Mayor Matt Mahan Releases March Budget Message, Maintains Core Services Despite Budget Shortfall
Mayor Matt Mahan releases his March Budget Message outlining priorities and next steps for the City of San José’s Fiscal Year 2026–2027 budget
FOR IMMEDIATE RELEASE
March 10, 2026
Media Contact:
Seamus Gann, Communications Manager, Office of Mayor Mahan
SAN JOSÉ, CA - Mayor Matt Mahan on Tuesday released his March Budget Message outlining priorities and next steps for the City of San José’s Fiscal Year 2026–2027 budget. The annual message sets policy direction for the city’s multibillion-dollar budget and guides the development of the proposed operating budget. Following approval of the message by the San José City Council, City Manager Jennifer Maguire will develop and present a proposed budget aligned with the council’s priorities.
“Tightening our belts does not mean abandoning our progress,” said Mayor Matt Mahan. “Even as revenue slows, we can continue making progress on the issues residents care about most by staying relentlessly focused on the basics and protecting the services people rely on every day.”
Facing a projected $56 million budget shortfall due to slowing revenue and rising costs, the mayor’s message directs the administration to maintain core services for residents while continuing progress on key city priorities: reducing unsheltered homelessness, cleaning and maintaining neighborhoods, improving community safety, growing the local economy and building more housing.
“With a 56-million-dollar shortfall, it’s clear that we face serious fiscal challenges in this year’s budget. Having navigated budget deficits as a councilmember and former school board member, I am confident that we can make the difficult decisions needed to deliver on our commitment to our residents,” said Vice Mayor Pam Foley (D9). “I support the Mayor’s March Budget Message as it focuses on preserving core city services while remaining fiscally responsible.”
The budget message acknowledges the structural constraints the City faces. Much of the City’s General Fund is tied to nondiscretionary costs such as pension obligations, state mandates and fee-supported services, leaving limited flexibility to close the gap without affecting services. To address the shortfall, Mayor Mahan is directing the City administration to conduct a comprehensive review of spending to identify efficiencies and service improvements with minimal impact to residents.
“In good years and bad, Mayor Mahan has made public safety his top priority,” said Santa Clara County District Attorney Jeff Rosen. “And every year, we’ve seen the results compound. I commend him for standing firm on the most basic responsibility of government — keeping people safe — even when tough tradeoffs are required. Because the safety of our community is not negotiable.”
The message also calls for optimization of existing services to reduce operating costs, increasing cost recovery for fee-support services where appropriate, and identifying new revenue opportunities. At the same time, the mayor is prioritizing the protection of core services and City Council focus areas, while asking the city manager to phase in potential reductions where possible to reduce impacts on residents and vulnerable communities.
“In a year defined by budget cuts, San José is choosing to go bold on housing,” said Ali Sapirman, Advocacy & Policy Manager for the Housing Action Coalition. “Streamlining fees, guaranteeing permit timelines, and stripping away unnecessary building codes aren’t small tweaks — they’re structural changes that actually move the needle on housing production. We’re glad to see the Mayor’s March Budget Message using this moment to build smarter.”
“In our neighborhood we’ve seen progress — fewer encampments and better response when issues come up — but we also know the work isn’t finished,” said Lone Bluff Neighborhood Association President Orlana Mejia. “It’s important the city keeps that momentum going even in a challenging budget year. Staying focused on core services is what matters most to residents.”
Despite the fiscal realities facing the city, the March Budget Message identifies opportunities to continue making progress on the City Council’s core focus areas. Key proposals across the focus areas include:
Reducing Unsheltered Homelessness
Rebid contracts within the City’s interim housing and shelter portfolio to reduce operating costs by up to 20% system-wide.
Preserve funding for the RV buyback program and explore scalable options for extended RV parking, including partnerships with mobilehome parks, to provide safer alternatives for residents living in vehicles.
Preserve 10% of Measure E revenues for homelessness prevention and pursue additional philanthropic and government funding — in partnership with a new mayoral Strategic Partnerships initiative — to expand the region’s Homelessness Prevention System and keep more families housed.
Integrate 90% of the City’s interim housing capacity into the Santa Clara County’s Coordinated Entry System to streamline referrals and increase placements into permanent supportive housing, while pursuing County cost-sharing partnerships for select interim housing sites.
Cleaning Up Our Neighborhoods
Explore AI-powered monitoring on City-owned cameras to strengthen enforcement related to illegal dumping.
Strengthen proactive code enforcement through the implementation of performance metrics that track the Chronic Offender Resolution and Enforcement (CORE) pilot program, Escalated Enforcement Policy and CodeX to ensure they’re reducing repeat violations and case durations.
Accelerate enforcement against illegal dumping by exploring granting authority to BeautifySJ teams to issue pre-citation warning letters, with a goal of reducing notification timelines from 65 days to about 10 days.
Increasing Community Safety
Pilot a Community Paramedicine program to reduce avoidable emergency room transports and ease pressure on emergency response systems through field-based care and coordinated follow-up.
Establish youth violence prevention as a priority within the Community Safety Focus Area and set aside $500,000 in one-time funding to advance Children and Youth Master Plan initiatives, with a focus on scaling the most effective programs through the San José Youth Empowerment Alliance.
Pilot AI-assisted report transcription using body-worn camera footage to reduce time officers spend on paperwork and increase time available for community policing.
Organize a study mission with City, County and judicial partners to examine San Diego County’s implementation of Proposition 36 and develop recommendations to expand court-mandated treatment and reduce repeat offenses locally.
Building More Housing
Streamline development services and implement permit transparency tools to accelerate housing approvals and guarantee ministerial projects are approved within 90 days.
Establish a development fee framework to defer payment of all housing impact fees and taxes until certificate of occupancy, and evaluate removing local building code amendments to reduce cost and complexity in homebuilding.
Explore creation of an ADU homeownership pilot program for first-time buyers, leveraging affordable housing funds and public-private partnerships to expand entry-level homeownership opportunities.
Develop a framework to allow removal or demolition of substandard properties from the historic resources inventory and explore an amnesty program for legacy unpermitted work on historic structures to support reinvestment while maintaining health and safety standards.
Growing Our Economy
Advance plans for a Downtown Sports and Entertainment District to attract major events, drive private investment, and strengthen San José’s position as Silicon Valley’s premier entertainment destination.
Explore a ministerial approval process for advanced manufacturing in industrial zoning districts to accelerate investment and support growth in high-paying manufacturing jobs.
Identify and prioritize near-term capital improvements at the San José McEnery Convention Center to attract high-attendance events and maximize hotel tax revenue.
Continue the Storefront Activation Grant program, explore modest funding increases to meet demand, streamline the application process, and pursue philanthropic partnerships to support small business growth in neighborhood commercial corridors.
The City Council will vote on the Mayor’s March Budget Message on March 17, 2026. Following City Council approval, the City Manager will propose an operating budget based on the direction in the approved budget message. The Mayor’s March Budget Message can be read here.
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About the City of San José
With nearly one million residents, San José is the largest city in the Bay Area and one of the nation's most diverse and creative. San José’s transformation into a global innovation center in the heart of Silicon Valley has resulted in the world's greatest concentration of technology talent and development.