
The Mayor’s Office is also projecting a budget deficit of $118 million for fiscal year 2009-10.