Five things to know about the 2026 San Jose budget

San Jose approved a $5.5 billion budget for fiscal year 2026, closing a $50.3 million shortfall with targeted cuts while increasing public safety spending by $24 million. The budget includes $750,000 for an AI report-writing tool to improve police efficiency and $764,000 for a fire department community paramedicine pilot program.

Getting your Trinity Audio //trinityaudio.ai player ready...After months of contending with a $50.3 million shortfall, San Jose has approved its budget for the upcoming fiscal year starting July 1 – delivering a $5.5 billion spending plan that https://www.mercurynews.com/2026/06/09/san-jose-budget-approved-june-2026/ , while balanced, contains cuts that officials described as tough but necessary. A city’s annual spending plan is a roadmap for how it intends to deliver critical services against its available funds – some budget advocates call it a “statement of values.” San Jose City Council unanimously approved the budget on June 9. Early in the process, residents across cultures and generations – including the most vulnerable among San Jose’s 1 million residents – engaged with city leaders through study sessions and public hearings, asking them to protect immigrant services, homelessness initiatives and assistance for the rising cost of living. San Jose officials maintain that, despite the cuts, they were able to produce a budget that reflects those community priorities. Spending has dropped, but priority areas remain funded The general fund approved this year was roughly $1.7 billion, about 13% less compared to last year. While the overall budget is $5.5 billion, the general fund represents the primary pool of money the City Council has direct discretion over when deciding which programs and services take priority. San Jose tracks its performance using five official “focus areas” adopted by the City Council 2023, including improving community safety, reducing unsheltered homelessness, cleaning up neighborhood blight, building more housing, and growing the local economy. Among those five areas, spending has largely decreased. The only exception was public safety. The broader “Public Safety City Service Area” – as it is officially called in the budget – actually saw an increase in planned spending, growing by about $24 million, or about 2.5%, this year. A significant portion of that increased spending includes $5 million from one-time cash reserves to pay officers to cover empty shifts, and $1.9 million to buy back banked time off, among other expenses. The budget also introduced $764,000 for a fire department community paramedicine pilot program, highlighted by Mayor Matt Mahan in his June budget message, mainly to provide medical treatment primarily to unhoused residents wherever they are located. About $750,000 is allocated for an AI report-writing tool he said would improve police efficiency and eventually reduce costs. Cuts were targeted, no mass layoffs While increasing spending simultaneously with making cuts https://www.mercurynews.com/2026/06/06/san-jose-budget-deficit-faq-june-2026/ might seem counterintuitive, it comes down to the source of the money. Many of the newly funded programs are largely one-time expenses paid for by tapping into temporary cash reserves. But to close the city’s $50.3 million structural shortfall, the city was forced to cut programs that generally rely on long-term, ongoing funding. To save money, among the many reductions, the budget deferred for two years the opening of a new police training center to save $778,000 and eliminated 85 city positions, the majority of which are currently vacant. Mahan noted that displaced workers will have opportunities to be reassigned to different roles within their departments. The budget also includes $5.4 million in cuts to homelessness-related programs, including suspending operations at the Taylor Street Safe Sleeping site starting in January. Additionally, the plan reduces general fund contributions to interim housing to save $1.25 million this year and scales back community events, reducing the popular Viva Calle https://www.mercurynews.com/2026/06/11/san-joses-rolls-out-the-welcome-mat-with-viva-callesj-on-sunday/ open-streets event from three dates to two. However, a council-adopted amendment set aside $60,000 to explore creating a smaller version of the event, dubbed “Viva Callecita.” Residents fought for the immigration defense fund and California Room – and they were saved From April to June, the city of San Jose held town halls, study sessions and hearings to get feedback from residents on their priorities on the budget. Following community input, councilmembers introduced amendments to save two of the most heavily defended programs that faced reductions or restrictions. These included funding for immigration defense – originally proposed to be cut in half to $500,000 – and regular public access to the California Room https://www.mercurynews.com/2026/05/06/san-jose-budget-california-room-library-pizarro/ , an important historic state archive at the Dr. Martin Luther King Jr. Main Library that was slated for reductions to save $388,000. Responding to community concerns regarding federal immigration activity, the council ultimately decided to fund the immigration defense at the full $1 million. Meanwhile, to keep the California Room open, the council approved bridge funding amounting to $245,000 to protect public access for the upcoming year. San Jose is not broke – but the budget remains fragile While the city has money in its emergency reserves, the balance sits at just 4.9% of its day-to-day operating costs – falling well short of the City Council’s 10% safety target. For a city with a $1.7 billion general fund, that means the ability to tap the checkbook for sudden, unexpected expenses is very limited right now. Several looming threats, however, could quickly strain the city’s finances. Just this past week, city officials noted proposed changes to voting thresholds on local tax measures on the November statewide ballot could cost the city upwards of $100 million https://www.mercurynews.com/2026/06/12/san-jose-budget-threat-california-tax-voting-threshold-initiative/ . Additionally, changes to card room regulations and a pending state audit on how Santa Clara County collects and disburses property taxes https://www.mercurynews.com/2026/06/05/even-with-hotel-tax-passing-mayor-warns-of-remaining-financial-threats-to-san-jose/ could cost the city a combined $65 million over the next several years. The city, meanwhile, still projects a deficit of $26.8 million, and $11.8 million the year after. While it expects surpluses after that, any sudden expenses, including those outside of the city’s control, could threaten the city’s fiscal stability. The city’s next challenge: Raising funds while the cost of living is high This precarious financial situation is mainly due to a combination of slowing revenues and rising costs, City Budget Director Jim Shannon previously told this news organization. Key funding sources, such as sales tax collections and property tax transfers, have slumped. Several residents who spoke at the budget hearing said they understood the need to raise money, but asked the council not to impose new taxes on residents. Some councilmembers agreed with that sentiment, while others acknowledged the financial burden on residents but noted that given the city’s challenging financial status, all options should be considered. Mahan said his priority is focusing on economic growth to expand the city’s tax base, rather than imposing new taxes that would further burden financially stressed residents. “In a moment where cost of living, and doing business is high, we have to compete to attract employers,” he said. “We need to focus on growing the local economy.” The mayor said this would entail supporting growing commercial corridors for small-business districts, while cutting down red tape and providing incentives for employers to locate in San Jose. “The best solution for preventing financial doom is to grow the economy to be able to grow our rainy day fund,” he said.