“The purity of the madness.”
This, Hunter S. Thompson explained, was what attracted him to the Book of Revelation, the literary source from which he borrowed — “stole,” as he put it — the most.
One does think about pure madness a good deal here in Thompson’s old roost of San Francisco; and the first beast was like a lion, and the second beast like a calf, and the third beast had a face as a man, and the fourth beast was like a flying eagle could, indeed, be something a city resident ambles past without half a glance, while having an animated business discussion into his iPhone earbud.
We are inured to much madness in this city. And this includes the finances that undergird our city’s continued functional existence. With the fiscal year commencing this month, San Francisco adopted its biggest budget ever. It did this in spite of the fact that the post-Covid-19 work model has eviscerated the Downtown office landscape and stanched this city’s flow of revenue.
It did this in spite of the fact that no economist, neither sane nor crazy, thinks things are going to get better in the next year. The smart money is on less money; big real estate will surely be reassessed downward; things will all but certainly get worse.
By the end of this budget’s term, the city will have burned through 43 percent of its pre-pandemic reserves, and it has not used the time that money has bought to make structural changes to match the new fiscal reality: The purity of the madness.
That next year’s budgeting process will be hellish is no revelation. The Chronicle wrote a good article about this; there will be less revenue to fund the city, and the one-time tricks and reserves the city used this year cannot be deployed again. That’s bad enough, but it gets worse. Book of Revelation-worse.
Not only will the city be running aground next year during budget season, it will be doing so in a mayoral election year.
And it will be doing so in a mayoral election year in which all of the union contracts come undone and must be renegotiated.
“If I were God,” said former controller Ed Harrington, “I would’ve saved more of the reserves for next year. I thought this year’s budget was going to be much harder. We transferred the pain to next year. It’s going to be there.”
San Francisco is not run by an elected God, but in terms of the budgeting process, Mayor London Breed’s power is godlike. Definitely not the all-powerful God of the Book of Revelation, but some manner of deity for sure.
So, we can chide the supervisors for using one-time money to bail out programs in a manner that exacerbates this city’s fiscal problems. But these are penny-ante items. This is the mayor’s budget and she, by and large, decided that we should have our dessert first — which sets us up to have our next budgetary meal be a punch in the mouth.
San Francisco’s present budget relies upon no small amount of bookkeeping legerdemain and fiscal sorcery; funding imperiled programs with the interest earned off accounts formerly held in escrow; stuff like that and that kind of stuff. You can go up and down the budget and find any number of small items like this: Potential cuts that induced rancor and feverish activity in the closing stanzas of the budget process,, but represent fractions of a cent on the dollar when contrasted with the budget’s totality. These proposed cuts, and the efforts to undo them, always monopolize the attention of our legislators, community activists, and the media — while the 99-odd percent of the general fund budget set by the mayor sails through.
And that’s normal. That’s how San Francisco handles its budgeting process: “Like watching 7-year-olds playing a soccer game,” as Harrington put it last year.
This year’s budget and budget process were very normal. And that’s odd, because this city’s finances are so decidedly not normal; the city is headed toward a looming abyss, in terms of generating the revenue it requires to pay workers, clean streets, provide services — and this budget puts us on cruise control right into it.
Pushing a Civil War amputation budget next year after this year’s ice cream with sprinkles budget is perverse. But the mayor’s strategy appears to be a desire to rip off the Band-Aid in one clean jerk. The rating service Moody’s revised its outlook on San Francisco this month to “negative” and made it clear that continuing to deplete the city’s reserves could result in a dreaded bond rating downgrade, which worsens the city’s debt costs.
It’s a safe bet that, in the coming months, this letter will be used as leverage by the mayor.
But it is also a safe bet that the city’s labor unions will use the tremendous leverage now gifted to them via synching their contracts with a mayoral election. This portends a nasty situation; it is, again, perverse that the city continues to deplete its reserves to stage a pending collision — with the impact coming at a time when both the fiscal and political atmosphere will be worse.
San Francisco was never a model of good government, with exceptions, such as setting aside the reserves the city is now burning through; thank you kindly. But, yes, to forego any meaningful budget sacrifices in year one so that you’ll come back in a hyper-politicized year two and demand the sacrifice of all firstborn sons is not good government.
Is it good politics? Probably not. You don’t earn many political points with austerity, especially if that austerity involves reducing the city services people care for, and the mad and maddening conditions on the streets don’t improve. The mayor’s office is also talking about a 2024 measure to reform the city’s business tax structure, which is alarmingly dependent on several large companies. This is a solid idea. But good luck selling a measure that, by design, raises the tax burden on small and middling companies to ease the load on the richest corporations in San Francisco.
