San Jose council adopts mayor's March budget message after bruising debate on shelter policy

SAN JOSE, Calif. — The San Jose City Council on March 18 adopted a revised version of Mayor Matt Mahan's March budget message that calls for shifting resources to expand interim housing and for new performance and accountability measures for city leaders.

"Achieving an overall balanced budget across the next 2 years will require a multi year strategy," Mayor Matt Mahan said as he opened the discussion, describing projections that show a roughly $46 million shortfall in fiscal 2025'26 and an additional ongoing shortfall of about $53 million in 2026'27.

The mayor's memo urged reallocating some Measure E funds toward operating shelters and interim housing, and it proposed clearer expectations that people accept low-barrier housing when it is available. Council members amended the mayor's text in a motion introduced by Vice Mayor Pam Foley; the amended message passed 7-4, with Councilmembers Cohen, Ortiz, Candelas and Campos voting no.

Why it matters: San Jose faces slowing sales- and property-tax growth after a postpandemic boom and must choose how to fund core services, homelessness responses and programs that spur revenue. The council action sets policy direction ahead of detailed budget hearings and a final budget vote in June.

What council approved

- Policy direction to prioritize funding for interim housing and shelter operations so the city can open more private rooms and managed interim sites this year, while keeping $50 million set aside for new affordable housing competitions, the mayor said. - Instructions to the city manager to pursue operational efficiencies, audit major contracts and return with options to reduce ongoing costs. - A package of memos from councilmembers, incorporated into Foley's motion, that directs additional review on workforce and immigrant legal supports and asks staff to return with achievable metrics for housing and economic programs. The council asked that proposals touching on enforcement or criminal penalties be further discussed with county partners before becoming formal policy.

Council action and vote

Vice Mayor Pam Foley moved the final package; the motion passed 7-4. The roll call on the final measure showed seven yes votes and four no votes; the council's public record lists Councilmembers Cohen, Ortiz, Candelas and Campos as opposing the measure. The council also directed staff to return with more detailed analyses during the budget study sessions and in committee meetings before final adoption in June.

Public comment and the debate

Hundreds of residents signed up for public comment. Two broad, sharply divided viewpoints dominated the chambers: advocates and many business and neighborhood leaders urging rapid, large-scale interim shelter and accountability for people who refuse services; and service providers, legal advocates and many unhoused-rights organizations warning that any policy that steps toward criminalizing people on the street would be ineffective, legally risky and would harm people with disabilities.

Julian Lake of the Bay Area Council told the council the mayor's package offered an opportunity to "make history by becoming the first city in California to achieve functional 0 unsheltered homelessness." By contrast, Elise Koff Ginsburg of the Behavioral Health Contractors Association said, "Criminalizing homelessness will only serve to further traumatize vulnerable people." Council members cited both kinds of testimony in their deliberations.

What council members said

- Mayor Matt Mahan framed the package as both urgent and conditional: it funds interim housing and asks residents and neighborhoods to accept the tradeoff of hosting sites in return for an expectation that people move indoors when space is available.

- Vice Mayor Pam Foley said the motion balanced fiscal restraint with the need to keep frontline services funded and to press the housing pipeline forward.

- Councilmember Campos urged that any new emphasis include concrete actions to improve economic mobility for historically underserved residents. "Our economy is not our businesses alone. It is our people," she said.

Next steps

City staff, led by City Manager Jennifer McGuire and Budget Director Jim Shannon, will use the council's direction to prepare more-detailed budget options, operating-cost estimates for interim housing sites and possible tradeoffs for the June budget hearings. Council members also asked for joint meetings with Santa Clara County to refine how law enforcement, behavioral-health diversion and housing placements would work together if the city adopts stronger enforcement measures tied to shelter availability.

The council's passage of the amended March message sets the policy framework for the budget process but leaves many key operational and legal details to further study and committee review in coming weeks.