San Francisco Faces $876 Million Budget Crisis, Mandating Steep Spending Cuts

San Francisco is grappling with a projected $876 million budget shortfall over the next two fiscal years, forcing Mayor London Breed to order city departments to prepare for across-the-board spending cuts of 15%, Bloomberg reports.

This looming deficit, which will significantly impact the incoming administration of Mayor-elect Daniel Lurie, highlights the city’s struggle with a slow economic recovery and rising expenses.

The shortfall stems from a sluggish rebound in the hotel and business tax base, failing to keep pace with escalating city expenditures. Adding to the financial strain is uncertainty surrounding $244 million in outstanding federal disaster relief funds, which could be withheld under the administration of President Donald Trump and a Republican-controlled Congress. Budget documents released Tuesday cite the Trump administration’s policies as having “unknown future impacts” on the city’s finances.

The projected deficit includes a $40 million reduction in estimated hotel tax receipts for fiscal year 2025-26 and a staggering $705 million increase in expenditures for the fiscal year ending in 2027, primarily attributed to rising salary and benefit costs.

Mayor-elect Lurie, a nonprofit founder, acknowledged the severity of the situation in a social media post, stating that the budget deficit “is a crisis that we must face head-on, and it will require us to make difficult decisions.” He will inherit the challenge when he assumes office in January.