City Rainy Day Fund a challenge
to coming budget

Mayor Gavin Newsom tells reporters improved economy ironically creates first time ever challenge to closing city budget.
Photo(s) by Luke Thomas

By Luke Thomas and Pat Murphy

January 19, 2006

The current San Francisco economic upturn ironically makes balancing next year's city budget more challenging, according to Mayor Gavin Newsom.

For the first time, the city will lose immediate access to 75% of revenue which exceed last year's revenues by 5%.

Close to seventy-five cents on those excess revenue dollars must be set aside for the city's new Rainy Day Fund, Newsom said.

City Controller Ed Harrington is computing a six-month revenue report, which will be include Rainy Day Fund projection.

Local economic growth this year widened the spread of new city revenues over municipal income last year. The Rainy Day Fund set aside is based on that spread.

Newsom pegged coming budget deficit at $80 million. Although it is much lower than last year's first estimated budget shortfall of $290 million, the mayor warned closing the deficit will be challenging due to a number of factors.

The projected deficit does not take inevitable wage increases into account, the mayor added.

"That projection does not include any base wage increases, and considering that we have 40 labor contracts that are being negotiated over the next six months...so I think we need to be cognizant of that.

"Beyond that there is a very distinctive aspect to this budget...that we have not experienced ever and that is the Rainy Day Fund.

"What the Rainy Day Fund is going to require us to do is set aside upwards of 75-cents of every dollar into that fund above our revenue growth of more than five percent.

"(The) consequence with the set-aside for baseline funded departments, which represents about sixteen-cents for every dollar, in addition to the seventy-cents you are talking about net benefits of additional revenue coming in based upon good economic news.

"This is a new constraint that is something that is going to make this budget as it appears, and not less challenging..."

City department consolidations and staff eliminations make further cuts difficult, Newsom continued.

"Additionally, based upon all of the cuts over four years, those that feel their departments can afford and absorb additional cuts are few.

"The point being is that I don't know of a department head that's come into my office suggesting anything but the fact that they are in desperate need of more, be it the Police Department, be it the Department of Human Services, and all the work we are doing on senior abuse and foster care, to deal with the quality of our streets, to deal with potholes, the PUC with expansion of Hetch Hetchy...the Redevelopment Agency, the Port...

"In spite of the 1,390 positions that we have eliminated or consolidated, it's going to be challening again this year," Newsom stated.

First implementation of the Rainy Day Fund stands to improve the city's bond rating.

"Our bond rating agencies love it and there's fiscal prudence in establishing the rainy day fund.

"But I don't think anyone intended...this economic prosperity to experience as we're going to experience it this year," concluded Newsom.

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