San Jose officials have agreed to green light Mayor Matt Mahan’s latest budget plans — but stopped short of tying portions of councilmembers’ pay to their perceived performance.
The City Council voted Tuesday to approve a $5.5 billion proposed operating budget for fiscal year 2025-26. Several of the mayor’s proposals moved forward, including reallocating Measure E affordable housing funds for short-term homeless housing and allowing police to arrest homeless people for refusing shelter. But a majority of councilmembers rejected basing pay raises for the city’s top leaders to achieving goals.
The city is facing a $35.6 million shortfall this fiscal year, which is expected to increase to $52.9 million in 2026-27. Councilmembers restored about $9 million in previously planned cuts that would’ve impacted vulnerable residents, including $300,000 in funding to nonprofits serving older adults after San José Spotlight reported on community backlash over initial cuts.
The city will also set aside $25,000 to help relocate a historic Japanese Farmhouse set to be displaced by an ambitious housing development; $1 million in one-time funding for undocumented immigrant support organizations like the Rapid Response Network and SIREN; and $80,000 toward community-led solutions to domestic violence after councilmembers found the most recent domestic violence report lacking.
“This is a fiscally-responsible, service-sustaining and forward-looking budget,” Mahan said at the meeting. “This budget also makes critical investments in the opportunity before us in 2026 as we become the first metro in history to host the Super Bowl and World Cup in the same year.”
Measure E reallocation
Councilmembers voted 8-3 to reprioritize $39.2 million in budgeted funds meant for permanent affordable housing under the voter-approved Measure E to instead fund the construction of temporary shelter to address homelessness in the short term. Councilmembers Bien Doan, Pamela Campos and Peter Ortiz voted no.
A proposal to use $2.6 million of the reprioritized Measure E funds for homeless prevention failed in a 6-5 vote, thus solidifying Mahan’s proposal to use 90% of this year’s fund for emergency interim housing. Councilmember Carl Salas said they should allow $2.6 million to be reserved for homelessness prevention because the move sends a message to residents that the city can focus on multiple solutions.
“It’s to stem the inflow (of homelessness) — not only after building all these sites,” Salas said. “It sends a strong message to our constituents and to Santa Clara County that we’re willing to be judged by our success, and two years is time enough for us to be able to rethink and revote.”
About $42.6 million of Measure E funds will be used for temporary housing in the fiscal year 2026-27 as a result of Tuesday’s vote. Councilmembers will revisit how Measure E funds are allocated in the 2027-28 budget.
Responsibility to Shelter
Councilmembers voted 9-2 to approve Mahan’s plan to form a new police unit to enforce his “Responsibility to Shelter” policy, which would allow police to arrest homeless residents for refusing offers of shelter. Campos and Ortiz voted no.
While Mahan’s plan originally tied arrests to three consecutive refusals of shelter, he’s since said a new in-house outreach team will have discretion over which homeless residents will be investigated and detained by police. He said the goal is to refer people for county-run health treatment center — but county officials disagree with Mahan’s approach.
Opponents to the plan said homeless residents experiencing distress from lifelong trauma would be less trusting of the city if they’re threatened with arrest for refusing resources.
“I want to caution the approach that we are choosing to take where we are placing a huge amount of burden on an individual and framing it as a choice, when the real culprit is a system that pushes people experiencing poverty into homelessness,” Campos said.
Council pay raises
Councilmembers voted 7-4 to reject Mahan’s “Pay for Performance” plan that would have withheld up to 5% of their salaries if they failed to meet citywide goals, as defined by the four City Council Focus Areas. Mahan, Vice Mayor Pam Foley and Councilmembers George Casey and Michael Mulcahy voted against rejecting the plan.
The plan would’ve seen city leaders being judged annually on focus area scorecards and dashboards using the same performance-based compensation model used for city department heads. Councilmember David Cohen raised concerns about the plan’s negative impact on underserved communities and how city leaders might be incentivized to chase popular priorities over communities with specific needs.
“Dividing the council over what kind of metrics we use to measure our own performance, and talk about what our own pay should be, is a distraction,” Cohen said Tuesday. “We all come in with our own local priorities.”
Contact Vicente Vera at [email protected] or follow @VicenteJVera on X.
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