Upcoming San Jose budget avoids shortfall — for now

Contrary to prior predictions, San Jose will not see a budget shortfall this upcoming fiscal year.

San Jose is in better financial shape than expected for the 2024-25 budget. The city will not see a surplus or deficit, but will still have to be conservative with spending as it braces for the years ahead, according to preliminary city data.

City officials say San Jose is doing better than expected because parts of the local economy are doing better than anticipated. The San Jose City Council also saved nearly $19 million of last year’s surplus in anticipation of a deficit.

For the upcoming budget, officials are prioritizing addressing homelessness, increasing public safety, decreasing blight and pushing forward with economic development, jobs and homes — the same issues that concern most residents, according to city surveys.

“These focus areas do indeed address the most wicked issues facing our city, region and state, and require multi-year transformational change to make meaningful progress,” City Manager Jennifer Maguire said during last week’s council meeting. “We have made significant investments in these focus areas this year, and we are starting to see some initial progress, but there is much more work to do.”

Officials forecast a $25 million to $35 million deficit in 2025-26, which means the city will need to look ahead as it drafts the upcoming budget. The anticipated deficit does not include several one-time funded projects for the 2024-25 fiscal year, including several BeautifySJ pilot programs and the San Jose Police Department sworn backfill reserve program.

To continue funding these one-time programs, the city will have to either reduce the level of services or find cuts elsewhere, Mayor Matt Mahan told San José Spotlight.

Costs for the city’s temporary housing developments are also expected to exponentially grow over the next five years as more homes come online, forcing San Jose to prepare for that reality.

To prepare for increasing costs, Budget Director Jim Shannon said the council will need to consider reducing funds for lower priority services, though he did not specify what those services would be. He said the city is looking at eliminating long-vacant positions — similar to what Santa Clara County did in 2023.

For economic development, the city wants to create incentives for companies to move into San Jose, particularly manufacturing and artificial intelligence. Officials are considering a leasing incentive program to lure more businesses into downtown. San Jose also intends to be ready for the Super Bowl and World Cup — both coming to Levi’s Stadium in 2026.

Other areas of focus include modernizing the 911 call center and recruiting more officers to join the San Jose Police Department. Better safety methods are on the list as well, with the growing number of traffic-related deaths. San Jose will pilot a traffic camera program to reduce speeding and reconfigure roads to force drivers to slow down.

“Last year, the city council sided with the community — voting for a budget that focused City Hall on the basic priorities that matter most,” Mahan told San José Spotlight. “And this year, we need to double down on what’s working so that we can continue to make San Jose the safe, clean city we call want to live in while acknowledging our financial reality.”

Mahan said there is little money to expand services this year, so instead “we must make strategic decisions that move the needle on our biggest challenges — homelessness and crime.”

The mayor will release his budget message on March 19, which will outline the priorities in more detail. This will be followed a detailed budget outlining the costs, done by city manager’s office.

Over the next few months, councilmembers, city workers and residents will engage in meetings to determine the final budget, which will be adopted on June 18.

Contact Jana Kadah at [email protected] or follow @Jana_Kadah on X, formerly known as Twitter.