San Jose Approves Budget Shaped by COVID-19, Protests

When San Jose unveiled its mid-year spending plan on Feb. 11, Budget Director Jim Shannon called it a “good news report.” Unemployment rates were trending downward and the city’s revenue was tracking up to $20 million higher than past projections.

But a lot has changed over the last four months.

In March, Santa Clara County became a major epicenter of the nation’s coronavirus virus outbreak and to date, there have been more than 3,200 confirmed cases of COVID-19. While the county’s strict shelter-in-place order has slowed the spread of the virus and prevented the hospital system from being overwhelmed, it’s had dramatically crippling effects on Silicon Valley’s economy.

As the current fiscal year comes to a close, cities throughout Santa Clara County are bracing for deep cuts as they struggle to gauge just how long the shelter-in-place—and impending recession—will last. In San Jose, city officials had to close the gap on a $71.6 million revue shortfall before the city council approved the $4.1 billion budget for the 2020-21 fiscal year on Tuesday night.

“This is something that we’ve really never experienced,” Shannon told San Jose Inside. “We’re looking at a revenue loss of about 9.3 percent which when you compare that to what we experienced to revenue loss in the great recession, that was 5.5 percent and the dot com bust that was 2.9 percent.”

Then came the protests.

Tear gas billowed above downtown San Jose the last weekend of May as thousands took to the streets outraged by the death of George Floyd. In subsequent budget hearings, community members gave hours of impassioned testimony, calling on the council to defund at least some of the San Jose Police Department’s $449 million coffer. But Mayor Sam Liccardo pushed back on the idea, saying that compared to most big cites, San Jose’s is an already understaffed department.

“We’re more defunded than you might think,” Liccardo said during a budget hearing at Tuesday’s council session. “We’ve got about 1.1 officers per 1,000 population. That is the most thinly staffed police department by a large stretch among any major city. Our response times have suffered as a resort.”

Instead, the council opted to fund a reform plan to the tune of about $1 million. As part of the 2020-21 budget, the council approved $15,000 to help the Independent Police Auditor update its online complaint form to accept photos and videos, $700,000 to restore cuts from the civilian service officers budget, $100,000 to evaluate how police address social issues and reduce noncriminal conflicts and $150,000 to fund an independent report on SJPD’s handling of recent protests.

Incorporating Equity

The council unanimously approved the spending plan Tuesday—a stark contrast to budget hearings last year, which culminated in a tense 6-5 vote. Council members Maya Esparza, Sergio Jimenez, Raul Peralez, Magdalena Carrasco and Sylvia Arenas spent the ensuing months fighting for $500,000 to “support the equitable distribution of city resources and services and bridge the gap between the city’s under-resourced, diverse communities and prosperous neighborhoods.”

Liccardo pushed back, and instead proposed what he called an “equity screen” that would ensure funds would go to areas with the greatest need. In his budget message, he allocated $4 million to programs that he felt fit the equity screen and was backed by data from the Social Progress Index and Government Alliance on Race and Equity.

But the five Latino lawmakers on the council voiced apprehension at the June 2019 meeting that the screen lacked solid criteria for evaluating just how city dollars would get divvied up.

Fast-forward a year and the overall tone on the council has changed on the subject of equitable budget-making. The COVID-19 pandemic, which has disproportionately impacted residents in poor, predominately Latino neighborhoods, has shone a light on just how deep the economic disparities run in San Jose.

In the last few months, for example, the city has ramped up its efforts to close the digital divide as the shelter-in-place order forced school kids to online learning. In May, council members learned that 11,600 San Jose students lack a device for distancing learning and 8,574 have no internet at all. While efforts have been underway for years to close the connectivity gap in the so-called Capital of Silicon Valley, the pandemic brought greater urgency as thousands of students had no way to keep up with their studies. 

In his recently unveiled final budget message of the 2019-20 fiscal year, Liccardo asked to allocate $3.5 million of CARES Act funding for a city partnership that would bring more than 11,000 San Jose students online.

But perhaps the biggest sign of lessons learned from a year’s worth of debate and study sessions was the creation of the Office of Racial Equity. Earlier this week, the council unanimously approved a $1 million budget for the office, which will staff with four to five full time employees. Instead of debating whether to create the office, the contention largely centered on how much money to allocate to the cause. 

Arenas, who led the call for more funding than the mayor initially proposed, called on her colleagues to rise to the occasion.“Our history is kind of leading us to an opportunity for us to talk about equity in a way we couldn’t talk about it last year,” she said from the dais on Tuesday. “We just really weren’t there.”

Though heartened by the investment, Carrasco—who represents East San Jose—expressed frustration with just how long it took the city to embrace equity as a lens for budget decisions. “I’m disappointed that it took the death of George Floyd and riots on the street for us to be shaken to our core, in order for us to believe it,” she said. “Because it’s ingrained in the DNA of the city of San Jose and we have council member that are representing it every day.”

When Carrasco took office five years ago, she said the city was still recovering from the 2008 recession, which the city responded to with draconian austerity—an approach she hopes to avoid this time around.

“They took a blunt instrument and they slashed services equal across the board,” she told San Jose Inside. “They closed down community centers. They closed down library hours. After school programs. Everything across the board equally. What was very apparent when I came in was really how unjust those cuts had been.”

City Manager Dave Sykes, who has worked for San Jose in different capacities since 1987, said that the agency’s understanding of equity has evolved over time.

“We as an organization have invested a lot more in understanding the role of equity in terms of service delivery,” he explained. “I don’t know if it's simple to say cuts were across the board [five years ago]. I don’t think that we had the same understanding of equity back then that we have now.”

Despite the city’s diminishing fiscal health, Jimenez said he believes this has been the most “consequential” budget process since he took office in 2016.

“Even though we are facing some budgetary challenges,” he said in a recent interview, “I do believe we’re in fact laying the ground work for future decisions that I think can have a tremendous impacts on the residents of the city.”

The council is slated to adopt the 2020-21 budget next Tuesday.

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