The San Jose City Council held a study session on February 5, 2026, to discuss the Preliminary General Fund Forecast and Budget Priorities for fiscal year 2026-2027. The session focused on setting priorities to address a projected ongoing general fund shortfall of $55 to $65 million. Mayor Matt Mahan opened the meeting, emphasizing that the session was about providing direction for the March budget message, not final decisions. City Manager Jennifer McGuire, Budget Director Jim Shannon, and Assistant City Manager Lee Wilcox presented an overview of economic conditions, revenue estimates, expenditure drivers, community priorities, and potential budget balancing strategies. Council members then shared their perspectives on service priorities, potential reductions, and structural changes. The meeting concluded with public comments.
All right. Good afternoon, everyone. Welcome. I'd like to call to order this study session of the 2026-2027 Preliminary General Fund Forecast and Budget Priorities, also known as priority setting, to order for the afternoon of February 5th. Tony, would you please call the roll? Kamei? Campos? Present. Jordios? Here. Cohen? Here. Ortiz? Mulcahy? Here. Duan? Here. Candelas? Here. Casey? Here. Foley? Here. Mahan? Here. You have a quorum. Great. Thank you. I was about to do the Pledge of Allegiance and then I realized we don't do that in our study sessions. All right. Well, welcome everyone. Thank you all for being here. I'm just going to offer a few opening remarks and then I'll hand things over to our city manager. for her opening remarks and then we'll get to the staff presentation before we go to council discussion and finally public comment at the end of the study session. So I want to just start by thanking City Manager Jennifer McGuire, Assistant City Manager Lee Wilcox, their Deputy City Managers, and the Office of the City Managers, Budget Director Jim Shannon, Betty Young, Claudia Chang and the entire team, I think most of whom are here. I want to recognize the extraordinary work that staff has put in over the last several months behind the scenes, not maybe obvious to us in public meetings, but the team there has been working a way really with teams across the organization to prepare for both the mid-year budget review, which we will hear next week, and today's priority setting and all of the budget work that comes ahead. That effort shows, and I want to thank you all for your professionalism, hard work, and commitment to the city. So the purpose of today's session is to hear directly from the city council about priorities and values that will inform the development of my March budget message and ultimately guide the entire budget process we go through together, culminating in a final adoption of the budget in late June. Today is not about final decisions, it is about general direction and priorities. It's about grounding our next steps in a shared understanding of the fiscal reality we face and the outcomes we want to deliver for our residents. The city manager is preliminarily estimating an ongoing general fund shortfall in fiscal year 26-27 of 55 to 65 million dollars. While I know that the administration will get creative and think critically to identify cost efficiencies as they are already doing and we've already supported, we will have a lot of work to do to balance our budget. And by the way, that work by the administration isn't just about identifying cost efficiencies, it's also optimizing existing services so that we can make them more efficient without losing quality, generating new and generating new revenue sources. But collectively as we head into this process we will collectively have to discuss service reductions which requires us to have an honest conversation about our capacity and the trade-offs we're willing to make. None of the necessary trade-offs will be easy and none should be approached lightly. Our city manager will be very focused on minimizing community and workforce impacts. But service impacts are likely, and today gives us an opportunity to align on principles and approaches for responsibly and sustainably addressing this shortfall while maintaining focus on what matters most to our community. Even in the face of these fiscal constraints, our responsibility remains the same, to deliver tangible and visible results for the more than 1 million people who call San Jose home. That means continuing to prioritize the services that most directly affect residents' daily lives, while also positioning the city for long-term stability and growth. I also want to note that I'm excited to be working with this year's Budget Brown Act group, including Vice Mayor Foley and Council Members Cohen, Kamey, and Tordios. I appreciate their collaboration in this process, but today is really about hearing from the entire council. For today's session there will be, following today's session, there will be multiple additional opportunities for both city council and the general public to provide input. These include the city service budget study sessions, budget town halls that I'll be leading across the city, and the public hearings on the March and June messages. Today is one step in that longer process, but it is a critical one. The feedback shared in this chamber today will shape how we move forward, how we balance difficult choices, and how we stay accountable to the people we serve. I'm excited, colleagues, to delve into