Mayor Lurie made ‘painful' cuts in his S.F. budget proposal. The hurt is far from over

San Francisco Chronicle​

a day ago

San Francisco Mayor Daniel Lurie said he made 'painful decisions' when assembling his recent budget proposal that would slash nonprofit contracts and shrink the City Hall workforce.
But the hurt is far from over. Lurie recently told the Chronicle that he is still eyeing a more ambitious overhaul next year as he tries to erase a deficit that's projected to reach as much as $700 million in the 2028 fiscal year.
Complicating Lurie's plans to rein in city spending is the fact that the Trump administration has already moved to claw back federal funds from San Francisco and could try to take more money away. And a Tuesday report from the city controller's office warned that proposed Medicaid cuts advanced by Congressional Republicans could further hurt city revenue — as could a potential recession.
Lurie's city spending plan would eliminate about $185 million in grants and contracts over two years and cut about 100 filled jobs from the government payroll. The proposal would help Lurie close a massive budget shortfall, but unions and nonprofits quickly decried what they view as an unwarranted assault on community groups that provide crucial services to residents and businesses.
Despite the early resistance, however, Lurie's inaugural budget blueprint does not represent a massive reorganization of the San Francisco bureaucracy, nor does it compare to the layoffs the city last experienced during the Great Recession.
Next year could be a different story.
In an interview with the Chronicle last week, Lurie indicated that he sees the current budget negotiations as a prelude to his plans for 2026. This year, his budget proposal was all about 'right-sizing,' he said. For next year, he has a different word in mind: 'restructuring.'
'This was a really focused budget on delivering core services (and) right-sizing our government,' Lurie said. 'And it does not mean the work is over. It was never going to be that way. … We have a lot of work to do ahead of us.'
It's not yet clear what Lurie's promised restructuring will look like. The mayor's budget plan this year already proposed combining two city departments beset by scandals into one agency. And a February executive directive that Lurie issued on permitting reform said the city should explore how it might merge 'key permitting functions' into one department.
Just how difficult Lurie's budget calculus will be in the coming year depends heavily on what happens at the national level.
San Francisco's nearly $16 billion budget relies on more than $2 billion in operating revenue from the federal government, the vast majority of which comes in the form of Medicaid reimbursements. Funding changes under consideration in Congress could hurt the city, but it's how much it might lose.
The controller's Tuesday report said the proposed federal budget bill 'represents the biggest set of cuts to Medicaid since inception and could result in thousands of San Francisco residents disenrolling from the Medi-Cal program and reduced funding for the Department of Public Health.'
Lurie has proposed setting up a $400 million reserve that the city could tap into to offset any major funding cuts from President Trump or Congress. The controller found that the reserve amount was 'commensurate to risk.'
Another unknown is the extent to which any national economic downturn could harm San Francisco's budget, and Lurie's ability to bring city spending in line with revenue.
The controller's report noted that, while unemployment in the city is stable and office attendance has risen, technology and hospitality companies continue to lay people off. Trump's tariffs and immigration crackdowns could further strain the economy.
Regardless of what happens nationally, Lurie has said he is already trying to end 'the era of soaring city budgets' and wants city officials to 'start living within our means.'
His proposed cuts represent a reckoning for nonprofits after years of flush city budgets that saw millions flow to third parties in exchange for providing crucial social services. Now, many of those organizations are reeling from deep cuts that could force layoffs and the shuttering of programs.
Some San Francisco legal aid organizations are facing deep cuts that they say could lead to more homelessness and less access to legal services for the needy. One legal aid organization's director is going on a hunger strike to protest the cuts.
The Latino Task Force, Housing Rights Committee of San Francisco, the Chinatown Community Development Center and dozens of others are facing cuts that will impact services. The People's Budget, a coalition of city advocacy groups that every year proposes changes to the mayor's budget, has a 'walkthrough' of all the groups they have heard from that are losing funding.
Anya Worley-Ziegmann, lead coordinator for the San Francisco People's Budget Coalition that advocates for nonprofits facing cuts, said in a statement that Lurie's budget proposal threatens 'essential services for food security, workforce development, legal aid, and children and families facing homelessness.'
'We cannot balance the budget on the backs of working class and marginalized communities while at the same time claiming to be a city that cares for all its residents,' Worley-Ziegmann said.
Lurie also is being slammed by fiscal conservatives who believe he should have made deeper cuts to the city's 33,000-person workforce and take on the city's 'nonprofit industrial complex,' a moniker critics have given to the large contractors that do work on behalf of the city. A previous Chronicle analysis found that San Francisco has an unusually high amount of public sector workers per capita, especially among public health and library employees.
Marie Hurabiell, founder of the neighborhood advocacy group Connected SF, praised Lurie for taking on the city's nonprofits and contractors as well as his effort to 'right-size' the budget after years of what she said was 'overspending' related to the pandemic.
But she said those changes will only get San Francisco to the level of spending it had before COVID, and there are many more cuts to be made to downsize the government so it better reflects the city's relatively small population. One way to do that is by doubling down on accountability, she said.
'For years there's been a lot of money flowing and our services have not been great,' she said. '(Lurie) is probably trying to be very thoughtful and methodical (about future cuts), but I'm hoping he will be more impactful.'
The existing job cuts in Lurie's proposed budget also drew some criticism from the executive committee of the San Francisco Democratic Party, which is controlled by moderates who generally share Lurie's politics.
Committee members said in a statement that Lurie's budget overall 'demonstrates bold leadership during a time of unprecedented fiscal challenge.' But party leaders said they were 'very concerned about the proposed reduction of city jobs currently held by San Francisco employees.'
'Cutting these roles not only disrupts lives and livelihoods but also risks weakening the long-term capacity of government to meet the needs of its residents,' the statement read.
Party chair Nancy Tung said the committee doesn't have a position on where budget cuts should come from if those 100 jobs were preserved. But she said the committee hoped Lurie and supervisors would be able to find a way to prevent any city employees from being laid off.
She also acknowledged that the city's financial condition had put Lurie in a tough spot and praised him for issuing a hiring slowdown on his first day in office.
'I don't envy where the mayor is in terms of having to do this,' Tung said. 'I also know that this is very hard for him, too. He is trying to do it as humanely as possible.'
Tom Li contributed reporting.