Crucial Programs Saved; Mayor’s Pet Projects Remain

by Paul Hogarth, 2009-07-02

Will Sacramento Blow Up City Budget? Will Newsom Target Add-Backs?

After intense negotiations, the Board of Supervisors’ Budget & Finance Committee began yesterday’s meeting 10 ½ hours past schedule – and approved a budget that Chair John Avalos and President David Chiu had crafted with the Mayor’s Office. The package has an unprecedented level of “add-backs” – $43 million – to save crucial services, and will stop all contracting of City workers. But this victory may be illusory and short-lived. The Board took $16 million out of the Police, Fire and Sheriff Departments – but what’s troubling is what was not cut. Gavin Newsom’s City-funded campaign for Governor remains intact, as are his “pet projects” like 311 and the Community Justice Center. Other savings in the budget are mostly technical, but part of the “add-back” money ($7 million) requires taking a chunk of what was set aside to deal with inevitable state budget cuts. Unless the voters pass serious revenue measures, expect to see devastating mid-year cuts in a few months. And with Newsom’s track record of making such cuts that thwart the will of the Supervisors, the future looks precarious.

An Unprecedented Level of “Add-Backs”

First, let’s talk about what good came out of this process. Each year, the Mayor proposes a budget on June 1st – and the Supervisors hold hearings for a few weeks, where Budget Analyst Harvey Rose identifies savings to create an “add-back” fund. After negotiations with the Mayor’s Office, we end up with an “add-back” list that restores some of the cuts – which mostly include health and human services that the Mayor expected the Board would restore. In other words, it’s a reactive process where the Mayor dominates.

Rarely do we see the Board of Supervisors assert themselves by taking on the Mayor’s budget priorities. This year, however, they did just that – by amending the interim budget. And despite many problems with the outcome that remain unresolved, we would not have seen $43 million in “add-backs” without this effort.

The Supervisors put many good programs back in the budget: (a) $3.9 million to the Department of Children, Youth & Families, (b) $4.1 million to Human Services Agency – including the Ellis Act defense money, (c) $12.5 million to Public Health – which has crucial mental health services and subsidies for HIV/AIDS housing, (d) $2.75 million to Recreation & Parks, and (e) $554,000 to the Office of Labor Standards & Enforcement. Five Housing Inspectors who got pink slips will be kept, the City will now have sufficient funds to do outreach for the 2010 Census, and the SRO Collaboratives are getting their money back. There will be no contracting out of City workers – such as security guards or Jail Health Services.

But not everyone is happy. Last week, the Budget Committee put $600,000 into the Public Defender’s budget – after Jeff Adachi spent weeks admirably standing up for his department against cuts. Yesterday, in negotiations with the Mayor’s Office, they took back half the money – and gave it to the District Attorney. And as I discuss further on in this article, the thrill of having a crucial program saved may only last a few months.

Budget Failed to Cut the Real Fat

For weeks, the Supervisors said we should cut a total of $82 million out of Police, Fire and the Sheriff’s Departments – because everyone has to “share the pain.” That figure was misleading, however, because the Mayor’s proposal increased those three departments by a combined $26 million. And while $82 million would have saved a lot more social services, the Budget Committee always treated it as a starting point for negotiations. In the end, they took $16 million out of the three agencies – or 61.5% of what Newsom had planned to increase in their budgets. Six million of the Fire Department is out, and one Police Academy class will be delayed (but not denied.)

But while that can be viewed as incremental progress, the Supervisors barely touched the fat in the Mayor’s budget that should have been targeted.

The Mayor’s Office – with its five press secretaries, Office of Criminal Justice, and Greening Director – was left unscathed, despite it being Gavin Newsom’s City-funded campaign for Governor. The 311 Center – another Newsom pet project that can afford to cut a few corners – was largely spared. Every budget cut has a constituency, and so it’s understandable that elected officials will hesitate to go after the Police or Fire Departments. But there is no real constituency behind the Mayor’s P.R. team – besides Newsom’s political future.

Why were they spared, when these programs are neither useful nor popular? I believe it’s because the Budget Committee did not vote to cut them out last week, which left the prospect of making such cuts a mere negotiation try in the final backroom deal. Whatever was said yesterday behind closed doors, Newsom must have refused to let his sacred cows go to pasture – and the Board pushing this would have been a “deal breaker.” The Supervisors could have strengthened their hand by first voting in Committee to slash his P.R. team – and then demand concessions for restoring it. With Gavin focused on the Governor’s race these days, who knows what he would have agreed to in exchange?

Take the Community Justice Center – another Newsom “pet project” that the Mayor wants to promote for a statewide campaign. The Budget Committee last week voted to de-fund it, but after negotiations it somehow got back in the budget. I am not privy as to why the Supervisors went along, but I hope it was done after Newsom agreed to restore crucial services. I don’t believe we would have seen $6 million cut out of the Fire Department – if the Budget Committee hadn’t voted out in the open for it last week, making it a starting point in yesterday’s negotiations.

How else did they close the gap? David Chiu pushed to consolidate the IT departments of City agencies – which will save $2 million. John Avalos got parking meters installed in parts of Golden Gate Park, bringing $500,000 in revenue. Much of the $20 million that Harvey Rose had identified are non-controversial (such as deleting unfilled positions), and most of the extra cuts agreed to yesterday were unspecified “savings.” The Supervisors, however, can be proud of one cut – which was voted on earlier this week: a million dollar ramp to an unused podium in the Board Chambers, which was a clear example of waste.

