You can convert the encoding before transferring the data to json_encode (which really needs UTF8 encoded strings). Using the mb_convert_encoding function will do:
$utf8String = mb_convert_encoding( $sourceString, 'UTF8', '<src encoding>' //in your case: ISO-8859-1 );
Meanwhile, work out a strategy for how you are going to convert your database to UTF-8, because it will save you a lot of pain by endlessly manipulating various encodings throughout your project.
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