San José Approves New Immigrant Funding in City Budget, With Cuts and Reserve Spending

Overall, the budget for the 2026-27 fiscal year cuts a net 19 positions throughout the city workforce, while 66 positions funded through one-time dollars will not be extended.

Since Mahan took office in 2023, the city has built out a system of tiny homes with more than 2,000 beds for people experiencing homelessness, helping to bring unsheltered homelessness down 10% from 2023 to 2025. But the amount of money needed to operate the shelter system has outstripped dedicated homeless funding and requires an ongoing infusion of general fund dollars.

The budget approved by the council will close a 56-tent sanctioned encampment on Taylor Street, saving $1.2 million in the upcoming fiscal year. It will also reduce funding for BeautifySJ, the city’s blight reduction program, by $4.2 million. The program will require less funding after city workers cleared two large encampments, one along Coyote Creek and another in Columbus Park, over the last year.

City leaders remain optimistic that ongoing negotiations with Santa Clara County will result in the county picking up some of the cost of the city’s shelter system, easing the future hit on the general fund.

Despite the gloomy fiscal outlook, the council agreed to put $1 million toward nonprofits that provide immigrant defense and legal services for residents facing deportation.

“When we talk about immigration services, we’re talking about keeping families together, helping people navigate complex legal systems and making sure our neighbors can live with dignity and without fear,” said Councilmember Peter Ortiz.

At a Monday public comment session on the budget plan, advocates pointed to increased fears in response to a planned U.S. Immigration and Customs Enforcement detention center in Gilroy.

“Families are already living in fear and uncertainty, workers are already facing risks, children are already worried about the possibility of being separated from their loved ones,” said Joanna Becerra, with the nonprofit Amigos de Guadalupe.

“The best way to respond to an emergency is to ensure our community is ready before it happens,” she added.

Much of the budget shortfall is closed through the use of the city’s Budget Stabilization Reserve, drawing the rainy day fund down from $87.5 million to just $25 million.

A stagnant local economy and sluggish real estate sales, along with higher-than-expected retirement costs, have left San José with an ongoing shortfall projected at $26.8 million for 2027-28 and $11.8 million in 2028-29. City budget analysts warned that those deficits could grow if new state regulations on cardrooms result in lower tax revenue from Bay 101 Casino and Casino Matrix.

Meanwhile, the city is expected to bring in $6.8 million in the upcoming fiscal year from Measure A, which is winning approval from roughly two-thirds of San José voters.

A contingency budget plan released by the city manager that did not include that additional revenue called for cuts to Sunday library hours and a downtown police foot patrol.

“We would be having a very, very different discussion in trying to do a greater cut on many of our services today” if Measure A had failed, said Councilmember Rosemary Kamei.

A handful of progressive supervisors had advocated for city staffers to explore changing San José’s business tax to bring in more revenue, but the idea was not included in the final budget plan.

The tax is currently assessed based on employee head count. A potential shift to a gross receipts tax could raise revenue without penalizing employment — but also create new challenges for collection and administration, a city report found.

“Now is not the time to explore an increase to the business tax,” said Vice Mayor Pam Foley. “I am concerned about the impacts on San José’s small businesses as well as our ability to attract large businesses to relocate to San Jose.”

Council members acknowledged that difficult budget conversations would likely carry into next year. But they agreed to tap reserves and shift existing funds in order to avoid deeper cuts initially proposed by the city manager — such as limiting public access to the California Room, a wing of the Dr. Martin Luther King Jr. Library dedicated to local history.

Ralph Pearce, a part-time clerk in the California Room, said the collection provides value to both advanced researchers and visiting schoolchildren.

“We’re not just about looking back,” he said during Monday’s public comment. “We’re about helping the city of San José move forward.”