San Jose approves $5.5 billion budget focused on housing, public safety

Though San Jose averted mass layoffs and preserved a majority of its critical programs in its new budget, it still targeted cuts across all areas — including housing, homelessness, and public safety — reductions that are no less painful to the most vulnerable among the city's nearly 1 million residents.

The financial realities of contending with a $50.3 million deficit capped a months-long discussion Tuesday afternoon when the San Jose City Council unanimously passed the balanced $5.5 billion spending plan.

While the cuts required to balance the budget may seem small in proportion to the multi-billion-dollar total spending plan, they are no less meaningful, according to hundreds of community members across generations and cultures who packed the chambers for the past two days. They repeatedly urged leaders to safeguard funding for immigration defense, youth initiatives and homelessness resources.

While city officials found some funding to close the $50.3 million hole, it was not enough to offset slowing revenues and rising inflation, forcing budget cuts they described as tough but necessary.

The city eliminated 85 positions, a majority of which are currently vacant, though Mahan's message noted that any actively displaced workers will "have opportunities to be reassigned."

The approved budget also includes $5.4 million in near-term cuts to homelessness-related programs, including pausing operations at the Taylor Street Safe Sleeping site starting in January, and reducing general fund contributions to interim housing by $1.25 million this year. It also scales back popular community open-streets events, trimming Viva Calle from three annual events to two.

Even with those immediate reductions, the overall multi-billion-dollar spending plan retains funding for most programs from the previous year.

One of the largest shares of the city’s overall spending is directed toward public safety across various departments, with other significant funding directed toward neighborhood services — which includes housing, libraries, parks, recreation, and planning. A separate, major portion of the spending plan is earmarked specifically for community and economic development.

On the ground, those broad spending categories reflected the mayor’s targeted policy priorities for the upcoming fiscal cycle.

Mahan wants to combat city blight through funded boosts to neighborhood cleanups, illegal dumping responses, and private property graffiti removal. The budget plan also sets a target for streamlining housing development by moving toward 90-day project approvals and launching a pilot program to support the construction of up to 50 ADUs for ownership.

To spur local economic growth, the strategy focuses on supporting small-business commercial corridors while tightening oversight on publicly funded events to ensure they justify the city’s financial backing.

One of the most fiercely debated items was restoring the city’s immigration defense fund to its full $1 million, which councilmembers ultimately agreed to do. The fund had been halved to $500,000 in the mayor’s initial budget message, with the remainder reserved for emergency allocation only if federal enforcement activity spiked.

“The best way to respond to an emergency is to ensure our community is ready before it happens,” said Joanna Becerra, a community organizer with Amigos de Guadalupe. “If we wait until the last minute to act, the damage could be far more severe and far more costly for our city and our future.”

Following spirited community feedback, council amendments restored the full $1 million immigration defense fund and saved the Dr. Martin Luther King Jr. Main Library’s historic California Room archives with $245,000 in bridge funding to keep it open for at least another year.

One amendment included in the approved budget instructs the city to explore creating a new “Cost of Living” strategic focus area. While not tied to immediate funding, the designation would join San Jose's five existing focus areas used to track and measure progress on major city goals, such as community safety and housing.

The incorporated amendments were championed by councilmembers, including Pamela Campos, Peter Ortiz, Domingo Candelas, George Casey, Bien Doan, Rosemary Kamei, Anthony Tordillos, and David Cohen.

Mahan also trumpeted priority items that he believed would have a long-term return on investment. Among those investments, the budget allocates $764,000 to launch a community paramedicine pilot program, which he said would save emergency room costs over time by providing healthcare directly in the field.

He also noted that investments in artificial intelligence transcription tools for police officers - currently budgeted at $750,000 - will improve police efficiency alongside other critical municipal technology upgrades.

While the city avoided laying off a number of its already lean staff - which neighbors like San Francisco have had to reckon with - the city's financial troubles are far from over.

The apparent passage of an increased hotel tax, expected to inject an additional $10 million into municipal coffers annually, has alleviated the city's financial worries, but long-term stability remains a serious concern.

Mahan highlighted two other threats to the city's stability and financial future: tens of millions in potential losses from card rooms due to changing state regulations, as well as a pending state audit of Santa Clara County's method of collecting and disbursing property tax revenues to local governments. If that audit rules against the region, it could force San Jose to pay a massive refund to the state, with both of those combined threats carrying financial impacts totaling up to $65 million.

The city still faces a projected $26.8 million deficit next year, and $11.8 million the following year. While those shortfalls are diminishing, any sudden expenses, including those caused by factors outside of the city’s control, could quickly add to that burden.

“The best solution for preventing financial doom is to grow the economy to be able to grow our rainy day fund,” Mahan said, noting that while the city was unable to do that this year, he views economic growth as the only sustainable path forward. “These include storefront activation grants, streamlining business permits, and attracting local employers.”

Ortiz, who supported the mayor’s budget priorities and amendments, said those investments will make a substantial difference for residents on the ground.

“Funding for beautifying San Jose, economic revitalization in District 5, support for arts and culture - that need is not a myth,” Ortiz said.

The council is expected to return on June 16 for a final adoption of the budget.

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This story was originally published June 9, 2026 at 7:33 PM.