This city at the foot of San Francisco Bay recently hit national headlines as a shocking example of the hard times many California public school systems have encountered.
But it is in Sacramento, some 130 miles to the northeast in the Central Valley, that the future of the state's schools is being determined. At stake is a major upgrading in the quality of education that children here and in other California communities receive.
The San Jose Unified School District filed bankruptcy papers last week, a tactic its leaders hope will enable them to open schoolhouse doors in September with the prospect of keeping them open through the 1983-84 year.
Meanwhile in Sacramento, the state superintendent of public instruction, Bill Honig, said he was confident his reform package - including substantial funding hikes - could survive the current budget tussle between Republican Gov. George Deukmejian and the Democratic-controlled Legislature.
Mr. Honig said Governor Deukmejian, aware of the ''momentum for reform'' and ''across-the-board support'' for statewide public school reforms, has agreed to ceiling the governor was insisting on a week ago.
The fiscal 1984 budget is being held up by a political tussle between Deukmejian and the Democratic leadership in the Legislature. The pending budget authorizes the governor to hold a special statewide election on a Republican-sponsored legislative redistricting plan. The Democrats say they won't pass the budget until Deukmejian promises not to call that election, which could cost up to $17 million.
Honig and some legislative leaders had sought $900 million in 1983-84 to finance school reforms. But the education chief says he understands the governor's desire to ''let the economy recover more before making further financial commitments.''
It means postponing initiation of some of the reforms, Honig admits, but ''key elements of the program will go into effect,'' he adds.
One reform that is drawing national attention is a ''master teacher'' program , under which top-rated teachers in local schools would be paid extra to share their expertise with their colleagues. As the legislation now stands, the master teacher program will be authorized but not funded until next year. School systems will be able to make their plans and select master teachers, with the expectation of initiating the program in the fall of 1984.
Even if the $700 million school-aid program survives this year's harrowing budget process, Honig admits school districts ''will still have to make cuts'' in 1983-84, ''but not major ones. Palo Alto, for example, would have faced a 15 percent cut, but this bill would take pressure off.''
The state schools chief says San Jose is ''a special case,'' although 20 to 30 other districts have ''real problems.'' Most of them, he explains, ''can live with budgets at last year's levels'' but could ''be pushed over the cliff without more money than Deukmejian's original $450 million.''
The San Jose Unified School District ''made a mistake,'' says Honig, ''in agreeing to a two-year teacher contract based on forecast income that did not come through.''
The city's school officials long ago acknowledged that mistake, but hope the federal bankruptcy court in San Francisco will free the district from the contract which provided for salary increases of 6 percent in 1982-83 and another 6.1 percent in 1983-84.
In fact, the district's budget for 1982-83 did not include funding of the scheduled raise. The San Jose Teachers' Association (an affiliate of the California Teachers' Association) took the matter to arbitration, and on May 12 a federal arbitrator ruled the district had to honor its contract.
Brian McKenna, executive director of the San Jose Teachers' Association, says his union had been ''more than willing to sit down with the school board and try to resolve the situation.''
But the school administration, he says, thought it could avoid paying any raise at all. In adopting its budget last summer, he charges, the board ''used discretionary funds for other things'' when it knew it might have to pay a teacher raise.
Now, says Mr. McKenna, the teachers' association ''will go to the bankruptcy court and try to get on the creditors' committee in order to protect its interests.''
Could there be a teachers' strike in September? ''It's too early to talk about a strike,'' says McKenna. ''There's still plenty of time to work things out.''
Lillian Barna, superintendent of the San Jose Unified School District (the largest of 20 school districts in the city), says the bankruptcy process ''buys us time, and in that time maybe the Legislature will heed the folly of its tight-money ways.''
But state Superintendent Honig says some financial reforms are probably needed. He doesn't suggest changing California's property tax limitation law (Proposition 13), but suggests that some way may have to be found to ''give school districts a bigger slice of the local tax pie.''
Honig, who recently shared the platform at Pioneer High in Whittier, Calif., with President Reagan, says federal funding has to be raised a bit, not cut. Mr. Reagan told a meeting of his National Commission on Excellence in Education at Pioneer on June 30 that ''all Californians will benefit from . . . reforms of the (state) system and yet do it with no new taxes.''
Speaking later, Honig rejected the notion that much can be accomplished without higher state taxes. ''You can't have it without paying for it,'' he warned. And, Honig says, ''despite what Reagan says, the federal role of providing 8 to 10 percent of funding necessary for public education - it's down to 6 or 7 percent now - is necessary.''
Director McKenna of the San Jose Teachers' Association asserts: ''California may need an initiative to take school financing out of hands of politicians - who have hidden behind Prop. 13 - and earmark certain revenues'' for local schools. ''There is widespread support in San Jose for more taxes - either state or local - for education.''
He adds a novel thought: ''It's possible the federal bankruptcy judge might approve a plan to ignore or set aside Prop. 13 so that local taxes could be raised to support the school district.''