Six months ago, San Francisco appeared headed for a budget bloodbath. Instead, it looks like a lovefest - although that may be short-lived.

Mayor Ed Lee rolled out his first budget Wednesday to a standing ovation from city officials gathered in the Board of Supervisors chamber. Afterward, criticisms leveled at the $6.8 billion spending plan for the fiscal year that starts July 1 were qualified and scarce.

"The budget shows a lot of good things," said Supervisor David Campos, a member of the board's more liberal wing, which often clashed with Lee's predecessor, Gavin Newsom. "A lot of good programs have been saved. There's still work that needs to be done ... but again, I think this has been a very, very positive process."

Board President David Chiu called it "the most open and collaborative mayoral budget process in memory."

When Lee took over as a one-year caretaker after Newsom was elected lieutenant governor, the projected deficit was $380 million. The most recent estimate was $306 million.

It was solved thanks to higher-than-expected tax revenues due to the rebounding economy, across-the-board cuts and deferring spending on projects such as replacing roofs on city buildings and upgrading playfields.

More than $31 million came from unforeseen property and payroll tax revenue. About $35 million in capital projects would be delayed.

The spending cuts include a decision to not hold new police academy classes, mothballing a fire engine based on the Embarcadero for another year, and trimming outpatient substance-abuse programs.

The budget, which must be approved by the Board of Supervisors, avoids laying off police officers, rolling closures at fire stations or shredding the social safety net - scenarios that had been feared at one time in the last year.

Concessions needed

But the mayor's budget is not without risk. It relies on more than $20 million in concessions from police officers, firefighters and nurses who are due raises and haven't yet agreed to forgo them.

If they refuse, layoffs are a possibility, the mayor said.

"They would definitely have to be in the formula," Lee said in an interview after releasing his budget. "If for any reason (unions) are unable to (forgo pay raises), we would then cut those departments by that much."

Lee's budget also taps $15 million from a $30 million reserve to offset shortfalls in state funding.

Sales tax proposal

It proposes using a 0.5 percent local sales tax to refill that reserve - but only if Gov. Jerry Brown fails to extend a 1 percent state sales tax set to expire July 1. Even though the local sales tax would represent a net decrease in the current sales tax, it's still an uncertain prospect that would need two-thirds voter approval in November.

The sales tax in San Francisco is currently 9.5 percent. If the state extension fails, it will drop to 8.5 percent. If city voters then approve Lee's proposal, the sales tax would be 9 percent.

Lee has also proposed saving about $6 million annually using the politically charged option of contracting out security work at the city's hospitals. That would mean shifting 58 sheriff's deputies and 25 other employees to different jobs.

Newsom had made a similar but broader proposal that would have contracted out jail medical services, museum security guards and others. It went nowhere amid strong opposition from organized labor.

Lee's scaled-back version would not mean layoffs. Instead, the deputies would be moved to help cut down on overtime at the jail, or to staff newly opened jail wings needed to house inmates moved from crowded state prisons. The state has been ordered to solve its crowding problem, and the governor has also proposed moving some prisoners to county facilities to save money. The other 25 employees would provide security at city medical clinics.

Budget by the numbers

Here's a breakdown of San Francisco Mayor Ed Lee's proposed 2011-12 budget:

$6.83 billion Total budget.

$266 million Budget increase from previous fiscal year (due primarily to federal funding for implementing President Obama's health care reform, water and sewer system seismic upgrades, and increased pension and health care costs).

$306 million Deficit that mayor had to close to present a balanced budget.

$28 million Changes mayor made to budget after hearing from residents, advocates, supervisors and businesses.

$25.8 million Savings from not funding police academy classes and officers forgoing pay raises.

$18.1 million Savings from not including a cost-of-living adjustment in city contracts.

2.5 percent Effective pay cut that those city contractors will receive.

Source: Mayor's budget office

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