Mayor's budget office and controller outline $653M two‑year shortfall; departments told to plan 7.5% reductions

The Mayor's Budget Office and Controller briefed the Budget and Appropriations Committee on the 5‑year financial plan and upcoming budget instructions on Feb. 17.

Ashley Grafenberger, the Mayor's Budget Director, said the joint 5‑year plan (published in January on December data) projects a two‑year shortfall of approximately $653 million for fiscal 2021–22 and 2022–23. Grafenberger said drivers include delayed revenue recovery, previously agreed MOU wage increases that were only partially funded, and assumed local COVID‑response costs that the administration expects to carry into next year. The plan assumes no new federal relief in baseline projections.

To close the near‑term gap and prioritize core services and equity outcomes, Grafenberger said the mayor has directed departments to submit budget proposals that include an ongoing reduction equal to 7.5% of adjusted general fund support and an additional 2.5% contingency proposal should fiscal conditions worsen. Departments are asked to identify core services, measure equity impacts of proposed reductions and propose mitigations for negative impacts.

Controller Ben Rosenfield said the six‑month status report (presented separately in the same hearing) may alter short‑term resources available to close the two‑year gap but that the mayor's instructions remain in effect for department submissions due the following Monday. Rosenfield also said pension fund returns for the current year have been stronger than assumed (planning return 7.4%, year‑to‑date returns much higher), which will reduce required general‑fund pension contributions in the near term.

Supervisors questioned whether the mayor's instructions would change once mid‑March updates and the controller's March forecast are available. Grafenberger said the instructions will not be revised before departments submit proposals; both the mayor's office and the controller plan March updates that will incorporate new federal, state and local data.

The mayor's instructions place an explicit emphasis on equity: departments must explain how proposed reductions would affect equity metrics, how they would measure positive impacts, and how they would mitigate negative outcomes. Grafenberger said departments will post proposals online and that the Controller's Office will post budget materials and maintain transparency required by local law.

The committee voted to file Items 1 and 2 for the record and to continue budget work in committee as the March updates arrive.