Gerry Shih/The Bay Citizen

Mayor Edwin Lee

San Francisco Mayor Edwin Lee unveiled a budget proposal on Wednesday that would trim social services and city administrative costs while avoiding any layoffs to the Police and Fire Departments.

Buoyed in recent weeks by an unexpected $47 million bump in tax revenues and a new budgeting process, Lee was able to put forward a spending plan without any severe cuts.

"Our city is no longer a stagnant city; it is a growing city," Lee announced at his budget presentation to the Board of Supervisors at City Hall.

Lee said that for the first time, San Francisco moved to a five-year financial planning and two-year budgeting process. Coupled with optimistic economic forecasts, the process reduced the city's $306 million deficit by $23 million. Lee proposed eliminating the remaining budget gap by reducing services for the homeless and those with mental health needs, scrapping funding for some capital projects and trimming the city's administrative overhead, according to a budget summary published by the mayor's office.

But in his presentation, the interim mayor argued emphatically for a vision of long-term planning and fiscal stability for the city that, coupled with pension reform, will likely define his legacy if he steps down, as promised, after one year.

San Francisco's overall spending increased by over $266 million, to $6.83 billion, largely due to the city’s increased pension and health care liabilities. “While our economy is stabilizing, we must continue to steer the city back toward long-term, fundamental financial health,” Lee said.

The budget announcement came a week after Lee announced a pension deal that extracted significant increases in pension contributions from the two politically powerful public safety unions.

Lee's budget assumes that police and firefighters will give back more than $23 million in pay raises, although the unions have not yet agreed to that concession.

“We understand how great a sacrifice it is,” Lee said. “At the same time — as we defined that [public] safety— it also means that we keep a very critical level of social services intact. We know that without that level of social services in place, the officers on the street would have a harder job.”

Lee's proposal will now proceed to the Board of Supervisors, which has one month to make amendments and pass the budget before the start of the new fiscal year July 1.

The board's liberal wing anticipated a smooth ride unlike previous years, when it grappled with former Mayor Gavin Newsom over spending priorities.

"His budget reflects a depoliticized process and shared values," said Supervisor John Avalos, who is running for mayor as a liberal standard-bearer. "I am confident we can get through the board a final budget that has broad agreement and minimal drama -- something San Franciscans have been longing to see."

Board of Supervisors President David Chiu, who is also running for mayor, praised the adoption of the five-year financial plan.

“This budget reflects a recovering San Francisco and, coupled with pension reform, a renewed focus on our long-term fiscal stability,” said Chiu. “I also thank and applaud Mayor Lee and his staff for the most open and collaborative mayoral budget process in memory.”

Fearing further reductions in state funding, Lee also proposed on Wednesday a sales tax increase for the November ballot.

The proposed tax hike of 0.5 percent would go on the November ballot “only as an insurance,” Lee said. The tax rate is expected to fall to 8.5 percent at the end of the month, if Gov. Jerry Brown fails to convince the Legislature to extend the current sales tax rate of 9.5 percent.

The local measure would put more than $60 million into city coffers, Lee said. The measure would require approval by two-thirds of voters.

We cannot be at their whim,” Lee said. “We have to protect our own services.”