Matt Mahan Is Running for Governor. What Does That Mean for San José?

San José Mayor Matt Mahan launched his campaign for governor this week, touting his record in office as a potential blueprint for California.

But as Mahan begins a four-month sprint to the June 2 primary amid a crowded Democratic field, he still has a day job to worry about: leading the state’s third-largest city in the face of fiscal headwinds.

Mahan’s allies and critics on the council are split over whether his run for higher office is a distraction or an opportunity for San José. The campaign overlaps with the busiest time of year at city hall, when the mayor and council negotiate a budget.

That task could be complicated by a $55 million to $65 million budget shortfall facing the city, according to an early estimate by the city manager’s office released in December.

While that deficit represents a much smaller share of San José’s general fund than shortfalls in San Francisco and Oakland, it still sets up difficult choices for Mahan and the council.

Asked how he plans to balance leading the city while reaching for the brass ring of state politics, Mahan replied: “I still wake up every day thinking about my primary job, which is being mayor.”

Mahan’s campaign is likely to lean heavily on his mayoral resume.

Since taking office in 2023, Mahan has led a major change in the city’s strategy for reducing homelessness. In consecutive budgets, he has won support for shifting money from Measure E, a voter-approved real estate tax, away from funding affordable apartments and toward building interim housing and shelter.

Mahan has touted a 10% decline in unsheltered homelessness during his time in office. And he has vowed that if elected governor, he would give cities such as San José more money to keep people off the streets.

“I think there’s a story to tell about how we can bring that same spirit of pragmatism and spirit of problem solving to the entire state of California,” he said.

But to Mahan’s critics at city hall, his run for governor is a confirmation of their view that he has used his job as mayor as a political stepping stone.

“This mayor has demonstrated to us that he leverages the communications of this city to his political benefit,” Councilmember Pamela Campos said. “And too often when we see decisions that are driven by what sounds good or what looks good in the moment, it doesn’t always mean it’s what is best for our community.”

Other aspects of Mahan’s tenure could be appealing targets for the Democrats running against him. Mahan has sparred with organized labor throughout his time as mayor, most notably in 2023, when he was the lone vote on the city council against giving city workers a 6% raise.

Campos said Mahan’s signature move on homelessness embodies what she sees as the mayor’s prioritization of quick wins over lasting impact, by diverting city spending on permanent affordable housing.

“Redirecting Measure E funds is a reflection of short-term thinking, rather than long-term housing stability for San José,” she said.

While Mahan leads weekly council meetings and spearheads the budget process, the city manager runs the day-to-day operations of city departments. That “weak mayor” system could make it easier for Mahan to hit the campaign trail and introduce himself to voters across the state.

“If we can produce a governor from the city of San José, I think it would be a boon for the South Bay and San José specifically,” Councilmember Michael Mulcahy said.

“Matt Mahan has more energy than any person I think I’ve ever met, and I think he will do the right thing for the city of San José by making sure he’s paying the attention he needs to in this very critical budget cycle,” Mulcahy said.

The city manager’s budget report highlighted slow growth in property and sales tax revenue, combined with higher-than-expected costs for retiree benefits.

“The local economy continues to be relatively weak, with stagnant job growth and a suppressed real estate market,” City Manager Jennifer Maguire wrote. “Unfortunately, several major General Fund revenue categories have weakened further since prior forecasts or continue at the previously forecasted low levels.”

Mahan is expected to unveil his initial spending plan in early March. After months of hearings and negotiations, the council will vote on a final budget on June 9.

By that point, Mahan could be on his way to Sacramento — or back on the 18th floor of city hall, licking his political wounds.