Of course, the level of political fallout depends on whether a mayoral candidate emerges whom the unions feel is viable. The mayor, it seems, is depending on that not happening.
Regardless, San Francisco is still faced with the inexorable problem of diminished revenues and burgeoning needs.
“Everywhere you look, you need more: More nurses, more cops, more this, more that,” sighs Rudy Nothenberg, a longtime former mayoral budget director and chief administrative officer. “I don’t know what the hell is gonna happen when the money for Muni runs out. There’s not enough of a business community left to tax, and we’re driving out what’s left of it. Where the hell is the money gonna come from? I’m glad I’m not there.”
This is what awaits us next year, and this is the scenario the city has chosen to intensify by putting off the tough decisions. The purity of the madness.
Standing afar off for the fear of her torment, saying, Alas, alas, that great city … that mighty city! for in one hour is thy judgment come.
An important issue. I unfortunately got to the end of the article without an understanding of the problems of the budget. The article quotes more from the bible than it concretely describes budget issues. One sentence teases at actually trying to explain issues with the budget: “funding imperiled programs with the interest earned off accounts formerly held in escrow”, only to dash any hope of reading an actual analysis of the budget with a beautifully nondescript phrase: “stuff like that and that kind of stuff”
Not the level of journalism I have come to expect from mission local especially on such an important issue
Agree with this comment. I came expecting to learn and instead found myself asking what this article really said.
Sir or madam —
I’m sorry you feel that way. I thought the notion of revenue not being there to meet the present level of expenditures was resplendently clear, but evidently not.
JE
What was missing for me were any numerical figures that put things in perspective. When I read that some of the issues are “penny ante” and others are much more significant, I get what you’re saying but it helps when there are numbers that support these claims. How much is paid out annually via the existing union contracts? How much of that goes to nurses, vs cops, vs teachers etc? Things like that.
Sir or madam —
I see what you’re saying, but the part where I denote that 99 percent of the mayor’s budget sails through kind of gets to all that. For the purposes of this story, going through the line items of the budget would be cumbersome and distracting from the main point: The pain was deferred until next year, when a confluence of (predictable) factors will amplify it.
Yours,
JE
Like I want something to tell my friends about this issue other than “SF is spending too much money. Another budget passed where SF spends too much money. Next year we will have to spend less money and there will be pain”. What could be cut next year? (Now I’m curious actually whether SF has ever been in a similar situation and what was the result?) how much over budget is it? what are things we are spending too much money on? How much less is our income? Any detail really would help me catch my friends’ attention.
I like the revelations metaphor, it does seem like that lol. I also appreciate that I can leave a comment on an article and be responded to by author who is also the managing editor
E —
I don’t know, man. You could tell them how you read that San Francisco continues to spend down its reserves rather than making structural changes to its budget it knows it needs to make because the revenue isn’t coming — and delayed the hard choices for a time when there’ll be crappier revenues and the political nightmare scenario of union contracts coming undone during a mayoral election.
You could tell them that.
JE
Please reconsider ODB’s comment. Some mention of the major line items likely to be jeopardized in next year’s budget would add a lot to the article.
Joe,
This was a good honest write up for SF. No normal working person can spend beyond their means and make it. SF needs to learn to live within its means like the rest of us. This means balanced budgets and saying no to things that are not sustainable.
SF needs major professional financial planning reforms.
Lot of words here but no explanation of what, exactly, the unions will do to extract untenable concessions, and what they’re willing to give up in city concessions for their personal paychecks. Who is this column even for?
Evidently not for inveterate commenter Jake T, who apparently needs someone to draw him a picture regarding how unions in search of a better contract could influence a budget drawn up during a mayor’s race.
JE
You spelled invertebrate wrong.
The one consistent thing in all politics is that politicians will always, without fail, kick the can down the road until there is absolutely no alternative but to address the 800 pound gorilla in the room. Between commercial real estate in the City being pretty much in freefall, along with the reduction in conventions, leading inexorably to a reduction in transient occupancy tax as well as sales tax, revenues are going to take a dump, both in inflation adjusted terms, as well as in real dollar terms. Then costs, in the form of renegotiated salaries and, in the event of a recession, increased welfare costs, will rise, likely by more than inflation, creating a perfect storm to swamp the budget…..in an election year.
Politically, if there is any consideration to placing revenue measures on the ballot, they better do it in the presidential primary, because no politician in their right mind wants to run for re-election on the same ballot as attempts to raise taxes.
