Supervisors Hear $338 Million Shortfall; Mayor's Office Asks Departments for Additional 8% Salary-Reduction Options

The San Francisco Board of Supervisors Budget and Finance Committee heard on March 27 that the city faces a projected $338 million shortfall over the next three years and that the mayor's office has directed departments to produce options equal to an additional 8% cut in their salary lines.

"We gave them an additional 8% of their salary line target," Nani Coloretti, the mayor's budget director, told the committee as she described the new instructions she had issued to departments. She said the revised submittals are due on Friday.

The joint three-year projection presented by Todd Rejstrom, director of budget and analysis in the controller's office, breaks the shortfall into two main parts: roughly $98 million of downward changes on the revenue (sources) side and about $241 million of upward changes on the expenditure (uses) side. "The hard-to-swallow news is really the fund balances and prior-year reserves are going down," Rejstrom said, noting the analysis assumes continued status quo operations and existing MOU commitments.

Rejstrom identified specific drivers: the use of one-time fund balances and prior-year reserves (about $168 million), a state budget reduction estimated at $41 million that was not assumed in prior reports, and personnel-related costs including the annualization of more than 700 positions and MOU increases projected at about $118 million. Revenue growth of roughly $111 million was also projected, but charter-mandated baselines and the rainy-day reserve rules would limit how much of that growth could be applied to the shortfall.

The controller's office also presented the biannual overtime report. The office projects overtime will reach about 6.8% of payroll this year, which Rejstrom said would represent approximately a $51 million overrun if current trends continue. The six departments that historically account for the majority of overtime — the Municipal Transportation Agency, Police, Public Health, Fire, Sheriff and the Public Utilities Commission — were identified as primary contributors.

Supervisors pressed both the mayor's and controller's offices on how hiring freezes and newly budgeted positions affect overtime. Coloretti described the city's current policy as a "non-essential hiring freeze," and cautioned that some classifications such as nurses and Muni bus drivers are difficult to pause without incurring overtime or service disruptions. The controller's staff noted that the city's budgeted full-time equivalents rose by more than 1,200 over recent years but that vacancies and fixed-post staffing requirements in certain departments continue to drive overtime costs.

The committee agreed to follow up with department-level hearings in April and to request more detailed breakdowns — in particular a clearer separation of demonstration-related policing costs (identified by the controller as roughly $6.4 million for demonstrations) from other patrol and service overtime. The committee tabled the six-month report for further review and continued items 1, 7 and 8 to the call of the chair to allow for deeper departmental responses.

What happens next: departments must submit revised budgets with the additional 8% salary-line options by the stated Friday deadline; the committee will hold targeted hearings in April to probe overtime drivers and department-specific requests before June when final budget decisions are scheduled to be made.