1

SF Budget��

January 2026

1/28/2026 11:55 AM

Coming to Grips With Our New Reality

3

• SF resident population down 45k since 2019 (5%)
• Back to 2012 level
• Largest exodus since 1906
• SF weekday (workday) population down 160k since 2019 (11%)
• Back to 2011 level

​

US Census

CA Department of Finance

Young Adult Exodus Drives DoF Projection of Zero Growth

• Domestic net outflow since 2012
• More births than deaths and net positive international immigration 2010-2018
• 20% of all SF 20-35 year olds left in 2021 🡪 collapse of the long term SF population projection, births now equal deaths
• Only 65+ age segment grew

4

CA Department of Finance

usafacts.org

2019

Trajectory

Current DoF

Projection

Surging City Budget

5

• SF inflation-adjusted budget up 54% since 2012

​

​

• $5.5B extra dollars

​

​

• On par with U.S. per capita of $20k
• 2.5x CA per capita of $8k

​

​

https://fred.stlouisfed.org/series/CASANF0POP

https://abag.ca.gov/tools-resources/data-tools/consumer-price-index

https://data.sfgov.org/City-Management-and-Ethics/Budget/xdgd-c79v/about_data

Budget in $millions, per capita in $

Fiscal years ending in June

Full Budget

Understanding the City/County Budget

• Budget cycle runs July to June

​

• FY2024 budget was $14.6B

​

• Includes “enterprise departments” which charge fees for service… supposed to be self-funding

​

• “SF City/County budget” excludes enterprise departments

​

• $10.1B SF City/County budget in FY2024
• $12,100 per capita

​

6

City/County Budget

Peer Cities Benchmarking

• 8 consolidated city/counties with similar populations
• Denver, Philadelphia, Honolulu, Jacksonville, Indianapolis, Kansas City, Nashville, New Orleans
• All run by Democrats except Honolulu (Independent)

​

• Adjusted to reflect SF cost of living, the average budget per capita is $7,400 in our peer cities

​

• The SF City/County budget would contract by 39% to be in line with peer cities

​

• Spend reduction of $4B
• $4,700 per capita x 832,346 residents

​

7

City budget books for each peer city

https://www.forbes.com/advisor/mortgages/real-estate/cost-of-living-calculator

City/County Budget

Department-Level Detail

• 52 city/county departments… 9 grew more than $100M FY2012-2025 after adjusting for inflation (dark orange)

​

• These 9 comprise increase of $2.9B … half is DPH and HOM
• DPH includes SFGH, LHH, Mental Health, SFHN, etc.
• HSA includes over 20 subcategory programs for children and adults
• HOM is partly funded by Nov ’18 Prop C homeless GRT of $250M
• POL spend is up, but significant shift to civilian staff to handle paperwork
• GEN includes debt service, contingency, etc.
• CHF includes afterschool, jobs, and other youth- and family-focused spend
• DPW handles street and sidewalk maintenance
• DEC formed in 2022 by ‘18 Prop C comm’l rent tax, coordinates preschool programs
• MYR oversees much of the city’s subsidized housing portfolio

​

• One “enterprise department” receives general fund support
• MTA is not self-funding, has grown $354M since 2012, and receives $540M+ from the general fund
• Projecting additional need of $300M+ annually beginning 2027
• Large capital projects at SFO and PUC

8

Largest 20 Departments + “Enterprise”

https://abag.ca.gov/tools-resources/data-tools/consumer-price-index

https://data.sfgov.org/City-Management-and-Ethics/Budget/xdgd-c79v/about_data

Full Budget

Dramatically Higher Compensation Spend Per Resident…

• SF spends 3-14x as much as other large CA cities per resident on public employees
• $7,025 per resident

​

​

• Excluding enterprise and county spend, SF City employee compensation of $3,220 per capita
• 42% higher than the next highest city (LA)
• Over 200% higher than the median CA peer city
• Grew at twice the rate of bay area inflation since 2018

​

​

​

​

​

9

Mercury News, August 26, 2024

Full Budget

City/County Budget

…Higher Comp Spend Driven By More Headcount…

10

• SF Chronicle analysis: typical large U.S. city has 5-12 city employees in core functions* per 1k residents

​

• SF employs 24 per 1k residents
• Only half of the city’s estimated 40k direct and NGO employees are included in this ratio

​

• Using per-capita benchmarks for direct employees only, SF is 4-8k overstaffed compared to:
• NYC: 3,500
• LA: 7,900
• Portland: 8,300
• Boston: 8,300

​

* In counties with >500k residents; excludes enterprise depts, hospitals, etc.

https://www.sfchronicle.com/projects/2025/sf-city-employees/

Municipal and county employees in core local government functions per 1K residents

City/County Budget

…Headcount Increase Is Recent

• If employees per capita were rewound to 2018 level… 4,000-7,000 fewer
• Average salary and benefits of $215k, so $860M-1.5B of savings

​

• Pervasive work from home among city employees that can (ie, excluding nurses, bus drivers, police, fire, etc.)
• 58% of city employees live outside SF

