Financial Plan Outlines Strategies to Restore Structural Balance to City Budget

05/03/11— Mayor Edwin M. Lee today introduced the first-ever proposed five-year financial plan for San Francisco. The five-year financial plan is a key part of a set of financial reforms designed to move the City toward longer-term financial planning and budgeting, and away from the short-term decisions that have led to repeated annual budget deficits.

“I believe we have the tools at our disposal to bring our budget back into structural balance and stabilize our City’s finances if we are willing to make the right decisions. This plan presents a high-level road map to achieve these goals,” said Mayor Lee. “This plan shows us that there are challenges ahead. But I believe it should be a source of optimism. If we can hold ourselves to a new standard of fiscal discipline in the coming years, we can restore stability to our City finances and escape the cycle of large deficits year after year.”

The five-year financial plan is a central piece of a set of budget reforms approved by voters in Proposition A in 2009, including stronger financial planning, two-year budgeting, and adoption of formal financial policies to strengthen financial reserves, prepare for natural disasters, and manage volatile revenue sources. Proposition A requires approval of the plan, following Board of Supervisors consideration, by July 1, 2011. 

“After years of structural budget deficits, this plan is a crucial step toward getting our fiscal house in order,” said Board of Supervisors President David Chiu, who co-sponsored Proposition A in 2009 with former Mayor Gavin Newsom. “The strategies are ambitious but achievable, and I look forward to working with the Mayor, my colleagues, City employees and all San Franciscans to protect the basic services that we all depend on.”

The Mayor’s Five-Year Financial Plan outlines seven strategies for restoring structural balance to the budget, replenishing the City’s reserves, and putting the City in a stronger position to be prepared for future economic downturns. These seven strategies include:
· Capital Spending and Debt Restructuring
· Control Wage and Benefit Costs
· Additional Tax, Fee and Other Revenues
· Adjust Baselines and Revenue Allocations
· Limit Non-Personnel Inflation
· Non-Recurring Revenues and Savings
· Ongoing Departmental Revenue and Savings Initiatives (New Ongoing Savings Initiatives & Cumulative Savings from Prior Year Initiatives)

A key strategy outlined in the Five-Year Financial plan is controlling growth in employee costs, particularly pension and other benefits. Over the next five years, wages and benefits are projected to grow 50 percent faster than City revenues. By FY 2015-16, existing City employees will cost the General Fund almost $650 million more than they do today, while revenues will grow by only $416 million during the same period. Mayor Lee has been meeting regularly with City employee unions and other stakeholders to develop a pension reform measure for the November 2011 ballot.

“There is no way around the fact that successful pension and benefits reform must be a cornerstone of any plan to bring the City’s budget back into structural balance,” said Mayor Lee. “The realities illustrated by this plan make me more committed than ever to working with our employees and elected officials to develop a responsible pension reform measure for the November, 2011 ballot. These are not just numbers on paper; unless we take action, increasing pension costs will translate directly into reduced services, layoffs, and continuing budget deficits as they consume an ever-growing share of our limited resources.”

The Mayor’s Five-Year Financial Plan is available online, go to: http://sfmayor.org/index.aspx?page=5