San Jose furloughs more than 1,000 employees

Projected $45 million budget shortfall; those affected will not have to reapply for positions

Faced with a $45 million budget shortfall and just two months left in the fiscal year, San Jose has announced furloughs for more than 1,000 of its temporary and part-time employees who don’t receive benefits.

“After a lot of thought and careful consideration, we’ve come to the decision that we’re going to end administrative leave for parttime, unbenefited and temporary employees,” San Jose City Manager Dave Sykes said during the virtual City Council meeting on Tuesday.

The furloughs are part of a string of cuts being made in light of a grim projection provided to the council earlier this month that showed the general fund budget falling short $45 million in 20192020 and at least $65 million in 2020-2021 due to revenue losses created by the COVID-19 pandemic.

They will affect approximately 1,180 city employees, including lifeguards, recreational leaders, library aides and community services aides. The employees will no longer receive paychecks but will remain on the city’s payroll and will not be required to reapply for their positions when normal operations resume, according to city officials.

When the Bay Area’s stay-athome order was issued in midMarch, the city granted paid administrative leave — through the order’s expiration on May 3 — to all employees that were no longer able to work. But faced with an unprecedented budget shortfall this late in the fiscal year and an order now extended until at least the end of May, the city has decided to begin furloughs starting Monday.

With less than two months into the region’s stay-at-home order, the economic impacts of the shutdown and COVID-19 pandemic are hitting some of the city’s largest revenue streams, from sales tax revenue to construction fees to convention center events. The city anticipates a 10% loss in sales tax for the current fiscal year and a 40% loss in its development fee program for construction projects between April and June, according to city officials.

“I think the approach that we’re taking is not an overreaction,” Sykes said during Tuesday’s meeting. “We need to take these revenue shortfalls seriously. They are real and we certainly do not assume that we are going to be reimbursed for the lost revenue.”

To make up for the revenue losses, the city is pulling funds from earmarked reserves and transfer balances and cutting a variety of citywide and capital expenses, including $3 million in emergency power generation, $1.5 million from the South San Jose Police Substation and $1.3 million in workers’ compensation-related savings.

In order to further balance the estimated shortfall, the city plans to use an estimated $18 million in sales tax revenue from eBay, $2.6 million from the sale of the Hayes Mansion and $24.4 million by reducing expenditures and liquidating reserves.

City budget Director Jim Shannon said he was proud of the package of cuts his team brought forward because of its “minimal impact on the organization and the community,” but he acknowledged, “it’s not without impacts.”

“There’s definitely things that are going to be felt here,” Shannon said during the meeting.

Mayor Sam Liccardo commended the work of the budget

team but also urged them to look at the impacts for the coming two to three years rather than solely just the year ahead. Liccardo noted that the city faced a shortfall of more than $300 million in a three-year span during the Great Recession and “by all accounts, this is a much deeper economic hole,” he said.

“So I think it’s really important for us to really vet all of our assumptions and get this news out early so that we can have honest conversations with everyone — with our public, with our employees and with ourselves — and then we can start to strategize and figure out how we will rebuild,” he said.

City officials called the furloughs and cuts announced Tuesday the “first step” to address the significant revenue loss experienced by the city due to the coronavirus pandemic. On May 8, the city plans to release the proposed budget for the 2020-21 fiscal year, which will inevitably include even more reductions to city funds, services and programs.