​

11

* Note that police staffing dropped and also mix shifted away from full duty sworn officers to civilians, masking a much larger drop in patrol officers

https://www.sf.gov/sites/default/files/2024-07/ASO%20FY2024-25%20%26%20FY2025-26%20-%20FINAL%207.31.24.pdf

https://www.sfchronicle.com/sf/article/remote-work-17510522.php?fromRichie=1

• Total funded headcount up 2,344 or 8% since 2018, while resident population dropped 5% and commuter adjusted population dropped 11%... headcount per capita up 14-21% since 2018… explains ALL of the excess
• 5 departments were 61% of total increase since 2018: Public Health, Human Svcs, Homelessness, City Admin, and MTA

Full Budget

Corporate and Nonprofit Vendors

• SF spends $7 billion with outside for-profit and non-profit vendors

​

• 10,900 active contracts with 4k vendors

​

• But… only 44 vendors have contractual relationships more than $100M

​

• Nearly 600 vendors are nonprofit organizations
• 54 had nonprofit statuses that were revoked, suspended or considered delinquent by the California Attorney General’s Office as of 2023

​

• Vendor contract performance management needs improvement
• Identified as a critical shortcoming for many years
• Significant cost savings (hundreds of millions?) from better management

12

As of January 2023

https://data.sfgov.org/City-Management-and-Ethics/Supplier-Contracts/cqi5-hm2d/data

https://sfstandard.com/2023/01/12/san-francisco-nonprofits-revoked-suspended-delinquent-millions/

Full Budget

City Grant Program (Non Profit Funding) Has Ballooned

13

• The city budgeted grants of $1.7B in FY2025 which are 92% concentrated in six departments Homeless, Early Childhood, Children/Families, Human Svcs, Economic and Workforce Development, Mayor

​

• Adjusted for inflation, grants have grown by over $700M since 2019

​

• Press coverage of fraud… how widespread?
• 2023 Citizen Grand Jury report: significant opportunity to reduce waste, fraud, and abuse through better goals and metrics and more oversight, without materially impacting outcomes for residents
• Controller recently implemented increased audit requirements, but performance tracking still absent

https://data.sfgov.org/City-Management-and-Ethics/Budget/xdgd-c79v/about_data

https://abag.ca.gov/tools-resources/data-tools/consumer-price-index

https://media.api.sf.gov/documents/2023_CGJ_Report_Hitting_the_Performance_Bullseye_-_Contracting_for_Better_Outc_h8lGNXC.pdf

​

​

Full Budget

Official City Forecast

14

• Annual deficit of $1.3B by FY2030
• Driven by $1.9B growth in spending, offset by $600M revenue growth
• City charter requires a balanced 2-year budget (9.101(c))
• Updated projection due this month

​

​

• Mayor’s budget team faced with how much to accomplish now versus over time

https://media.api.sf.gov/documents/Five_Year_Financial_Plan_FY_25-26_through_FY_29-30_FINAL_0.pdf

City/County Budget General Fund + Req’d MTA

Full Deficit Picture

• MTA currently receives $500M+ per year from the General Fund
• Additional unfunded $300M+ annual deficits beginning in 2027 when pandemic-era relief ends
• Uncertain success for local/regional transit revenue initiatives at the ballot box (BART too)
• $400M risks to property tax forecast as downtown CRE vacancy persists
• Federal reductions (TBD) increase the deficit; recession scenario is a further risk
• Full deficit risk of $1.7-2.5B+ by 2030

15

https://media.api.sf.gov/documents/Five_Year_Financial_Plan_FY_25-26_through_FY_29-30_FINAL_0.pdf

City/County Budget General Fund + Full MTA

SFMTA Forecast

SF’s Competitive Disadvantage

• Notable SF companies have been moving their headquarters out or downsizing SF footprint for far too long
• One every three years pre-pandemic

16

• Trend has accelerated dramatically in the past 5 years
• Three per year, or a loss rate 9x the 20 years pre-pandemic

​

• Despite the AI hype, CRE vacancy remains at 35%

Addressing SF’s Competitive Disadvantage

• 2023 analysis by SF Treasurer, Controller, and Chief Economist: a mid-size business in SF pays at least 20x the business taxes it would pay in other bay area cities

​

• Business taxes generate $1.7B for SF
• Reducing by half to close the competitive gap would mean cutting spending by another $850M

17

Addressing the deficit and mitigating our competitive disadvantage would mean spending reductions of $2.5-3B

FY2026 (and 2027) Budget��June/July 2025 Final Numbers

18

FY2026 Budget Overview

• Maintains then grows current spending levels
• FY2026 spending in line with FY2025
• FY2027 grows by $330M

​

• $440M higher than Breed’s final 2026 budget

​

​

​

19

Deficit Drivers

• We do not have a revenue problem, we have a cost problem, and costs need to be reduced

​

• Biggest drivers of cost growth are:
• Existing and future labor agreements ($690M)
• Employee health and dental benefits ($200M)
• Public health operating costs ($200M)
• HSA - IHSS and other costs ($120M)
• Increases to nonprofit grants ($85M)

