Airport officials said airline capacity reductions throughout the nation and the deep economic recession have contributed to the drop off.
The passenger traffic numbers dropped from 10.7 million in 2997 to 9.7 million in 2008. That is a 8.8 percent drop.
Airport officials said December 2008 traffic fell 14 percent to 689,000, compared to 813,000 in December 2007.
That was the 15th straight month that passeneger traffic had dropped compared to one year earlier, airport officials reported.
Airport traffic had not been under 700,000 passengers since February, 1995.
SJC, and airports in California overall, showed average capacity down 11 percent in January compared to a year ago, airport officials reported.
According to recent data, in November 2008, Oakland International capacity and traffic is down approximately 30 percent, while international traffic at San Francisco International was down 13 percent.
The large decline has been the cause of declining airport revenues, causing SJC to eliminate 45 vacant positions in the midyear budget revisions scheduled to be examined by San Jose City Hall next month, city officials said.
Immediate steps to severely curtail expenditures in all operating and capital programs at the airport are underway, according to facility officials.
Officials said the hope is that the cutbacks might help balance the budget in the face of projected shortfalls of at least $35 million in each of the next two fiscal years.