San Jose council approves mayor’s budget plan

San Jose officials have signed off on the mayor’s plan to reallocate a majority of funding meant for affordable housing and put it toward temporary homeless shelters.

The City Council voted 7- 4 in a contentious meeting Tuesday to accept Mayor Matt Mahan’s March budget message for the 2025-26 fiscal year — with the elimination of homelessness and related public safety threats as top priorities for funding amid the more than $100 million projected budget shortfall over the next two years. Mahan successfully proposed redirecting as much as 90% of tax-funded affordable housing dollars from Measure E, a voter-approved property transfer tax from 2020, toward temporary shelters for the upcoming fiscal year.

Councilmembers Pamela Campos, David Cohen, Peter Ortiz and Domingo Candelas voted no, citing issues with putting a plan to tie pay raises to performance for top city officials within the budget discussion, as well as proposals to address homelessness.

“Most democratic systems resist pay for performance modeling … and they’ve cited risks like — perverse incentives, short-term decision making versus long term goals and manipulation of benchmarks,” Cohen said at the meeting.

One of Mahan’s proposals to address homelessness is the “responsibility to shelter” initiative, introduced earlier this month. Under the policy, homeless residents who choose not to accept shelter after being offered it three times within an 18-month period can be arrested for trespassing.

“The truth is, this is a failing of the state of California,” Mahan said Tuesday. “The Lanterman-Petris-Short Act severely restricts who we can compel to come in doors, which leaves us with a law enforcement approach to get the person into the care of the county.”

Mahan’s plan requires cooperation and coordination with the county in order for his plan to work. But with the county facing a shortage of mental health treatment beds, it will be difficult for homeless people to get the services they need. As part of the ongoing budget process, city leaders are expected to set up a joint meeting between the city council, Santa Clara County Executive James Williams and the county Board of Supervisors.

Homeless advocates protested outside City Hall prior to the meeting, saying the mayor’s initiative criminalizes homelessness. But Mahan said he doesn’t want to see anyone go to jail for being homeless. He mentioned Fremont and Milpitas as examples of cities that have recently taken a tougher approach to address homelessness.

“We have neighbors who are outright banning camping without offering housing and shelter — that’s criminalizing homelessness,” Mahan said. “We will take a middle path that says we’ll invest in safe places for you to go, but there has to be some accountability for coming indoors.”

Chuck Cantrell, a local economist and vice chair of the San Jose Planning Commission, said city officials need to take into consideration the disproportionate number of Black homeless residents in San Jose. Black residents make up about 17% of the homeless population despite being only 2.5% of the total local population, according to the National Alliance to End Homelessness.

“Jailing unhoused people will lead to the greater numbers of Black people in our prison system,” Cantrell said Tuesday. “For the crime of being unhoused, they will be dragged off to prison where they will get eight cents an hour for their labor.”

Residents who spoke in favor of Mahan’s budget plan pointed to San Jose having the opportunity to be a leader in cracking down on homeless residents refusing help.

“This budget proposal gives San Jose the opportunity to make history by becoming the first city in California to achieve functional zero unsheltered homelessness,” Julian Lake, public policy director of climate and energy at the Bay Area Council, said. “Let’s turn the page on encampments and build a future where no one is left to suffer on our streets.”

Mahan’s budget plan said the 2025-26 fiscal year shortfall has been reduced from $60 million to $46 million, with a $53 million budget shortfall anticipated for 2026-27. City officials reshuffled this fiscal year’s budget last month and agreed to a hiring freeze after deficits forced them to identify millions in savings.

The hiring freeze and looming possibility of layoffs led to more than 200 city workers and labor union leaders protesting last week against staffing cuts — as well as call for increased staffing at city departments now that the budget shortfall is less than anticipated.

As the 2025-26 fiscal year begins in July, the council’s approval of Mahan’s budget plan will help the city manager’s office prepare proposals for final budget deliberations in May.

Contact Vicente Vera at [email protected] or follow @VicenteJVera on X.