Board rejects $3.4 million supplemental to raise nonprofit contractors' cost‑of‑doing‑business

After nearly two hours of debate, the San Francisco Board of Supervisors voted 6–5 on March 3 to defeat a midyear supplementary appropriation that would have shifted about $3.4 million from the general fund reserve to increase cost‑of‑doing‑business payments for nonprofit agencies that contract with the city.

Supporters, led by Supervisor Mar, described the request as a small, targeted way to raise nonprofit contractors to parity with recent municipal increases and to help keep community providers and their staff in the city. ‘‘This supplemental brings nonprofit contractors to parity with that level of a 2.25% increase,’’ Supervisor Mar said during the discussion.

The measure sought to appropriate $3,400,000 from the general fund reserve to the general city responsibility account to fund a 0.75 percentage point supplemental cost‑of‑doing‑business allocation for nonprofit agencies that contract with the city. Proponents said the increase followed a board resolution from August that prioritized a supplemental if unanticipated year‑end revenues materialized; they cited a $21.6 million unappropriated general‑fund surplus shown in the city's Comprehensive Annual Financial Report.

Backers framed the item as a fairness and retention measure for nonprofit staff who provide human services, housing‑stability programs and other safety‑net services. ‘‘Our nonprofit workers are some of the hardest working in the city,’’ Supervisor Mar said. ‘‘They serve crucial community needs and have been chronically under compensated.’’ Other supporters — including Supervisors Yee, Kim, Avalos and Campos — argued that rising rents and costs were forcing nonprofit organizations and their employees out of San Francisco and that the city had available reserves to cover a modest supplemental.

Opponents focused on process and competing priorities. Several members said they favored a permanent, structural fix that would guarantee regular escalators in nonprofit contracts but objected to approving a midyear supplemental outside the regular budget process. Supervisor Wiener and others also said the city's limited discretionary pool of funds must be balanced against other needs, including public safety and longer‑term budget sustainability.

The roll call vote recorded five ayes — Supervisor Kim, Supervisor Mar, Supervisor Yi, Supervisor Avalos and Supervisor Campos — and six no votes from Supervisors Farrell, Tang, Wiener, Breed, Christensen and Cohen, resulting in defeat of the ordinance to appropriate the funds. The clerk announced, "There are 5 ayes and 6 nos ... This ordinance fails."

Supporters said they will press for a permanent solution during the regular budget cycle, including hearings and possible ordinance language to require escalators in nonprofit contracts. Supervisor Mar said she will introduce a hearing request to pursue a long‑term fix and to continue discussion in committee.

The board did not adopt the appropriation and no funds were moved. Supporters and critics signaled they will continue discussing both an immediate remedy and structural changes during the coming budget process.