As San Jose braces for the worst recession since the Great Depression, the nation’s tenth largest city is proposing deep cuts across an array of city agencies in the wake of a global pandemic that has devastated the American economy.
The outlook is even bleaker than San Jose anticipated with an expected deficit now at $71.6 million — far exceeding a projection made last year that the city could see a $.5 million surplus and going beyond the $65 million shortfall that the city had projected just one month ago.
San Jose City Manager David Sykes’ proposed spending plan for the new fiscal year starting July 1 is expected to lead to reduced programs at community centers and libraries, fewer police officers patrolling the streets and heftier workloads for employees across the city.
“Though the exact depth or length of this recession is not known — especially when considering the need for some levels of social distancing to continue for an extended period of time — we can assume that the after-effects of the pandemic will linger and that the City will likely struggle with General Fund shortfalls over the next several years,” Sykes wrote in his budget message released Tuesday night.
The release of the city’s 2020-21 budget comes just two weeks ago after the city approved a separate string of cuts aimed to balance the current general fund budget, which projections showed would fall short by $45 million by the end of June. As part of the plan to fill the hole, the city has furloughed more than 1,000 of its temporary and part-time employees who don’t receive benefits.
With hundreds of businesses shuttered across the city due to the government’s efforts to combat the coronavirus pandemic, taxes and fees are coming in well below forecasts. Sales tax, for instance, is expected to generate $220.5 million in the coming year — a sharp decline of $47.2 million from previous projections. The city’s financial analysts are expecting revenues will drop 9% next year compared to 2018-2019 — a more substantial drop than what the city saw during the Great Recession and Dotcom Bust.
Despite the already significant projected losses, San Jose Mayor Sam Liccardo said he thinks the city has “underestimated” the extent of revenue drops, especially in the categories of sales and hospitality taxes.
“Based on the data that I’m seeing, I expect there will be additional cuts we will have to make in the coming months,” Liccardo said, adding that the city officials would do “everything in our power to protect public safety and basic services to the extent those dollars are available.”
To balance the city’s $4.1 billion proposed budget and close the gap for 2020-21, Sykes plan calls for combining new revenue sources, expenditure reductions and use of reserves.
The city currently does not plan to lay off any employees, but one-time funded positions that expire at the end of June will not be extended — shrinking the city’s full-time staff roster of 6,647 by 103 positions.
Some of the biggest proposed budget reductions include a $1.4 million cut to aquatics programs and family camps at community centers, a $1.5 million savings for reducing library programming and operating hours and a $7.2 million cutback to the city’s Sworn Hire Ahead Program, which allows the police department to hire officers in advance of future vacancies.
A handful of public safety improvements proposed in the mayor’s budget message released in March have been dropped from consideration, such as adding 20 sworn police officers to the force, launching a downtown foot patrol program and matching grants to hire more firefighters. If the recession worsens and revenues decline even further, city officials have a contingency plan with another $12 million in budget cuts, including eliminating 75 more positions.
Earlier this month, the federal government awarded the city with a $178 million bailout as part of its Coronavirus Aid, Relief, and Economic Security Act — also known as the CARES Act. The federal government earlier this month outlined the wide variety of “unforeseen financial needs and risks” created by the public health emergency that the city can spend federal funds on — from medical expenses at public hospitals to food delivery for vulnerable residents to payroll expenses for public safety.
The city is still evaluating the costs associated with the city’s pandemic response efforts and how the federal funding can be used, so it was not included in the budget.
Paul Kelley, president of the San Jose Police Officers Association, has requested that the council use a portion of the new funding stream to avoid cuts to the city’s police force, as proposed in the budget.
“The federal infusion of cash will greatly assist in preserving essential services and programs that are desperately needed during this once in a lifetime pandemic,” Kelly wrote in a statement Wednesday. “It makes little sense not to spend this money as it was intended.”
The San Jose City Council is holding virtual public hearings on the budget on May 21 and June 15 with plans to finalize and approve the budget on June 16.
To read more details about the proposed budget, click here. t
