We Can’t Tax Our Way Out of Budget Problem

Updated by Admin on October 23, 2009

San Francisco now faces a budget shortfall of $53 million in the current fiscal year. Even if the city leverages its entire General Fund reserve, the projected shortfall would still amount to $28 million the city does not have. Clearly, elected leaders must take immediate action to get the city’s fiscal house in order.

Mayor Newsom and a handful of Supervisors are taking the city’s budget problems seriously. Following the Controller’s initial analysis, Mayor Newsom rightly called on city departments to revisit and reduce their budget expenditures.

Unfortunately, progress to address the budget crisis recently hit a roadblock when the Board of Supervisors voted 8 to 3 to authorize spending almost $2 million to postpone Health Department layoffs that had been part of the compromise budget-balancing agreement of last July.

The decision was reached, under intense pressure from the SEIU, despite the Board’s previously authorized budget and Mayor Newsom’s repeated threats to block the spending. However, common sense seems to have prevailed, with City Controller Ben Rosenfield preventing any additional General Fund expenditures because of the projected deficit.

With a Mayoral spending block imminent, one thing is abundantly clear: a budget deficit of this magnitude can not be solved by creative accounting alone. Like the businesses and households of San Francisco, the city must find ways to reduce its costs and live within its means. We simply cannot tax our way out of this problem, as some supervisors have suggested.

As 2009 comes to a close, the private sector and nearly 40,000 unemployed San Franciscans have come to understand that there are no protected positions in this economic downturn. Rising costs have forced the private sector to shed over 80,000 jobs since 2000. In contrast, the cost of city government over the past decade has increased 58 percent, from $4.2 billion to $6.6 billion.

Recent data from the Bureau of Labor Statistics also shows that the average private sector salary in the city is $76,000 in wages and benefits, while San Francisco public sector employees earn an average of $120,000. Isn’t it time for everyone in labor to start sharing in the sacrifice others are making to deal with the unfortunate economic reality confronting our city?

The Chamber applauds Mayor Newsom and Supervisors Sean Elsbernd, Carmen Chu and Michela Alioto-Pier for their ongoing efforts to protect the city’s fiscal health. They have demonstrated through their actions that they are prepared to make the difficult decisions that will be needed to address the looming – and far greater – budget crisis when the city’s deficit climbs to $522 million if current trends continue.

Earlier this year the Chamber was an active participant in dozens of meetings with city officials and labor leaders to discuss both reform and revenue measures. While those meetings fell short of complete agreement, they did indentify many cost saving ideas, government reform measures along with new revenue sources. Maybe it’s time to get serious about reform together with economic development programs to get people back to work. Taxes cannot solve a half-a-billion dollar problem and higher taxes will not provide jobs to our unemployed. Our city is between a rock and a hard place. We either share in the budget sacrifice now, or risk having to make even greater tradeoffs in the future.