City officials warn May revise could deepen San Francisco shortfall; $20 million in CARES Act money may help

Ashley Grafenberger of the Mayor's Budget Office told the Budget & Appropriations Committee on June 10 that the governor's May revise shows an unusually large swing in California's finances, with "the state is projecting a $54,000,000,000 shortfall over 2 years." She said the May revise proposes spending rainy-day reserves, relying on federal funding and using CARES Act dollars and noted the proposal includes about $1.3 billion of CARES Act revenue distributed to counties; San Francisco's initial estimate is "about $20,000,000" of that allocation.

The city controller, Ben Rosenfield, emphasized the breadth of likely impacts and urged vigilance. He said state-level proposals include trigger cuts across many programs, and the controller's office and mayoral staff are actively pressing the state delegation. "It is the highest possible priority for everyone," Rosenfield said in describing negotiations over a measure that could remove or retroactively reallocate excess ERAF/ERAF-like funding; he warned the retroactivity language could amount to "a $180,000,000 when we account for the retroactivity bill, in the bill, and then approximately $60,000,000 going forward thereafter."

Why it matters: Committee members said the scale and speed of this downturn are striking and that state decisions will shape local choices for years. Supervisors asked whether the one-time CARES allocation would offset current fiscal-year shortfalls; Grafenberger said the CARES reallocation would not rebalance the current fiscal year because it is restricted to COVID response expenditures and would be available for the next fiscal year.

Committee members also probed the budget's trigger cuts and potential cuts to education and public-safety realignment revenues. Rosenfield and Grafenberger told the committee they are tracking how those cuts would filter down to San Francisco and said the city has been in frequent conversation with affected counties and state finance officials.

Supporting detail: Grafenberger referenced the governor's May revise and the May budget outlook prepared by the Mayor's Budget Office. She said the city estimates roughly $375,000,000 of COVID-related costs this fiscal year that the city initially expected to offset in part with FEMA reimbursements and CARES Act funding, and that available CARES Act funds are likely to be largely spent this year, leaving limited carryover. Rosenfield placed the current downturn in historical context, reviewing prior recessions and recounting how midyear cuts, reserve draws and labor concessions shaped recoveries.

Public comment: Two callers during Item 1 asked elected officials to explain stimulus and small-business support distribution and to post budget documents online for public review.

What's next: Committee members voted to continue Item 1 to the call of the chair for additional follow-up and more detailed information from the Controller's Office and the Mayor's Budget Office. The committee directed staff to continue tracking state-level negotiations before the legislature's June budget action and report back to the committee.