San Francisco Mayor Daniel Lurie has ordered city departments to prepare for deep budget cuts as the city confronts a growing financial crisis. The two-year budget deficit is now projected to reach $936 million, forcing City Hall to rethink how public money is spent.
Lurie is seeking $400 million in permanent spending reductions from the city’s general fund starting next fiscal year. His administration says the goal is to close the gap while still protecting the most essential public services.
New Strategy Focuses on Core Services
Unlike past approaches, Lurie did not tell departments to cut a fixed percentage of their budgets. Previous administrations required across-the-board reductions, such as 10% or 15% cuts. Instead, Lurie wants departments to first identify their most critical programs.
Services considered essential will be prioritized for funding, while programs viewed as discretionary could be reduced or eliminated altogether.
Mayor Lurie’s Key Priorities
The mayor has outlined several areas he wants to protect during the budget process, including:
- Making San Francisco more affordable
- Keeping streets clean and safe
- Strengthening the local economy
- Improving health care and homelessness services
“We aren’t just going to do everything a little worse,” Lurie said. “We’re going to decide what truly matters and deliver world-class services.”
Hiring Freezes and Cost-Cutting Measures
Lurie has also instructed departments to eliminate vacant positions and avoid adding new full-time jobs. Agencies are being asked to review contracts, reduce unnecessary services, and find opportunities to share resources with other departments to save money.
These measures are aimed at slowing rising costs, especially labor expenses, which have outpaced the city’s tax revenue growth in recent years.
Economic Pressures Add to Budget Strain
San Francisco’s financial struggles have been worsened by a slow recovery from the pandemic. While business tax revenue is expected to be slightly higher next year, it will not be enough to offset major federal funding cuts.
Recent legislation passed by Congress has reduced funding for Medicaid and food assistance programs, with stricter eligibility rules. These changes could heavily impact San Francisco’s Department of Public Health and may leave tens of thousands of residents without health coverage or food support.
Recent Budget Efforts and Ongoing Challenges
Earlier this year, city leaders closed an $800 million two-year deficit when approving San Francisco’s $15.9 billion budget. That plan eliminated around 40 filled city jobs and reduced the city’s long-term structural budget gap by about $300 million.
Despite some positive signs — such as new businesses opening in Union Square and increased leasing by artificial intelligence companies — San Francisco continues to struggle with high office vacancy rates and empty downtown storefronts.
Tourism is expected to improve slightly in 2026, but visitor numbers remain well below pre-pandemic levels seen in 2019.
What Happens Next
City departments must submit their proposed budgets by February. Lurie and his financial team will review the plans and decide where cuts will be made. The final budget proposal must be delivered to the San Francisco Board of Supervisors by June 1.
Mayor Lurie said his administration will work closely with supervisors, labor groups, and community partners to produce a responsible budget that supports long-term recovery.
Conclusion
As San Francisco faces one of its largest budget challenges in years, Mayor Daniel Lurie is taking a targeted approach focused on essential services rather than across-the-board cuts. With nearly $1 billion in projected deficits, the months ahead will be critical in shaping the city’s financial future and determining how core services are preserved during tough economic times.