Crisis in Sacramento Will Re-Ignite City Budget

But 7 million dollars of the “add-back” money comes from the “state revenue reserve,” which is not a prudent place to start finding savings. With Sacramento’s crisis reaching epic proportions, the City will have to adjust its finances – after the final news of the state budget emerges. One reason why it was so crucial to protect the City’s health and human services is that we must prepare for awful cuts in health and human services at the state level (that trickle down locally).

The Mayor’s budget proposal set aside $25 million for this, and Newsom admitted on June 1st that it was probably not enough. As of a few weeks ago, San Francisco looked like it could face about $200 million in budget cuts from the state, which will be an utter disaster. But now the City’s “state reserve” fund is only $18 million. What will happen when the state finally passes a budget, and the worst-case scenario occurs?

I would certainly bet on the very worst coming from Sacramento. Governor Arnold Schwarzenegger has vetoed every budget measure, because he refuses to support “any tax increase whatsoever.” Republicans in the state legislature hold Sacramento hostage, because the two-thirds vote requirement allows them to. Why is the City using money set aside to avoid state cuts to poor people – in order to avoid drastic local cuts to poor people? It is fiscally unwise, and morally abhorrent.

Was the extra $7 million in “add-back” money needed to save programs? Yes. Was it a prudent place to find the money? No, and some Supervisors even acknowledged it last night. “I am very alarmed by the foot that can drop in Sacramento,” said John Avalos. “Our work today stands very vulnerable before us.” Ross Mirkarimi noted the “great deal of uncertainty we can't control. It still makes me feel slightly uneasy.”

Revenue Solutions for November Ballot

Supervisors have stressed the need to raise revenue for months. But San Francisco’s fiscal straitjacket requires the voters to pass tax measures – and progressives don’t have the best track record in getting those passed. Polling shows that an alcohol tax is the most popular, but such a proposal was not on the Budget Committee’s agenda yesterday. The Supervisors voted to send two tax measures to the full Board, in consideration for the November 2009 ballot.

The first measure – a 0.5% sales tax – would net the City $51 million, according to the Controller’s Office. It would require a two-thirds vote of the electorate, unless all 11 Supervisors vote to put it on the ballot – in which case it would need a simple majority. The other measure – a vehicle license fee – isn’t even currently allowed under state law. Other proposed taxes that will be heard at later hearing include a parcel tax. These tax measures, however, may be a hard sell – because we failed to cut the real fat at City Hall.

Mid-Year Cuts: How Will Newsom Treat the Add-Backs?

What happens if the City has to make mid-year cuts – based on what happens to the state budget, the failure to pass revenue measures, or a further declining economy? The Mayor has the unilateral power to not spend appropriated money in those cases, but the only power the Supervisors have is to de-appropriate funds. Newsom has displayed a shocking lack of respect for the Board in the past on this issue, and it was on the Committee’s mind last night. Chris Daly even warned his colleagues: “once this budget passes without assurances [from the Mayor], there is no seat at the Board of Supervisors until June.”

If Newsom can make mid-year cuts, will he target the $43 million in “add-back” funds the Supervisors had worked so hard to restore? According to the Budget Analyst, 41% of the “add-back” money appropriated during last year’s budget was never spent – because the Mayor did mid-year cuts that disproportionately affected money that the Supervisors had prioritized. What is the assurance that something like this won’t happen again, and how do we know if all the efforts to use “add-back” money to stop cuts were in vain?

During the budget negotiations, Chiu and Avalos had the Mayor write a letter – where he promised to “collaborate with” the Supervisors if mid-year cuts become necessary. But Newsom’s past actions have generated mistrust, and it showed. Daly has a Charter Amendment that would compel the Mayor to spend certain appropriated funds. Mirkarimi has a budget motion to put certain programs “on reserve” if mid-year cuts become necessary – including $2 million for 311, 50% of all public relations officers and the Mayor’s Greening Director. This motion will be heard at a future Budget Committee meeting.

And while the Supervisors spent hours at City Hall over the past two days crafting the budget deal, the Mayor was barely around – delegating much of the negotiating work to his Chief of Staff Steve Kava, and Budget Director Nani Coloretti. In fact, my understanding is that Gavin Newsom spent all of 20 minutes in budget negotiations with Chiu and Avalos during those two days.

Where was Newsom? On Wednesday night, he met with Plan C for their fundraiser at Medjool’s. Newsom was scheduled to speak to the anti-progressive group on a proposal to fast-track condominium conversions as a means of “raising revenue” for the City. In other words, the measure that Newsom and Plan C are supporting would balance the budget on the backs of evicted tenants.

Yesterday at 9:15 a.m., while Supervisors Chiu and Avalos were meeting with Kava and Coloretti to negotiate a budget deal, Newsom was getting interviewed live on MSNBC – where he talked about what a great job San Francisco is doing on health care. Around 2:30 p.m., while budget talks were still ongoing, Newsom was promoting his MSNBC interview on Twitter. Does the guy realize he is still Mayor, and has responsibilities that are less glamorous than going on national TV?