SAN FRANCISCO—The city of San Francisco is facing an $840.2 million deficit with the upcoming two-year budget, according to a projection in the Six-Month Budget Status Report released by the controller’s office on Feb. 18.
Mayor Daniel Lurie called the deficit “historic,” and said it could rise to $1 billion in year three.
“We cannot continue spending beyond our means year after year,” he said in a statement emailed to The Epoch Times. “We must immediately begin putting our fiscal house in order.”
According to the status report, the current projection has significant risks from “uncertainty in the economy and potential policy changes affecting federal revenue.”
The controller’s office predicts a $35.7 million improvement in the general fund compared to its last projection in the December 2024 Five Year Financial Plan.
“San Francisco has green shoots everywhere and growing momentum, but years of budget decisions that prioritized short-term fixes over long-term sustainability have left the city vulnerable, further challenged by uncertainty at the federal level,” Lurie said.
Lurie called for “a responsibly balanced budget that focuses on core city services.”
“If we don’t take decisive action this year, the impact on our city, our ability to keep streets clean and safe, our public health infrastructure, and our economy will be further jeopardized,” said Lurie. “This will require some extremely tough decisions, but I know we are up to the challenge.”
San Francisco expects to receive $452 million in federal revenue, according to the report.
However, some of these funds could be affected by the Trump administration’s decisions to eliminate or change federal funding based on new immigration, LGBT, energy, and DEI policies, the report states.
Although two courts have issued temporary restraining orders, “that litigation and the threat to the City’s federal funding remain ongoing. For example, the courts may lift part or all of the funding freeze,” the report states.
One case, filed on Feb. 7 by San Francisco and other local governments around the country, took aim at an executive order issued by President Donald Trump that orders federal officials to cut off federal funding to sanctuary jurisdictions to the extent allowed by law.
San Francisco has had sanctuary laws that shield illegal immigrants from federal immigration authorities since 1989.
Citywide revenues are expected to be $169.9 million below budget and $119.7 million below previous projections, according to the report.
“The variance from prior projection is largely due to worsening expectations for property, hotel and sales taxes,” the report states.
San Francisco’s sales tax recovery once exceeded that of other Bay Area counties, but that trend has reversed in the recent two quarters. According to the report, this is due to factors including “inflation, interest rates, consumer debt, online shopping, and a shift in spending patterns toward nontaxable services,” which have caused store closures and fewer luxury purchases.
However, departments will have a $97.7 million net surplus by the end of the year. The mayor’s hiring restrictions announced in January have contributed to the surplus, according to the report.
