San Francisco budget outlook warns upcoming police and firefighter labor contracts could widen projected deficits further
Labor agreements emerge as a central variable in San Francisco’s multi-year budget outlook
San Francisco’s long-range financial planning identifies police and firefighter labor negotiations as a major uncertainty that could compound an already challenging budget picture in the next budget cycle. The city’s five-year financial plan for fiscal years 2025–26 through 2029–30 forecasts sizable and growing gaps between ongoing revenues and the cost of maintaining services, with personnel costs representing the largest share of General Fund spending.
The financial plan highlights that police officers and firefighters move into “open contract” status beginning in fiscal year 2026–27, meaning wage and benefit terms for those bargaining units must be renegotiated during fiscal year 2025–26. City projections include placeholder assumptions for these open agreements—using projected inflation as a planning benchmark—while acknowledging that actual outcomes will be set at the bargaining table and could differ significantly.
How contract timing intersects with the deficit forecast
The city’s budget is built on a two-year cycle. Under the adopted approach to forecasting, the financial plan incorporates known increases from previously negotiated agreements and then models additional costs tied to open contracts once they begin. For police and fire, that transition starts in 2026–27; for most other miscellaneous unions, open contracts are assumed to begin in 2027–28.
Even under baseline assumptions, the plan projects escalating salary-and-benefit pressures citywide, driven by negotiated wage schedules, inflation in benefit costs, and retirement and health-related obligations. The plan also underscores that once all labor contracts are closed during a budget cycle, officials have fewer near-term levers to reduce direct labor costs without broader service or workforce changes.
Budget context: recent actions and competing pressures
In the most recent two-year budget process, city leaders emphasized structural steps aimed at closing a large shortfall while maintaining core public safety staffing. The adopted budget framework preserved police, fire, and other emergency response functions while other areas faced position reductions, grant and contract trims, and consolidation efforts.
At the same time, the financial plan anticipates additional cost growth outside of wages, including higher debt service and real-estate costs, inflation affecting contracted services and nonprofit agreements, rising workers’ compensation costs, and planned investments in capital and technology systems. These non-personnel obligations reduce flexibility when labor costs rise faster than revenues.
Key factors that will shape the next round of negotiations
Wage growth assumptions vs. bargaining outcomes: Planning models use inflation-based assumptions, but negotiated raises may be higher or structured differently.
Benefits and retirement contributions: Employer contribution rates and health costs can change over time, affecting total compensation beyond base pay.
Staffing and overtime dynamics: Hiring levels, vacancy rates, and overtime policies influence total spending even if headline staffing targets remain unchanged.
Ripple effects across departments: Public safety contract terms can influence patterns in other labor negotiations and the overall affordability of services.
City financial planning describes employee compensation as the largest cost driver in the projected deficits, and it flags upcoming police and firefighter negotiations as a pivotal inflection point beginning in fiscal year 2026–27.
What happens next
Labor negotiations with police and firefighter unions are expected to occur during fiscal year 2025–26, ahead of the fiscal year 2026–27 start of the new terms. The resulting agreements will be incorporated into updated forecasts and will shape the options available for balancing future budgets while sustaining service levels.