San Jose staff warn $60 million shortfall for FY2025–26; Measure E flexibility proposed to narrow gap

San Jose city staff told the City Council in a priority‑setting study session that the City faces a preliminary ongoing general‑fund shortfall of about $60 million for fiscal year 2025–26 and outlined options to close the gap before the March budget message and June adoption.

The March budget message will reflect council feedback from the session, Mayor Matt Mahan said, and staff described five broad strategies city leaders should consider: (1) permit more flexible use of Measure E revenues for homeless sheltering and services; (2) identify ongoing cost reductions; (3) use the budget stabilization reserve in a targeted way; (4) preserve gains from recent budget cycles where possible; and (5) allow a very limited set of new, strategic investments.

The nut graf: Staff stressed the numbers are preliminary and based on October data, but said the twin pressures of weak sales‑tax and modest property‑tax growth, plus continuing service costs and retiree liabilities, are producing a multi‑year budget challenge that will require tradeoffs. In that context city managers asked councilmembers to flag priorities and potential tradeoffs now, so the mayor’s March message can reflect them.

City staff explained the drivers in some detail. Jim Shannon, the city’s budget director, told the council that property and sales taxes — the two largest…