The city council voted 8-3 to move forward with the mayor's suggestion to ask all 11 of the city's unions, to take a 10 percent cut in salaries and benefits.
It is a move that is aimed at saving 450 jobs and keeping public services running. If the city cannot close the $116 million budget gap, the mayor says park, community center, and library hours could be cut -- dramatically.
"I hate the idea of layoffs and I hate the idea of cutting services to my neighborhoods, but the choice is either concessions or cut services and do layoffs," said San Jose Mayor Chuck Reed.
All of the city's 6,800 employees, including police and fire fighters, are being asked to give up pay either through salary or benefits cuts.
"The city seems to be looking at balancing the entire budget deficit on the backs of city employees," said Yolanda Cruz form the American Federation of State County and Municipal Employees union, or AFSCME, Local 101.
Some council members suggested a sliding scale, rather than 10 percent across the board cut, to make it less painful for employees, but the mayor insists the city needs money, especially since $138 million went to employee retirement funds this year. The city's obligation next year is expected to go up another $53 million.
"I also ask union leaders to come to the negotiating table with egos set aside and share with us the responsibility of doing what's necessary," said Paul Higgins, a San Jose resident.
Community members spoke out asking everyone, including the unions, to help -- even if it hurts.
"It may not be the best thing, but in order to keep some of these things open for the city, if that's the solution, that's what has to be done," said Dan Kropp, a San Jose resident.
But for Gay Gale, a city worker, struggling financially in these economic times is not a viable option.
"It's really a challenge for us on our salaries, increase our payments for retirement, increase our payments for medical, at the same time we're taking a hit on all the increased costs in the city," said Gale.
Tuesday night's vote will allow the city manager to start negotiating with the unions. That situation may not go well, since some union leaders told ABC7 striking is not out of the question.
A final budget vote is expected to take place in June.