With a troubled economy and huge City and State budget deficits, the last few years have presented tremendous threats to the health and human service safety net. In 2002, HSN organized the largest San Francisco nonprofit rally ever - leading over 1000 nonprofit staff and clients in a protest against budget cuts at City Hall. Since that year, hundreds of nonprofit staff and clients have spoken out at Board of Supervisors public hearings to oppose draconian cuts. HSN has participated at every level of the process to protect health and human service programs. During these years, the Board has reallocated tens of millions of dollars to prevent cuts in homeless, mental health, substance abuse, HIV/AIDS, senior, domestic violence and other programs.
We entered 2004 expecting devastating cuts as the City faced a daunting $352 million deficit. But in an effort to preserve services, Mayor Newsom's budget cuts focused on City administrative streamlining. HSN believes that the 2004 budget demonstrated the impact of our years of work to educate public officials about the need to protect the safety net, especially in difficult times, as well as the importance of nonprofits' role in delivering those services. However, the failure of two local revenue measures to pass on the November 2004 ballot threatened to nullify many of these successes. The City implemented an 18-month budget cut of $97 million in January 2005, including about $8 million in reductions to nonprofit services.
The City addressed an additional shortfall of $130 million in its FY 05-06 budget. The Mayor again went out of his way to preserve safety net services in all departments. However, the proposed City budget contained difficult and controversial cuts. HSN and nonprofit representatives participated through hearings, meetings and letters throughout the process. The Mayor and Board ultimately restored over $22 million for health and human services.
But the most precedent-setting victory of 2005 was the Mayor's surprise announcement of a 2% increase to general fund nonprofit contracts, funded at about $6.5 million. Past failures to fund rising salaries and business costs have threatened nonprofits' ability to provide effective services. In the past, nonprofits had received small cost-of-living-adjustments for salaries, but this was the first time the City has ever given nonprofits an increase on the entire contract amount, recognizing skyrocketing costs of health insurance, workers comp, rent and other expenses.
These victories continued in 2006 and 2007. In both years, the Board restored millions of dollars to the budget for safety net services. In 2006, the Mayor's budget included a 2% cost-of-doing-business (CODB) increase on nonprofit contracts, and the Board allocated an additional 1%, for a total increase of about $8 million. The Mayor's FY 2007-08 budget provided a 2.45% CODB, and the Board again added 1% for a total of over $8.5 million.
The situation deteriorated in 2008, however. Facing millions of dollars in budget cuts to services for our most vulnerable city residents, HSN and its members succeeded in their fight to have the Board restore most of the cuts. But for the first time in many years, nonprofits were forced to absorb inflationary cost increases with no CODB increase. We are deeply concerned that the sector's capacity continues to erode through inadequate funding, as the lack of a CODB represents an invisible budget cut that impacts organizations, services and clients.
Controller's Report on the Effects of Nonprofit Budget Cuts
In January 2004, the San Francisco Controller's Office conducted a study to assess the effects of budget cuts on health and human services, both for nonprofit City contractors and City-provided services. This study was the result of legislation promoted by HSN, which unanimously passed the Board of Supervisors in 2003. HSN worked with the Controllers Office to develop the survey, and urged nonprofits to respond so that the full impact of budget cuts would be documented.
Board of Supervisors budget information