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The San Jose City Council is holding a special meeting Thursday afternoon to discuss a projected $96.5 million shortfall in the city's general fund for 2010.
The projection was contained in a report released recently by City Manager Debra Figone. Council members will discuss strategies for closing the budget gap.
Options the City Council will consider include reducing employee salaries, retirement benefits, health care and other benefits, cutting workers' compensation costs and raising fees and taxes.
They will also consider reducing or eliminating services, which would result in layoffs.
The discussion marks the beginning of budget talks, spokeswoman Michelle McGurk said.
"We're starting early because many strategies require negotiation with our bargaining units," she said.
McGurk said the budget shortfall stems from a combination of factors, including dramatic drops in sales tax and property tax revenues, a declining economy, the state's raid on local resources and requirements that the city compensate for losses in its two pension funds.
The city manager's report indicates that if the projected deficit is not resolved through other means, it could lead to the elimination of more than 700 positions in the city.