...San Francisco's economy is diverse, with a tax base that captures most of its economic activity, including property, sales, business, hotel, utility, and parking taxes. The city's economy has contracted, but is still outperforming the state and nation in terms of the unemployment rate. The city expects to end fiscal 2009 modestly better off than was expected in April 2009, with 2009 revenues slightly better and expenditures modestly lower. Nonetheless, this still includes a sizable use of fund balance, and fiscal 2010's budget used fund balance and other nonrecurring revenues to balance about 38% of the deficit. Maintaining even the current financial position will require fiscal discipline, as the city's political and structural characteristics limit flexibility by earmarked revenue, mandated funding levels, and funding programs at levels beyond the state appropriations. This will continue to be challenging due to the state's own budget challenges and cuts to state-funded social programs....
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