​

• Deficit reduction means addressing these drivers… the sooner the better

20

https://media.api.sf.gov/documents/March_Update_FY_25-26_through_FY_29-30_03.31.25_FINAL.pdf

Headcount Deep Dive

• This $890M deficit contributor by 2030 equates to 4k excess headcount
• $890M / $235k estimated average fully loaded SF city employee in 2030 = 3,787

​

• “Bumping” rules mean layoffs are not practical

​

• Hiring freeze combined with natural attrition and retirements can drive needed workforce adjustment over 3-4 years
• Critical to implement it with discipline and minimize “special exceptions”
• Mayor and supervisors need and deserve the strong and vocal support of local businesses and residents as they undertake this difficult work

21

Note that Mayor Bass proposed a 2,700 headcount reduction in the LA budget for FY2026, laying off 1,600 and closing 1,100 open positions… subsequently restored 1k of these by reducing funding for homeless shelters and housing… City of LA employs 35k

City Grant Program Deep Dive

22

• The grant program is budgeted to be $600M+ in excess of the pre-pandemic level

​

• The program has been shown to be rife with waste, fraud, and abuse and should be significantly reduced and restructured to require transparent performance reporting

​

• Here again, the vocal support of local businesses and residents is crucial

​

FY2027 (and 2028) Budget��December 2025 Budget Instructions

23

FY27-28 Outlook and 2030 Projection

• Controller forecasts deficits of $296M+$640M (FY27+28)
• $1.2B 2030 deficit; $617M more revenue but $1.8B more spending

​

24

• Assumes $800M+ growth in annual local tax receipts by 2030, offset by reductions in federal transfers
• Risk from $400M property tax appeals, $350-400M excess ERAF, further federal reductions is not included here

FY27-28 Mayor’s Budget Instructions

• $400M in annual ongoing spending reductions
• Eliminate discretionary programs, restructure around CURRENT staffing
• Reduce citywide workorders/overhead by 10%
• Centralize where cost effective
• Implement measurable outcomes in grants and contracts

​

25

Budget Calendar

• New approach to budgeting

​

• Rather than the 10-15% reduction targets mandated by Breed, MBO will take a more active role in managing department submissions

​

• Jan 20 interim milestone, with Feb 23 department submissions due

26

Note: 2026 Ballot Propositions – New Taxes

June 2, 2026 (Primary Election)

• Changes to Business Tax Based on Executive Pay ("Overpaid CEO Act"): $200M annually to SF
• Status: Petition in circulation.
• Details: Backed by labor unions, this measure targets large corporations by increasing the Overpaid Executive Gross Receipts Tax. It would apply higher tax rates to companies where the top executive's pay is significantly higher than that of their average employee.

November 3, 2026 (General Election)

• Regional Transit Sales Tax (SB 63): $140M annually to SF
• Status: Legislative authorization and signature gathering.
• Details: This measure would likely propose a 0.5% to 1% sales tax across Bay Area counties (with San Francisco potentially hitting the 1% mark) to provide a "fiscal lifeline" for transit agencies like BART, Muni, Caltrain, and San Francisco Municipal Transportation Agency (SFMTA)
• Parcel Tax: $187M annually to SF
• Status: In development/planning.
• Details: Local parcel tax specifically for San Francisco to fill a projected $300+ million annual deficit for Muni, intended to prevent deep service cuts.
• Statewide "Billionaire Wealth Tax": $100B over 5 years to the State of CA
• Status: Signature gathering for the state ballot.
• Details: A proposed 5% “one-time” tax on billionaires residing in California. While a state measure, its impact would be significant for San Francisco given the city's high concentration of ultra-wealthy residents.

27

One More Thing…

• City contributes to the pension and OPEB funds* every year, but fund balances are insufficient to fully cover estimated future liabilities

​

• Pension net liabilities are about $4B using the official discount rate of 7.2%
• Using a more-realistic 6.2% discount rate results in pension net liabilities of $9B
• OPEB* estimated at $4B in 2023
• Total pension and retiree healthcare unfunded liability of $13B

​

• This problem will need to be addressed over time… the sooner we start, the more and better options exist

​

28

* Other post-employment benefits… healthcare

29

The Path Forward – Near Term

• Overlap of spending growth since 2018 and discretionary general fund dollars equates to $1.1b actionable spending reduction today without charter reform or ballot propositions
• Combination of headcount attrition and grant program reduction
• Near term procurement reform (eg, see Dorsey’s domestic partnerships idea) and medium term contract management reform

​

​

​

​

​

​

​

​

​

​

​

• Medium to long term improvement will require charter reform through the November 2026 and November 2028 ballots
• Critical to improve the overall corporate and individual affordability equation: cost of housing (means test rent control, reduce trade union requirements, revamp affordable housing funding mechanisms); transit (low cost provider of transportation choice, in partnership with private innovators); population growth (ultimate long term challenge for the city, lowest percentage of <18 in the country, net negative domestic migration since 2012, requires more 20-35yo’s… getting married… and having kids in SF)

30