San Jose's balanced budget assumes Measure A passes. If not, cuts.

San Jose
City Council Meeting
May 6, 2026

TL;DR

• The proposed budget closes a $50.3 million shortfall, but it assumes voters pass Measure A on June 2. If the TOT measure fails, the city loses $9 million and triggers a contingency plan with cuts to library hours, parks, and police.
• Three structural risks together top $75 million: Measure A, an ERAF lawsuit between the county and state, and new state rules that could cut card room revenue by up to $25 million.
• The end of large encampments is saving the city money. Homelessness spending drops by $5.4 million next year and more after that, with Coyote Meadows being cleared now and interim housing capacity over 2,000 beds.
• Fire Station 32 and the Police Training Center are deferred for two years, though the fire chief is weighing a lower-cost soft opening.
• A net 85 positions are cut citywide, mostly vacant ones. The contingency plan, if triggered, would change that picture.

What happened

1. The balanced budget assumes Measure A passes on June 2. If it doesn't, cuts hit.
   1. The city's proposed 2026-27 budget closes a $50.3 million general fund shortfall. It also assumes voters approve Measure A on June 2. Measure A is a modification to the transient occupancy tax, the tax hotel guests pay. If voters reject it, the city loses about $9 million, and a contingency plan kicks in. The contingency plan would cut library hours, recreational and parks access, parts of the police department, and strategic support, mayor, and council office staffing.
   2. What this means for you: The June 2 vote decides whether library hours, park programs, and police staffing hold at current levels next year. Budget Director Jim Shannon told the council the contingency plan reductions would be "significantly more impactful" than anything in the current proposed budget.
2. Three risks beyond Measure A total over $75 million
   1. Mayor Matt Mahan flagged three structural risks the city does not control. Measure A is one. The second is ERAF, the Educational Revenue Augmentation Fund, a state mechanism that redirects local property tax revenue to schools. The county and state are in court over how ERAF should be calculated. The city could lose about $9 to $10 million a year and face a one-time clawback of $35 to $39 million. The third is card room revenue. The California Bureau of Gaming Control approved new regulations limiting cardroom operations. Industry leaders estimate an 85% reduction in operations and a $25 million annual loss to the city.
   2. What this means for you: Even if Measure A passes, the city is exposed to risks that together eclipse the current shortfall. Shannon told the council the city's general purpose reserves sit at 4.99% of operating expenditures. Council policy says 10%. Anything that pushes those reserves lower leaves less cushion for the risks the mayor flagged.
3. The end of large encampments is freeing up money in the budget
   1. The mayor said San Jose is "nearing the end of the era of large encampments," with the final large encampment at Coyote Meadows being cleared now. Interim housing has expanded to over 2,000 beds. The shift lets the city restructure Beautify SJ and interim housing operations. Beautify SJ contractual services drop by $4.2 million in 2026-27 and $6.4 million ongoing. Interim housing drops by $1.2 million in 2026-27 and $14.2 million ongoing. The Taylor Hub site closes in January. The city plans to buy two motels it currently leases, and the county will take over operations at two interim housing sites in 2027-28.
   2. What this means for you: This is the biggest single budget pivot in the proposal. Total savings reach about $5.4 million next year, with more in following years. The city says the shift will not reduce the focus area work on unsheltered homelessness.
4. Fire Station 32 and the Police Training Center are deferred two years
   1. Both projects are pushed out for two years to help close the shortfall. The fire chief is weighing whether Fire Station 32 could open in a modified, lower-cost form, possibly with a truck company shifted from another station.
   2. What this means for you: District 7 Councilmember Bien Doan, a former fire chief, pressed on this point. City Manager Jennifer Maguire said more details may come at the Public Safety study session on Monday. If conditions improve, both projects could move back up.
5. A net 85 positions are cut, mostly vacant ones
   1. The proposed budget reduces budgeted positions citywide by 85. Most are currently vacant. Of the filled positions, most will be moved to a different role inside the same department.
   2. What this means for you: Direct employee impact is limited under the proposed budget. The contingency plan, if Measure A fails, would expand the impact.

What residents brought up

• The Mayor opened public comment. The City Clerk reported no speaker cards. No residents addressed the council on the proposed budget at this session.
• The Mayor noted residents have weighed in through district town halls hosted by council offices and through the annual resident survey, which still shows public safety, homelessness, housing, the economy, and clean neighborhoods as the top concerns. Beautification has moved into the top three.

Also happened

• Jen Baker, the new Director of the Office of Economic Development and Cultural Affairs, gave her first economic outlook to the council. San Jose's unemployment rate is 4.1%. Santa Clara County is at 4.2%. For 25-to-29-year-olds, unemployment is 8.5%, tracking the national average.
• The average wage per job in San Jose is over $128,000 a year. Twenty percent of residents live on less than $55,000 a year.
• Funding for the Momotaro statue, a gift from sister city Okayama that was stolen and is being remade, will come from cultural arts funding in the TOT fund. The change will be memorialized in the rebudget cleanup MBA.
• The city is budgeting $350,000 for the 2027 celebration strategy ahead of San Jose's 250th birthday, split between a temporary staff position and program funds.
• $100,000 is budgeted for an assessment of Enhanced Infrastructure Financing District tools as a way to fund public infrastructure.
• The City Hall water intrusion project is estimated at $45 to $50 million. The proposed budget includes $2 million this year to award a design-build contract.
• The San Jose Works youth job initiative reduces summer placements from 325 to 295 with the elimination of a vacant staff specialist position.

For any updates or corrections, please email steven@polisdesk.com