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Thursday, March 8, 2012

City's Incredible Shrinking Budget Deficit Also Shrinks Leverage with Labor

Posted By on Thu, Mar 8, 2012 at 11:45 AM

click to enlarge This? This is money we still owe! We're still broke!
  • This? This is money we still owe! We're still broke!

The news that another $60 million has been whittled off the city's projected budget deficit could be considered cause for revelry. But don't break out the pointy hats just yet. For one thing, the city is still $170 million in the hole based on the current calculations -- much less than before but still pretty serious money.

And, just as you wouldn't wear your best suit when heading to auto row to negotiate a deal, it behooves the city to plead austerity during forthcoming labor negotiations. While cops and firefighters are in the midst of multi-year deals, more than two dozen unions will renegotiate their contracts this year.

It's a Catch-22 of sorts -- though, considering the stakes, maybe it's a Catch-22 million. You want to cut your deficit because you need the city to work -- but, once you do, the people who make the city work want their share. And they don't want to hear your sob stories about "structural deficits."

The improving projections -- which you can see here -- come largely via more money flowing in from sales taxes, hotel taxes, property and transfer taxes, and payroll taxes. These are pretty clear signs the economy is picking up: People are buying stuff; traveling through our city; avoiding real-estate meltdowns experienced elsewhere; and hiring people. But, before you negotiate with the city for a raise, consider the following caveats from the joint report just released by the city's number-crunchers:

  • This projection assumes no major changes to policies, service levels, or the number of employees;

  • This projection assumes the economic recovery that began in 2010 will continue and will be reflected in tax revenue increases, many of which will reach prior peak levels in fiscal years 2011-12.

  • ...We expect significant cuts in State funding for fiscal years 2012-13. A number of actions taken by the State to address the fiscal years 2011-12 budget shortfall are the subject of litigation and have been temporarily stayed.

Finally, the report factors in a $16.2 million bump in city tax revenue in the near future due to the America's Cup -- while also assuming private fund-raisers will hit targets that have already been deemed insufficient to cover city costs.

So there is, as the city would put it, "a very substantial gap" between current resources and what it would cost to continue providing the same service levels for the near future. We'll see how that line goes down during the forthcoming labor negotiations. Expect lots of fun.

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About The Author

Joe Eskenazi

Joe Eskenazi

Joe Eskenazi was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left. "Your humble narrator" is a staff writer and columnist for SF Weekly, which he has written for since 2007. He resides in the Excelsior with his wife, 4.3 miles from his birthplace and 5,474 from hers... more


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