SAN JOSE -- With San Jose's financial outlook slowly improving, the City Council approved a budget aimed at rebuilding services cut back by a decade of deficits, with a focus on the Police and Fire departments.

"It's a great relief to be here talking about what we're not cutting," Mayor Chuck Reed said of the budget for the fiscal year starting July 1. "We've been in the process of digging our way out."

Councilmen Ash Kalra and Don Rocha disagreed with the mayor's specific spending recommendations.

Rocha opposed opening a recently built but mothballed police substation in the south end of San Jose, aimed at improving response times in those neighborhoods, arguing that with police short-handed the benefit is questionable and funds should be spent on road maintenance and health programs.

Kalra wanted to offer police bigger raises, commit to restoring 10-percent pay cuts that all employees took to reduce layoffs a couple years ago and open all libraries on Saturdays. The city offered up to 9 percent raises to police officers over two years, some of which is contingent upon the city winning lawsuits over pension reforms and some of which is a "retention bonus" requiring officers to commit to staying on the force for a couple years. Kalra said the city should offer 10 percent to the cops over two years, similar to what the officers have demanded. An arbitrator is expected to settle the police pay dispute. The city has been recruiting to fill vacancies amid a wave of retirements and resignations.


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"They are leaving," Kalra said. "The issue is compensation. We need to do more."

But Reed said that "if we didn't have to add another $9 million to cover the increase in retirement costs, we could afford a lot more in raises."

Reed sponsored a measure that voters approved last June to reduce pension benefits, blaming "skyrocketing retirement costs" for a decade of budget deficits and service cutbacks. Unions representing cops and other city workers are fighting to block the measure. Reed said the budget assumes $20 million in savings from the measure while additional savings would come if the city wins in court.

"It is retirement cost increases that are eating our lunch in a lot of different ways, and one of those is pay," Reed said, arguing Kalra's proposal to give the cops the 10-percent raise would "put a huge hole in the budget."

Contact John Woolfolk at 408-975-9346. Follow him on Twitter at Twitter.com/johnwoolfolk1.

San Jose Budget
San Jose's fiscal year 2013-14 budget at a glance:
$2.6 billion total budget includes the general fund for basic services, including the Police, Fire and Library departments, separate funds for the airport, utilities and other programs, and funds for capital improvements.
$934 million general fund includes $307 million for police, $163 million for the Fire Department, $52 million for parks and recreation, $27 million for transportation, $26 million for libraries and $96 million in reserves.
$1.5 million budgeted from funds dedicated to specific programs, including the airport, convention center and utilities providing trash collection, wastewater treatment, and storm drains and water service.
$748 million budget for capital improvements to the airport, parks, roadways, wastewater treatment, libraries, and police and fire stations.