Financial Summary

Message as of the April 24, 2025, Proposed Budget publication date with Federal and State content as of May 20, 2025.

The Proposed 2025-26 Budget provides for expenditures of $1.23 billion offset by revenues of $1.15 billion and $78.1 million in direct fund contributions. The largest fund included in the County budget is the General Fund. The Proposed 2025-26 General Fund Budget is balanced with $793.5 million in expenditures and revenues. The budget reduces by 74.40 FTE positions to a total of 2,724.16 FTE positions while maintaining General Fund reserves at 12.7% or $98.1 million.

New in the Proposed Budget is the County’s five year, 2025-2030 Capital Improvement Plan and richer details within each department’s budget, including discussions on emerging issues, highlighting key accomplishments in addition to progress on operational objectives, and discussion of the major changes across all divisions. The budget also includes a new Debt Overview intended to summarize the County’s debt including information on liabilities like pensions and claims liabilities.

The Budget was published on April 24, 2025 to begin the budget hearings starting on April 29, 2025. While the County has much to celebrate over the past year as seen within the hundreds of departmental accomplishments and completion of operational plan objectives, 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.

In response, this budget prioritizes mandated services, protects essential programs, and makes strategic investments in our future. And although it is presented amid 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, it does not yet reflect any budget impacts from changes in federal policy. The County’s exposure to federal funding and policy risk is significant. Continued engagement with state and federal partners, local scenario planning, and strategic reserve management will be critical to navigating this uncertain environment. Absent action, federal policy changes could result in multi-million dollar funding losses, operational disruptions, and negative impacts on the health, safety, well-being, and civic participation of tens of thousands of County residents. The County would return to the Board at such a time when a response is required in alignment with development of the Federal budget, and possibly as soon as July or August 2025.

Some of the major changes in the Proposed 2025-26 Budget would:

• Reduce Health Services Agency staffing by 74.40 FTE positions, representing approximately 10% of the agency’s workforce, while prioritizing and maintaining mandated services. As of the date of this report, this would include 11.60 FTE filled positions for potential layoffs effective June 30, 2025.
• Reduce by $8.98 million total Health Services Agency budget, across the Behavioral Health, Health Centers, and Public Health divisions, primarily due to low behavioral health reimbursement rates, reduced health center visits, increased costs, and the financial impacts of new mandates.
• Provide $5.3 million in net costs for operating the new Children’s Crisis Center, which has a Children’s Crisis Stabilization Unit (8 chairs) and Children’s Crisis Residential Program (up to 16 beds).
• Underfund the General Fund 1% contingency by $1.2 million, resulting in a balance of $6.9 million.
• Maintain General Fund reserves at $98.1 million, or 12.7% of expenditures—below the 28.1% average reserve in 2024-25 of county peers.
• Increase Measure K unincorporated area sales tax revenue by $3 million to reflect a full year of receipts.
• Allocate $6 million from the General Fund for capital investments, including:
  • $4 million for road and drainage infrastructure maintenance, including $2 million from Measure K District Sales Tax;
  • $1 million for environmental and parks capital projects ($200,000 for each district), including $100,000 allocated by District 3 for the Davenport Sanitation District and Shark Fin Cove Parking Study, from Measure K District Sales Tax; and
  • $1 million for repairs and improvements to aging County facilities.
• Maintain Measure K District Sales Tax contributions of $1 million for homelessness services and $1 million for housing-related uses, including $400,000 for behavioral health room and board at licensed residential facilities.
• Maintain Measure K District Sales Tax restricted contingency of $1,000,000 to respond to new disasters or any shortfalls of General Fund disaster claims.
• Return all CZU Fire rebuild-related services to the Community Development and Infrastructure building permit center.
• Provide $24.2 million for ongoing road and bridge investments, including Buena Vista Road, Soquel Drive/San Jose Road/Porter Street, San Lorenzo Way Bridge replacement, culvert rehabilitation, signal maintenance, vegetation control, and transportation grant matching funds.
• Recognize receipt of a $5 million National Oceanic and Atmospheric Administration (NOAA) grant to serve as the County’s match for the Watsonville Slough Ecosystem Restoration Project.
• Reflect completion of prior-year road projects, including:
  • $25.5 million in roadway improvements (e.g., Soquel Drive, Green Valley Drive, Holohan Road);
  • $13.8 million in storm damage recovery projects; and
  • $5.6 million in pavement management projects.
• Reduce sanitation capital project funding following completion of Phase 2 of the Freedom Sewer Rehabilitation and the Davenport Storage Tanks Projects.
• Apply $6.6 million in anticipated federal reimbursements to service and reduce 2024 disaster-related debt.
• Provide $4.5 million for enhanced fire services in the Pajaro Dunes County Services Area (CSA) 4, including three new fire suppression vehicles.
• Increase funding by $2.7 million to address rising liability and property claims and insurance costs.
• Allocate funding for the implementation of the Human Capital Management (HCM) and Payroll System, targeted for completion by Summer 2026.
• Budget negotiated salary and benefit costs based on new agreements with the County’s labor partners.

Additional discussion of budget changes is included in within each department “Budget Summary of Changes” and “Major Changes” section.

As shown in Table 1, the total County Proposed 2025-26 Budget for expenditures decreased by $176.2 million from the 2024-25 Adopted Budget.

