Visitors to San Francisco may well leave their hearts on the Golden Gate Bridge, but it is their wallets and tax contributions that Mayor London Breed really wants. The city's proposed 2023-24 budget calls for an overall increase in spending of what seems a modest 4%, but the whopping $14.6 billion request does little to address the two-year deficit of an eye-watering $780 million. In fact, it seems that Frisco is leaking cash at an unsustainable level. But who is to blame for the swirling finances?
A Little Perspective …
According to the latest data, San Fran is home to roughly 715,000 residents; the budget for the next fiscal year works out at about 20K for every man, woman, and child. To put this into context, there are 120 countries with a gross domestic product over $15 billion, but 70 that have a GDP less than that of Frisco’s yearly budget. Jamaica, Nicaragua, Albania, and scores of other nations manage to get by on a lot less with a whole bunch more in terms of population. Nicaragua has almost ten times the population of SF; Mozambique boasts almost 40 times as many people. It is notable that many of the nations with less cash are also troubled by food insecurity, war, and general political upheaval. Breed has no such calamities at which to point the finger of blame.
The San Francisco Standard reports, “The longer-term five-year budget projection paints an even grimmer picture, a deficit that balloons from $745.6 million in the 2025-26 fiscal year to $1.22 billion in the 2027-28 fiscal year.” This is a stupefying picture considering that, just last year, the city was applauding itself for having a budget surplus for the first time since 1998. It is, sadly, all too easy to claim solid fiscal stewardship when federal COVID funds are refilling the coffers at an unprecedented rate.
I Left My Heart (and Money) in San Francisco
Part of the city's economic downturn comes from the government turning off the cash spigot. But other factors take their own portion of the blame. Nordstrom recently announced the closure of two downtown locations due to what it described as the "dynamics" of the area. This is hardly an isolated incident, with both companies and individuals leaving Frisco in droves.
During the COVID pandemic, working from home became an appealing option for many folks. Add to the equation that SF has the highest business taxation in the area, more than 180 different taxes (including the Prop. C anti-homelessness tax – that appears not to have worked), and onerous business regulations, and it becomes clear why businesses are fleeing the city. In November 2022, a Board of Supervisors meeting projected that “commercial property tax revenue losses [will be] nearly $1 billion over the next six years.” The San Francisco Chronicle detailed a Bay Area Council report that explained the cash difference to companies based in the city:
“For example, in the report, a hypothetical financial technology payment processing company with 1,000 employees and $500 million taxable gross receipts would pay close to $7 million in business taxes annually, including $2.7 million in Prop. C taxes, while the same company would pay slightly less than $70,000 in San Jose.”
A choice between paying $7 million or $70K is no choice at all.
In 2016, Forbes determined that of the 100 most populous cities, San Francisco deserved to be ranked number two on its list of "America's fastest-growing cities." Just four years later, and Frisco began experiencing a reverse gold rush. Indeed, the city has lost more than 17% of its population since 2020 – roughly 150,000 people. Projections indicate that if the trend continues, by 2029, there will be just 484K willing to keep those flowers in their hair. With rampant homelessness, poor sanitation, and open-air drug markets where dealing and usage are tacitly allowed and rarely punished, it's no surprise the streets have become filthy and unsafe.
Spending Wisely?
London Breed (Photo by Justin Sullivan/Getty Images)
Breed, in figuring the budget, asked all of the 48 departments under her purview to seek cuts of 10%. In reality, despite the 4% funding increase requested, 15 departments will see their budget increase beyond this figure, and only 18 departments will actually face a budget reduction.* But who gets the big bucks?
The Department of Public Health is already the big-ticket item, with around $3 billion per year to keep it funded; this will increase by approximately 8% ($240 million). These funds will go toward salary increases that were negotiated via labor agreements and overdose-prevention programs. Other recipients include 10% for Fine Arts Museums and 28% for vaguely termed “Human Rights.”
Of note is that the police will receive an additional $11 million in funding. This is an area of contention within the city. In 2020 – the “Summer of Love” – the mayor announced she would be cutting the law enforcement budget by a staggering $120 million; that cash would instead be spent on addressing racial disparities. "With this budget, we are listening to the community and prioritizing investments in the African American community around housing, mental health and wellness, workforce development, economic justice, education, advocacy and accountability," she said.
However, by 2021, the reality of reduced policing hit home amid the rioting and looting that still plagues the city to this day. At a press conference, Breed said that her office would be "more aggressive with the changes in our policies and less tolerant with all the bulls--- that has destroyed our city." The law enforcement budget has since been increased.
Not Just SF
(Photo by Tayfun Coskun/Anadolu Agency via Getty Images)
Exorbitant taxation, rampant drug use, and crime make it apparent that San Francisco no longer offers the promise it did just a few short years ago. The grand experiment in defunding the police and paying for social justice causes through increased tax on businesses and individuals has fostered a culture of fear, where resentment runs rife and government action appears – at best – punitive. San Francisco may be able to pull itself out of this tailspin, but it is not just one city that is suffering under the impact of the last three years.
As Liberty Nation author Kelli Ballard recently noted, “The pandemic, with lockdowns that forced so many small businesses to close, changed America’s dynamics – economically, socially, and politically.” Couple the ghost of Covid authoritarianism with the abandonment of law enforcement and, in the eyes of many Americans, the idea that a progressive city and a rewarding, safe life go hand in hand is a thing of the past. And no minor tweak to debt-driven budgets is likely to revive that dream anytime soon.
*For some departments, the budget increases come not from the city’s coffers but from revenue generated through its own activities, e.g. the Transportation Agency and the Utilities Commission.
