As Mayor Gavin Newsom gets ready to present his budget for next year by June 1, he will have to close a $64 million projected shortfall in The City’s operating budget, significantly less than was anticipated earlier this year, according to a report released Friday by the Mayor’s Budget Office.
The projection marks the second consecutive year that San Francisco has faced a sizably lower shortfall than originally forecast, a fact city officials attribute to an economic turnaround.
The recent forecast comes as good news, since the Controller’s Office had projected a $172 million shortfall for the upcoming fiscal year, which begins July 1, 2007.
The forecasted $64 million shortfall "means that things have improved and things have gotten much better from what we were projecting back then," City Controller Ed Harrington said. "And that makes sense, the economy is better, taxes are up — all the things that you would have hoped for have pretty much been happening."
The City is expected to see a 4 percent increase, or $100 million, in revenues next year. "That’s really good news, that The City is continuing on the economic upswing we’ve been experiencing over the last year and a half," the mayor’s budget director, Noelle Simmons, said.
The bulk of next year’s shortfall is the expected salary boosts for police officers, firefighters and nurses, all of whom have contracts that are up for negotiation.
"The entirety of next year’s projected shortfall is attributable to the growth in wages and the cost of benefits to city employees," Simmons said.
"We know they are going to get some good-sized raises," Harrington said. "And then you have just the need to hire more cops."
With the projected shortfall, departments are being asked once again to submit budgets that reduce spending by 3 percent.
"What’s awful is that it’s better than anticipated but it’s still negative. San Francisco will always have more needs than we have money," Harrington said.
The projected shortfall back in the spring was off for three main reasons. Unanticipated savings of $46 million have come in from fiscal year 2004-05, estimates of revenue have increased slightly and the contracts negotiated this year avoided increases for the upcoming fiscal year.
The projected shortfall is most certainly expected to change. "It’s only a snapshot in time," Simmons said.
But it does indicate a health economy. "If the economy stays going strong, we have a chance to have some real good years," Harrington said.