There needs to be a major review of contracts that get rubber stamped every year. Prop C gave us a ton of money to revamp our Byzantine mental health system. All it did was create a feeding frenzy of new and mysterious providers and programs on top of good programs that need more support. Some might recall the circumstances that lead to the departure of the last director of DPH-no bid contracts to her partner. No penalties, just a quick retirement-nothing to see here folks! Don’t blame city workers for nepotism and graft; blame da mayor. If she chose to fill vacant city job positions instead of handing out favors to friends, corporations and developers we wouldn’t be in this mess.
P.S. city workers are required to be disaster workers.
My prediction is the NEW mayor will be from a wealthy background and have much business acumen. With no obvious need for money or help from the sharks that swim in the San Francisco political pool. ( see Breed’s need for 5k loan from Nuru as proof or recent revelation of mayoral hopeful Safai working with John Pollard and the RBA for funding ) The budget is tweaked to satisfy donors of the politicians and this is a big reason it all seems so unmanageable. Debts have to be paid. This is the only logical reaction from the mess we are in.
Yes, it would be nice if the Mayor bucked all of the forces aligned in favor of the sync-ing of the 24 election to contract expirations. But those were some very powerful forces indeed. SF Dem party is not to be messed with.
Nicely written. It seems inevitable that one or two sacred cows may need to be slaughtered and sacrificed to fix this mess.
My guess would be city facilities that hold large parcels of valuable real estate?
City College?
Laguna Honda?
Oof
What we have here is the culmination of decades of economic corruption where mayoral tech, office and tourism contributors have coerced successive mayors to dispense with fostering economic diversity in favor of allowing contributors to seek rent. It takes the electorate to tax whatever industry survived the mayoral corruption filters.
Now that these houses of cards have fallen, San Francisco’s primary task should be to reconstruct a diverse economy that will be more resilient the next time there’s an economic crash.
This means telling Ron Conway, John Bryant (BOMA) and Joe Dallasandro (SFCVB) to sit down and shut up to create the space for the growth of a bottom up economy that serves San Franciscans. Instead, Mayor Breed is cranking up the Reaganesque neoliberal economic Wurlitzer of tax cuts and tax cuts and more tax cuts to subsidize failing sectors.
Thanks to Scott Wiener, San Francisco should see state funding for poverty mitigation cut off once demand falls and lenders stop funding developers’ housing projects and the City fails to meet state goals. Hopefully the fruits of this corporate welfare qua economic malpractice will ripen soon and will put the kibosh on his plans to succeed Pelosi.
Progressives lost the fight for a diverse economy over the past two decades. At this juncture, do we double down on failure or reassess and reposition SF’s economy for the benefit of residents?
The best thing that can happen with a budget catastrophe is for the progressive branded nonprofits to get cut off of the city teat. Not only are good dollars thrown after bad as circumstances deteriorate, but the political stasis that continued funding for these sinecures has contributed to SF’s political, economic and social decline as the leeches bleed the host dry.
With gerrymandering playing out, we’re already seeing the nonprofits jettisoning any pretensions of left of center politics, already sucking up to their new political overlords tryna to save their skins. Bring on the popcorn as the itinerant operatives caterwaul and wail that not paying them hurts poor people and people of color.
Easy solution: decertify all the public employee unions and zero out all “non-profit” contracts. Voila. You cut spending by 60% AND made every problem the city faces better overnight.
Nonprofits were created so work done by city workers (unionized) could be “contracted out” to private enterprises with non-unionized workers. The whole point of the nonprofits was to cut wages and jobs for those providing services. The result has been a steady degrading of city services. Now you say dump the nonprofit contracts and decertify the unions. Then who will do the work? You?
Zero out the nonprofits, poverty mitigation, affordable housing and DPH contracts, and to recover those functions within government using union labor. Eliminating the self serving narrow government funded lobbying and political activism by these city nonprofit contractors will be well worth the trade off.
Compared to the nonprofits, unionized city workers are eminently accountable to elected officials instead of the other way around.
Defund the f-ing cops, there’s a lot of money being wasted there.
I would start by defunding the homeless industry
That’s a great suggestion. Because everyone knows that it makes way more sense to fund senseless, blundering endeavors as opposed to funding programs for those in need.
Blundering is actually a great term to characterize the city’s homeless programs given their ineffectiveness and low return on investment.
The error here is equating the benevolent claims of recipients of public dollars with the failed outcomes from those dollars. The question has been called. All that remains is to see where the cards fall.