The 2025-26 fiscal year is shaping up to be an exercise in belt-tightening for large and small jurisdictions across California. San Francisco is no exception.
Like its neighbors in Southern California, the city and county government is facing an estimated $781.5 million budget shortfall, down from $817.5 million, and is looking for calm waters through the fiscal storm. The deficit in the 2027-28 fiscal year is projected to fall $18 million, to $763 million, according to a May 12 budget status report from the Office of the Controller’s Budget and Analysis Division (BAD).
“Some risk to this projection remains from economic uncertainty and potential changes affecting federal revenue, however, the risk is much greater in the budget years,” the status report reads.
The city/county government had an operating budget of $15.9 billion in the 2024-25 fiscal year. The proposed budget has fallen slightly from the previous year to $15.5 billion for 2025-26. The deficit and revenue decline are attributed to a number of factors, including property tax, sales tax and hotel room tax declines.
The Department of Technology, for its part, is expected to end the year with a small surplus, the report notes. “The Department of Technology projects to end the year with a surplus of $0.1 million due to under-recovery of $0.3 million in interdepartmental services offset by $0.4 million in salaries and fringe benefits and non-personnel savings.”
In documents published earlier in the year, the IT department detailed some of the changes it would be implementing over the coming fiscal years. They include a $6.9 million budget adjustment to accommodate contractual obligations, increased service requests and compliance; a reduction of overall budget by 15 percent in FY25-26 to $12.7 million; and a request for five full-time project positions to continue the expansion of the city’s fiber network.
The budget process for the city/county government began in December with planning and instructions, before heading to the departments for input. The mayor’s budget instructions for select departments were published March 31, with a full proposal to the Board of Supervisors by June 1. A final, approved budget will be finalized by July before being signed by the mayor in August.
The mayor’s instruction document included several items for the departments, including the permanent reduction of General Fund spending by 15 percent; assessment of community-based grant allocation to include organizations that provide “strong outcomes and cost-effectiveness”; the re-examination of all contractual and non-personnel expenditures; the elimination of vacant positions with hiring occurring only in “core departments”; and the consideration of a hiring freeze with the potential for layoffs.
In addition, the instruction document outlines a freeze on overnight and air travel “unless required by an outside funder or third-party agreement.”
San Francisco's Flightpath Through an $818M Budget Deficit Storm
Cities across the state are tightening belts and measuring their options going into the next fiscal year. San Francisco is one jurisdiction facing significant financial headwinds.
