So what happened? Just this spring the negotiations for our present city budget were uncharacteristically free of doomsday scenarios, boasting a “back to basics” focus and a manageable $25.4 million deficit to balance. Now, suddenly San Francisco is facing a projected $229 million budget shortfall for 2008-09 plus $118 million in 2009-10.

Mayor Gavin Newsom ordered all department heads Wednesday to cease hiring new employees and start looking at ways to trim their budgets by as much as 13 percent. His office described the oncoming surprise deficit as a kind of “perfect storm” of accumulated new expenses. In the biggest bump, next fiscal year The City begins paying $111 million more in salaries and $22 million more in health and other benefits — largely due to hiring some 700 new employees this year, including 100 police officers for the short-staffed SFPD and 200 nurses. The public safety workers and nurses have also negotiated substantial raises for next year.

But that is only the beginning. San Francisco voters are rarely shy about passing measures that mandate more spending for favorite needs, including schools and youth services. Next year the voter-imposed spending burden will grow by $72 million — and that does not even include the November passage of Proposition A, which bestows $28 million in operating budget dollars onto Muni in 2008-09.

This litany of looming fiscal woes must also take note that the recent windfall of city property transfer taxes has shrunken drastically with the housing market slowdown. Plus, California’s newly projected $10 billion state deficit for next year leaves little doubt that San Francisco coffers will face considerable legislative shortchanging.

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While a $229 million shortfall paints a grim enough picture, it is neither unprecedented nor unendurable in recent city history. Mayor Newsom had to balance an even larger $299 million deficit when he first took office in 2004 — and San Francisco is still here. The City’s economy is generally healthy and tax revenues are forecasted to increase by 5 percent, the historical average. Local housing prices have held steady so far, although considerably fewer homes are selling. With a current $6 billion budget, San Francisco has a $1 billion discretionary spending fund.

“It’s not the end of world, but it certainly is a significant number,” Controller Ed Harrington said about the projected deficit. Based on prior examples of the City Hall budgetary bargaining process, what lies ahead is at least six months of tough fiscal choices featuring a hiring freeze, across-the-board departmental cuts and some fee increases, but with relatively few layoffs. Also expect numerous hard-fought battles over preserving the funding for favorite programs of various top players and organized interest groups.

The mayor is to be commended for getting an early start on the difficult negotiations coming. And The Examiner is especially heartened to learn from attendees at Newsom’s department-head meeting that he repeatedly stressed cutting middle management jobs as opposed to laying off the actual “people sweeping the streets or police walking beats.”