Lee avoids budget drama, but other fiscal fights loom

http://www.sfbg.com/politics/2012/05/31/lee-avoids-budget-drama-other-fiscal-fights-loom

When Mayor Ed Lee unveiled his proposed $7.3 billion city budget today, it was a sharp contrast to the annual budget rituals of his predecessor, Gavin Newsom, both in style and substance. Not only did Lee present a budget without employee layoffs or cuts to critical social services, but he capped months of collaborative work with the Board of Supervisors by presenting his proposal in Board Chambers.

Newsom preferred to offer his budgets during press conferences in his office or at media-friendly events outside City Hall, and his budgets were developed with little input from supervisors and almost always included controversial cuts to programs favored by progressive supervisors or constituencies, triggering an angry backlash that created an air of acrimony around the board's budget hearings.

Lee credited his economic development programs with this year's budget turnaround – commenting that “San Francisco's economy has recovered and our reserves are growing” – and it is true that the payroll taxes paid by businesses came in about $65 million above projections.

But an even bigger factor in this year's projected budget deficit shrinking from $263 million to $170 million was the increase in the real estate transfer tax on properties over $5 million, proposed by progressives and approved by voters in 2010. The real estate transfer tax is expected to bring in more than $200 million in the coming fiscal year, $85 million more than this year. By comparison, the 5 percent across-the-board budget cuts that Lee ordered earlier this year amounted to just $58 million.

Lee has insisted the business tax reform be revenue-neutral, but SEIU Local 1021, the largest city employee union, wants it to bring in an additional $30-50 million per year, which represents how much the city has lost every year since 2001 when the biggest downtown corporations sued to invalidate the city's gross receipts tax.