San Francisco is looking at a budget deficit of $411 million for the 2021-2022 fiscal year, according to a five-year financial plan released Friday revealing that the deficit is expected to continually rise.
The 98-page document released by the Mayor's Budget Office and the Controller's Office stated that total costs are expected to grow over time — leading to a $503 million cumulative shortfall in five years — with no certainty of high-wage workers returning to city offices when the pandemic is over.
The report revealed that total expenditures are projected to grow by approximately $1.47 billion over the next five years, representing an increase of 23.7% from the 2020-21 fiscal year. During the five years of the plan, baselines and reserves are expected to grow by $354.6 million (24% of total expenditure growth), employee salary, pension and fringe benefit costs will grow by $565.1 million (39% of total expenditure growth), citywide operating costs will go up by $304.8 million (21% of total expenditure growth) and departmental costs will rise by $242.2 million (17% of total expenditure growth).
Meanwhile, city officials have largely spent one-time sources to close the previous two-year budget gap of $1.5 billion, according to the report.
In contrast to expenditure growth, available General Fund sources are projected to increase by $963.4 million over the same period, an overall growth of 15.5% from the 2020-21 fiscal year. As required by its Charter, the city will need to implement strategies to close the gap between sources and uses over the five-year time period.
The report specifically questions whether tourism, offices and small businesses can rebound to their pre-pandemic levels, pointing out that sales tax receipts dropped more than 70% in the second quarter last year compared with the same period in 2019 in retail, hotel and business districts downtown. Meanwhile, the city saw practically no growth in online sales tax — unlike San Mateo and Santa Clara counties — showing that people moved away from San Francisco while working remotely. Another indication of this is the loss of commuters to the city.
The report stated that If workers return to their offices post-pandemic, San Francisco could return to normal, but if office tenants and their employees decide that the cost benefits of extended working from home — or relocation out of the city — outweigh any loss of productivity, then the city's expensive office and real estate markets face an uncertain future.
"It is tempting to ask, if the city was attractive to tech investment in 2019, why should it be so different in 2021 or 2022, after the pandemic?" it stated. "On the other hand, those companies and their workers have never had to suddenly cope without their office space. The lessons and habits they learned about remote work during the pandemic will have a powerful influence on the future of the San Francisco economy."
San Francisco employees
| Rank | Prior Rank | Name/Prior rank |
|---|---|---|
1 | 1 | Salesforce |
2 | 2 | Wells Fargo & Co. |
3 | 4 | Sutter Health |
