San Jose officials outline $60 million shortfall, urge council feedback on Measure E flexibility and cuts

City officials told the San Jose City Council during a Feb. priority‑setting study session that the preliminary general fund forecast for fiscal year 2025–26 shows a tentative ongoing shortfall of about $60 million, driven mainly by weaker sales tax receipts and slowing property transactions.

The budget director, Jim Shannon, told the council the city’s two largest general‑fund revenue streams — property tax and sales tax — are underperforming compared with earlier forecasts and that staff built the preliminary estimate from October data that will be updated before the formal May release. He said the city’s retirement costs have begun to stabilize but remain a substantial long‑term pressure on the general fund.

The city manager, Jennifer McGuire, and assistant city manager Lee Wilcox framed staff’s recommended approach around five broad strategies: (1) consider a policy change to allow Measure E revenues greater flexibility to pay for homelessness sheltering and support; (2) identify ongoing…