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Budget office warns of persistent $100M-plus gap as state realignment and cuts create uncertainty
Summary
Mayor's Budget Office told the Budget & Finance Committee that despite some local revenue gains, projected state cuts and uncertainty over tax extensions and realignment leave the city with a substantial deficit — even after department targets and contingency proposals — requiring difficult trade-offs ahead of the June 1 submission.
Carmen Chu, chair of the Budget and Finance Committee, opened the committee’s review of the city’s near-term fiscal outlook as the Mayor’s Budget Office described continuing uncertainty from the state budget and the possibility of realignment taking effect July 1.
Greg Wagner, the Mayor’s Budget Director, said the joint report that will update deficit projections is expected within one to two weeks but cautioned the city still faces a “very substantial deficit.” Wagner said the city has identified about $70–75 million in citywide solutions and roughly $80 million from the first 10 percent departmental target, but that even accepting all department contingency proposals (roughly $108 million) would leave a gap in excess of $100 million.
Kate Howard of the Mayor’s Office summarized developments in Sacramento, saying the legislature passed a package of cuts totaling about $12.5 billion that would reduce IHSS hours, CalWORKs and Medi‑Cal funding and include changes to permit realignment. Howard said the governor has conditioned signing realignment-authorizing legislation on a plan for tax measures and has made commitments to counties and law‑enforcement stakeholders about funding tied to realignment’s implementation.
Supervisors pressed how the city is represented in realignment talks and whether Sacramento meetings are happening; Howard said Chief Still of the probation department, the city’s lobbyists (Suter & Associates), CSAC and associations for sheriffs and probation officers have been involved and that both Sacramento and local discussions are ongoing. Given the possibility realignment would need to begin as of July 1, Howard and Wagner recommended prompt hearings and planning so the Board can weigh in.
Wagner described several scenarios: ‘‘in our kind of optimistic planning scenario we had hoped that with some revenue growth…we could get through the budget without going far into the contingencies. The less optimistic scenario would mean we would have to go further,’’ and he said the current outlook resembles the less optimistic case.
The committee agreed to schedule follow-up hearings and encouraged supervisors to provide priorities to the Mayor’s Office as staff prepares a public balancing plan for comment. The item was continued to the call of the chair.
