Why a Pandemic Budget Is Necessary
Illustration credit: Brian Stauffer/Foreign Policy
By Joel P. Engardio
New York Governor Andrew Cuomo often refers to fighting the coronavirus pandemic as a war. To go with that sentiment, New York Mayor Bill de Blasio announced his city would have to enact a “wartime” budget and cut $2 billion in municipal services over the next year.
In a war like coronavirus, spending must first soar. We spend what it takes to save lives, even when we know such spending is unsustainable — because it’s the right thing to do.
Then the deficits arrive and spending must contract. New York is already preparing for the inevitable: aggressive cuts in non-essential services. San Francisco must do the same.
Before the coronavirus pandemic, San Francisco was looking at a $420 million budget deficit over two years. We were spending way beyond our means even in boom times. Now that we’re in crisis mode, early estimates projected the deficits could reach $1.7 billion. Within a month, that number was revised to $2.5 billion. Don’t be surprised if it goes even higher.
This is a big concern because cities can’t just borrow their way out of a deficit the way the federal government does. San Francisco needs to enact a pandemic budget.
Sobering outlook
Ben Rosenfield, San Francisco’s budget controller, compiled a sobering post-coronavirus outlook. He predicts a recession in our local economy.
Rosenfield said there isn’t enough data yet to determine if we’re headed for a limited or extended impact scenario. But in the best case we can expect “severe” losses through the summer. Otherwise, we could see losses the rest of the year with an extended recovery through 2021.
“I’ve stopped defining worst-case scenarios because they keep getting worse every week,” Rosenfield told the Chronicle in May.
Ted Egan, San Francisco’s chief economist, told KQED the $750 million that City Hall currently has in its rainy day and general reserves will soften the budget impact. But it won’t go far enough to cover multi-year revenue losses.
Bold actions
City Hall helped flatten the curve of the virus locally as one of the first municipalities in the nation to order residents to shelter in place — a bold step that saved lives. The key was residents partnering with City Hall to adhere to the order.
We must continue working together. That means taking bold action to flatten the devastating economic curve headed our way. Everyone will have to pitch in.
Just as New York has started to put itself on a “wartime” budget, San Francisco must act quickly to rework our budget to reflect the reality of a pandemic-fueled economic disaster. Each day we delay, we compound the fiscal pain that will be felt.
“It’s going to be recession time in City Hall,” Egan told KQED, “and we’re going to have to be looking at savings.”
The hard truth is that City Hall will be forced to make significant layoffs of city employees and reduce services. It isn’t a choice anymore.
Recent history as a guide
The last time City Hall faced a budget crisis of this magnitude was the Great Recession of 2009.
Mayor Gavin Newsom dramatically cut salaries and put many city employees on shortened workweeks. Newsom and his chief of staff took 15 percent pay cuts. All department heads saw their salaries reduced by 10 percent, along with anyone in the mayor’s office who made more than $100,000. Newsom asked all union employees to take a 6 percent cut.
The 2010 cuts at City Hall were tough and today’s economic situation is much worse. The other problem is that we had 26,000 city employees then, which was considered a lot for a city of 805,000 people.
Yet we have more than 40,000 now. City Hall grew enormously during a decade of economic expansion, far outpacing a population increase of less than 80,000 people. We doubled our budget and now we have one city employee for every 23 residents.
That’s a $3.7 billion payroll that wasn’t sustainable in boom times, given the deficits we were already facing. Now, it has ballooned into crisis proportions.
No shortcuts
Ideally, City Hall should have dealt with its out-of-control $13 billion budget long before trouble arrived. But we let the budget double the past decade when we could have audited programs and measured for results.
We could have developed a process for prioritizing services that have long term benefits and clearly defined goals. Then we would know with more certainty which programs are most impactful. This is good information to have when an economic disaster comes along and we have to make decisive budget decisions.
Unfortunately, we didn’t do this sensible work when things were good. And the longer we wait, we will be forced to make cuts without the luxury of time to give each budget component thoughtful attention.
There are no easy shortcuts to reduce the budget. You can’t just eliminate an entire department to save a billion dollars. Optimizing a budget the size of San Francisco’s requires detail-oriented analysis of line items and existing systems. It’s long, grinding, hard work that requires shared sacrifice.
Every department and every city employee will have to be part of the solution.
When department heads can make more than $300,000, a 10 percent cut means they will have to get by on $270,000.
A Real Balanced Budget
We have to remember that a city can’t borrow or print money like Congress can. We are forced to balance our budget and that means the $2.5 billion deficit we are facing must be offset in very real and hard ways.
The good news is that there is plenty of savings to be found in a bloated $13 billion budget, which has doubled since the last economic crisis.
To start, we must audit every program to ensure that the money is being well spent. For example, the Examiner recently reported that “San Francisco spends more than $100 million a year on job training programs but lacks crucial information to gauge their effectiveness.”
The city controller recently released a public integrity review on the Department of Public Works that revealed $25 million in unaudited and unsupervised contracts for homelessness services.
We should measure programs for success and only pay for what works. We must look in every nook and cranny of the budget. The funds we save there can be better allocated to essential services for our residents. It is a difficult, but not impossible, task to find these savings in a budget as large as ours.
Still, there will be no way to avoid the cuts in salaries of city employees — by far our biggest expense.
Our economy and vulnerable populations face a very real challenge. The statistics, as grim as they are, don’t yet fully reveal the extent of the losses we will suffer. Our reserves will not be enough to get us through.
That’s why City Hall must make some tough decisions and sacrifices to enact a pandemic budget. It’s the only way we can ensure better days on the other side of this crisis.
Joel Engardio is a candidate for supervisor on San Francisco’s westside in District 7. Learn more about his views on local issues at engardio.com/issues