It is my privilege to present the recommended budget for Fiscal Year 2025-26. Over the past year, we’ve made meaningful progress in infrastructure, service delivery, and equity—while staying fiscally responsible. This $1.23 billion budget, including a $793.5 million General Fund, reflects the values of our community. It includes 2,724.16 full-time equivalent (FTE) positions across 22 departments that provide a wide range of public safety, safety net, land use, community, infrastructure and support services.
While we have much to celebrate over the past year, we are facing headwinds in the form of reduced health care funding, delayed disaster reimbursements, State budget uncertainty stemming from larger worldwide economic uncertainty, and uncertainty over shifting priorities in Washington, D.C. and threats to federal funding. The County has already felt the sudden impact of losing two federal public health grants worth $408,000, which funded 5.7 FTE positions, and quickly pivoted to save these positions by using other public health funding sources. The speed and breadth at which federal funding is being threatened may make it difficult to shift as easily in the future. Additionally, the cancellation of the Federal Emergency Management Agency (FEMA) Building Resilient Infrastructure and Communities (BRIC) grants, which were intended to support local wildfire risk reduction, have compounded fiscal pressures.
The new federal administration is also considering federal changes to eligibility requirements for Medi-Cal (medical, dental, vision, drug and behavioral health coverage for individuals and families), CalWORKs (monthly cash aid for families with children), and CalFresh (nutrition program for individuals and families), which would have significant negative impacts on Santa Cruz County residents. Nearly 90,000 County residents are on Medi-Cal, and the County estimates at least a third of these individuals, many of whom are unhoused, could lose coverage.
In response to these threats, this budget prioritizes mandated services, protects essential programs, and makes strategic investments in our future.
GETTING THE JOB DONE
Despite these emerging challenges, they do not detract from our accomplishments on behalf of residents. Construction is nearly complete on the new 8-chair Children’s Crisis Stabilization Center, with an additional 16-bed residential program, which will provide a critical resource for local families struggling with mental health issues. We launched a 24/7 mobile crisis response team to address mental health issues for all community members. We are breaking ground on a 32-bed Behavioral Health Bridge Housing to provide supportive service and transition those experiencing homelessness into long-term housing. And we are expanding services to justice-involved youth so that they can remain closer to their families.
We continue to expand our reach and improve customer service. In South County, we’ve invested in services for collecting taxes, recording documents, issuing marriage licenses and certificates, accepting passport applications, and more at the 500 Westridge Government Center, bringing vital resources closer to home for many residents. We are also building on the success of the Unified Permit Center by launching an organizational assessment focused on improving planning and permitting services. Near-term improvements are already underway to increase clarity, consistency, and efficiency for our residents.
PRIORITIZING FAMILIES, ROADS AND BEHAVIORAL HEALTH
We are moving forward with the County’s Housing Element by updating zoning, streamlining permitting, and supporting affordable housing development. These steps aim to make housing more accessible for working families, seniors, and those most in need.
While the County has $89.8 million in FEMA reimbursements outstanding and $50 million in unfunded storm damage projects, our ongoing recovery from recent natural disasters remains a top priority, and we are moving forward with critical local infrastructure improvements. This year, in addition to local road improvements through Measure D, we are investing $1 million in environmental and parks investments, $1 million in facility improvements, and nearly $4 million in drainage infrastructure and road maintenance through the Measure K half-cent sales tax and other General Fund revenues — a commitment to addressing a clear top priority for many residents.
Facing credible threats to federal health care funding in addition to existing financial challenges, including the County’s lower behavioral health reimbursement rates compared to neighboring counties and reduced Mental Health Services Act revenue from a decline in the tax and diversion by the State, we are sharpening our focus on mandated health and behavioral health services, requiring reductions in discretionary services. The County’s Health Services Agency will be reduced by $8.98 million and 74.40 FTE positions – equal to one in ten positions – most of which are vacant. At the same time, we are undertaking efforts to improve the delivery of behavioral health services to those who need them most.
CREATING A NEW VISION
In the new fiscal year, we will update the County Strategic Plan with robust community engagement, ensuring that our residents, stakeholders, and elected leaders have a voice in shaping our future. The result will be a new plan with a clear set of objectives so that our community can see what our shared goals are and how we intend to achieve them.
As we enter a period of fiscal uncertainty, we are prioritizing essential mandated services, making difficult reductions where needed, seeking new revenue sources, and investing in long-term resiliency. Our strategy includes modernizing operations, increasing efficiencies, and continuing strong advocacy for stable funding. Together, we will build on our success, be resilient in the face of challenges, and make Santa Cruz County a place where all residents continue to thrive.
Respectfully submitted,
Carlos J. Palacios
County Executive Officer