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Dear Neighbor,
Happy Mother’s Day! I hope that all of the moms reading this feel loved and appreciated on this special day, as you should every day. And as we navigate a challenging budget year in San José, I’m reminded of how hard my mom worked to make sure my sisters and I had the opportunity to thrive, even when times got tough.
Many of our families know the feeling of managing a tight budget: sitting at the kitchen table figuring out what's essential, where you can save, and how to keep investing in the things that matter most for the future. That’s the conversation we’re having in San José this year.
As you know, the economy and therefore the City’s revenue growth is cyclical. We’ve entered a period of slowing revenue while most of our costs (employee compensation) are locked in each year, which means we have to make tradeoffs to maintain a balanced budget. Fortunately, with the expertise of our talented administrative staff, we have a balanced Proposed Operating Budget for Fiscal Year 2026-2027 that addresses our projected shortfall while maintaining a focus on the outcomes that matter most for our community.
The budget process isn’t flashy, but it’s the foundation for the everyday services our residents rely on. Every year you tell us your priorities, and that informs our focus areas: reducing unsheltered homelessness, cleaning up our neighborhoods, improving community safety, growing our economy, and building housing.
We’ve worked hard to hold City Hall accountable for results in these focus areas and keep our residents informed every step of the way: we track progress through our regularly-updated public dashboards, spell out our theory of change in each area and clearly explain the connection between our strategies, spending, and outcomes.
As I write to you, the City is clearing Coyote Meadows, the last large encampment in the entire city, marking the end of the era of large encampments in San José. We’ve been able to accomplish this by expanding our shelter and interim housing capacity to more than 2,000 beds to bring people indoors, while investing in prevention to reduce the number of residents falling into homelessness in the first place.
As conditions on the ground change, we have an opportunity to redesign and optimize services like BeautifySJ. Teams can now shift toward responding to smaller encampments and a more mobile unhoused population, while saving millions in operational costs. Right-sizing these efforts is part of how we’re closing the gap this year.
We’re partnering with the County and the Housing Authority to integrate our homelessness response and leverage their resources and expertise to reduce pressure on our budget. These partnerships will result in approximately $5.4 million in savings next fiscal year, and even more in the years ahead.
And just like families look after their own during tough times, we’ve worked hard to protect our city workers. The City Manager’s Proposed Operating Budget includes a net reduction of 85 positions, but fortunately most of these positions are currently vacant, and most impacted employees will be able to transition into different roles at City Hall.
We know we can’t cut our way to a better San José, which is why we’re continuing to invest in our long-term economic development strategy: make it easier to invest and do business in San José, attract visitors for sports and events, and grow our small business ecosystem. To achieve these goals, we’re enhancing business recruitment in key growth industries where we can compete, we’re doubling down on our new business improvement districts, and we’re making sure the world knows San José is the most “power ready” city in the country, with up to two gigawatts of new energy coming online over the coming years. This budget also includes a limited number of pilot programs, such as our Community Paramedicine pilot, which will help specially-trained paramedics respond to behavioral health and addiction crises on our streets to reduce the burden on other first responders.
Fiscal responsibility means being honest about the uncertainty we face.
This budget proposal assumes voters will approve Measure A, which would modify the City’s transient occupancy tax to collect more revenue from out-of-town visitors’ hotel stays. If it does not pass, the City would face an additional $9 million deficit. That would mean further cuts to city departments and staff.
The State has also threatened other local revenue streams, from a dispute with our County over education-related revenue to new gaming regulations that could reduce cardroom operations. Altogether, top-down changes from Sacramento could put tens of millions of dollars in annual revenue at risk in the coming years. I share this possibility to encourage everyone, including my colleagues, to maintain fiscal discipline in this budget and as we look to future years. We have a bright future ahead — assuming at least some of our economic development bets pay off — but now is not the time to make big new commitments. Let’s maintain the focus that has helped us deliver measurable progress in our focus areas and increased trust in City Hall by 40% over the last four years.
In closing, thank you to everyone who has participated in the budget process through public meetings at City Hall and town halls in our neighborhoods. My office is hosting one more virtual budget town hall on May 18 at 6:00 p.m., and I’d love to hear your input as I craft my June Budget Message. Because the more voices we hear, the stronger this budget will be for the one million residents of our city.
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