San Francisco’s political establishment in girding for a fight with the city’s Catholic Charities if the agency obeys its ex-archbishop’s demand that it stop allowing gay couples to adopt children.

With one e-mail last Thursday to his old prefecture in San Francisco, William Levada, who now heads the Congregation of the Doctrine of the Faith in the Vatican and is the second-highest ranking Catholic in the world, has set off a chain of events that is likely to shake the foundations of Catholic charity in this city and across California.

“Patently offensive,” said San Francisco Mayor Gavin Newsom as he announced he would not go to Archbishop William Levada’s elevation ceremony to cardinal in Rome on March 24.

“Cardinal Levada is everything that’s wrong with the Catholic Church,” said city Board of Supervisors member and gay activist Tom Ammiano, as he introduced a resolution condemning Levada on Tuesday, demanding that the new cardinal withdraw his “discriminatory and defamatory directive.”

In his new job as the chief interpreter of Catholic doctrine in Rome, Levada last week forbade gays and lesbians from adopting children through Catholic agencies—even though he himself had allowed at least three children to go to gay and lesbian households during his tenure as archbishop in San Francisco.

In Catholic circles, the move showed that Levada, once the head of what is arguably the most liberal diocese in the nation, has now moved close into the orbit of ultra-conservative Pope Benedict XVI.

As in Boston, where an identical controversy erupted in October, San Francisco’s city government has vowed to fight the policy, because it directly violates local and California anti-discrimination laws.

San Francisco’s Catholic Charities is now less of a collector of private philanthropy than a distributor of local, state, and federal government grants and a contract administrator of the social programs that the money pays for. Over 70 percent, about $17 million, of its $24 million annual budget comes from the city tax revenue.

Ammiano said that he values the other work that Catholic Charities does. He called them “good people.” The agency administers an award-winning HIV/AIDS program.

But would Ammiano move to strip the organization of its funding if it refuses to comply with city and state law?

“Yes, of course,” he said.

Trent Rhorer, the executive director of the city’s Human Services Agency that manages about $8 million of Catholic Charities’ contracts said that he hopes “they can continue to provide adoption services for all kids—regardless of the placement—without discriminating.”

But Rhorer wouldn’t say what he would do about it if they refused, saying that it’s “too early” in the conflict, and calling Catholic Charities one of the city’s “key partners in delivering services to families and children.”

The controversy is reminiscent of a similar battle between the city and Catholic Charities over a 1997 law which requires city contractors to give the domestic partners of employees the same job benefits, like health insurance, as married spouses. Now the State of California and 11 cities have similar rules, and more than 8,000 companies offer domestic partner benefits. But San Francisco’s Equal Benefits Ordinance, co-authored by Ammiano, was one of the first in the nation and sparked a months-long controversy here—and the same threat of slashed city funding.

Levada, who had just been installed as the city’s new archbishop, was at the center of that controversy, in which the city and Catholic Charities eventually compromised. The organization agreed to provide benefits for one other person in each employee’s household, regardless of who they are—and so pays the benefits without having to acknowledge the nature of their employees’ relationships.

In Boston on Friday, Catholic Charities chose to abandon adoptions, its founding mission, rather than comply with Massachusetts anti-discrimination laws.

Gay legal scholar, New York Law School professor, and Gay City News contributor Arthur S. Leonard said that by accepting public funding, Catholic Charities invited restrictions on its practices. In a recent California Supreme Court case on which Leonard reports in this issue, the city of Berkeley was sustained in its decision to stop giving the Sea Scouts free marina space as a result of the group’s refusal to promise not to discriminate against gays and lesbians. The Sea Scouts acted out of fear of censure from its national parent organization, the Boy Scouts of America, and sued to be able to preserve its membership policy without losing public benefits.

Leonard reports that the court decided that discrimination has to end when tax dollars are involved.

“Maybe you can discriminate if you want, but you’re not going to do it with public funds,” he explained.