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Mayor's office warns of multiyear budget gap; orders 15% ongoing reductions in year one
Summary
The mayor's budget office and controller presented a five-year financial update showing expenditure growth outpacing revenues and projecting an $876 million two-year deficit; the mayor's office instructed departments to propose permanent 15% reductions to general fund spending for 2025-26 and implemented a near-term hiring freeze.
The mayor's budget office and the controller presented the city's five-year financial plan update Feb. 5, warning that projected expenditure growth will outpace revenue growth and create an $876 million two‑year shortfall over the next two budget years.
"Our rate of expenditure growth far outpaces the city's general fund revenues, which is projected to create an $876,000,000 2 year deficit for the next 2 budget years," Benjamin McCloskey, interim director of the Mayor's Budget Office, told the committee. The presentation attributed the immediate deficit mainly to lower-than-anticipated revenues and projected larger salary and benefit cost increases tied to existing labor agreements.
The mayor's office instructed departments to identify ongoing, permanent spending reductions totaling 15% of general fund budgets starting in fiscal 2025-26, to reexamine community-based organization (CBO) contracts for cost-effectiveness and to pause new, not-yet-implemented programs and contracts unless the mayor's office approves exceptions. Mayor Brandon Lurie additionally directed a citywide hiring freeze effective Jan. 9 through the end of the fiscal year; departments may request exceptions for critical, hard‑to‑fill public‑facing roles.
The update projected $1.7 billion in expenditure growth over five years versus $520 million in revenue growth and singled out several risks, including uncertainty in FEMA reimbursements, property- and business‑tax appeals, federal grant availability, and pension fund investment returns. The controller noted the city is relying less on one‑time sources that were available earlier in the pandemic.
Supervisors used the hearing to press for more detail on hiring-freeze rules, the treatment of temporary and grant-funded positions and consolidation of redundant contracts and programs across city departments. McCloskey and Controller Greg Wagner said departments will submit proposals by Feb. 21 and that the controller's six-month financial report later this month will provide updated data on current-year revenues and expenditures.
The committee voted to continue the hearing to the call of the chair so the mayor's office, the controller and departments can return with supplemental financial details.