The largest changes in the Proposed 2025-26 Budget from the 2024-25 Adopted Budget are the result of:

• Decrease of $90.0 million in other financing sources due to the completion of $89.1 million in 2024 disaster-related financing.
• Decrease of $86.9 million in intergovernmental revenues primarily due to lower expected federal disaster reimbursements, the completion of state-funded transportation projects, and reduced Housing for Health funding.
• Increase of $11.3 million in tax revenues from a full year of Measure K sales tax receipts, normal growth in property taxes, and higher revenue from the Pajaro Dunes CSA 4.
• Decrease of $8.5 million in miscellaneous revenues due to the completion of the Phase 2 Freedom Sewer Rehabilitation Project.
• Decrease of $76.1 million in fixed assets due to timing differences; the Adopted Budget includes carryover of 2023-24 appropriations, while 2024-25 carryover will be incorporated in the Adopted 2025-26 Budget on September 30, 2025.
• Decrease of $37.8 million in other financing uses resulting from the completion of $11.1 million in Debt Service funding for at-risk federal disaster reimbursements and a $10 million General Fund loan to the liability and property internal service fund.
• Decrease of $36.1 million in services and supplies primarily due to $30.2 million in completed public works contracts for transportation, storm, and infrastructure projects.
• Decrease of $19.3 million in intrafund transfers due to administrative changes replacing cost plan transfers with direct charges for facilities and utilities, along with reductions in the Health Services Agency.
• Decrease of $7.4 million in other charges due to reduced Housing for Health program costs related to funding changes.

As noted, the 2024-25 general capital, road and other capital projects that are not completed by June 30, 2025 will be carried over and added to the Adopted 2025-26 Budget.

Table 2 presents the Proposed 2025-26 Budget by departments illustrating their total revenues, total expenditures and the contributions required to fully finance their community services and staffing levels. The contribution amounts are presented as information and are not shown as revenue within each department. Accordingly, they are shown as a negative amount to represent a credit against the total expenditures. The District Sales Tax contribution reflects the share of General County Revenues from Measure G and K that is allocated for use within and benefiting the unincorporated areas of the County. This amount is part of the total General Fund contribution.

The Health Services Agency includes a net reduction of 74.40 FTE positions, of which 43.5 FTE positions are in the Behavioral Health Division, 19.90 FTE positions are in the Health Centers Division,10.0 FTE positions are in the Public Health Division, and 1.0 FTE positions provide support across all health services. These reductions reflect the difficult balance between substantial constraints on State and federal revenue sources, including low reimbursement rates and reduced and diverted revenue, combined with cost increases that require protecting the ability to meet mandated services, grant requirements, and patient and community safety. See the Health Services Agency budget for more about these reductions.

Table 3 illustrates the net contribution required from each fund type (or the amount revenues are below total expenditures).

Total fund contributions in the Proposed 2025-26 Budget represent the amount by which maximum budget authority exceeds available revenues and must be funded from prior year fund balances. The Proposed 2025-26 amount of $78.09 million is a decrease of $12.98 million from the inclusion in the adopted of $28.05 million transfers out of prior year fund balance including $21.17 million for reserves against loss of federal disaster reimbursements and a loan to the liability and property internal service fund.

The $59.4 million in 2024-25 Estimated Actuals contributions to balance the General Fund consist of $21.17 million transfers out from prior year fund balance, nearly $30 million of budget authority that in January 2025 were estimated to be used but no longer likely to be needed by June 30, 2025, such as General Fund contingencies and professional services, primarily in the health and human services category.

As shown in Table 4, the General Fund’s Proposed 2025-26 Budget revenues are projected to decrease by $27.8 million. The single largest change is a decrease of $30.7 million in intergovernmental revenues, including the removal of $13.6 million in federal disaster reimbursements, reductions of $5.0 million in Health Services Agency revenue, and a decrease of $4.3 million in Human Services Department child welfare revenue.

The General Fund expenditures are expected to decrease by $71.2 million from the 2024-25 Adopted Budget. This reduction is from a decrease of $25.6 million of other financing uses, attributed to the completion of the $11.1 million transfer out to the Disaster Debt Service Fund for at risk federal disaster reimbursements and the $10 million General Fund loan transfer out to the self-insured Liability and Property Internal Service Fund. Additionally, a decrease of $20.2 million in intrafund transfers is primarily from an $18.2 million reduction in health and human services categories. Reductions of $9.9 million in other charges and $9.2 million in services and supplies reflect decreases in contracts with service providers.

Although the total decrease of $0.8 million in salaries and benefits is modest, it does account for increased costs related to negotiated salaries and benefits, which is offset by a $5.5 million reduction in the Health Services Agency resulting from the elimination of 74.40 FTE positions.

As shown in Chart 1, and discussed in the February 25, 2025 Mid-Year Report, the General Fund forecasted actuals reflects a reduced structural deficit compared to our 2024 forecasts. Our models do not yet fully capture the extent of the headwinds the County faces, including reduced health care funding, delayed disaster reimbursements, state budget uncertainty linked to global economic volatility, and shifting federal priorities and potential threats to federal funding. In addition, the models do not yet account for potential impacts from significant State budget cuts anticipated in the Governor’s May Revision, as reported on April 17, 2025. Key drivers of the forecast include:

• Losses in federal funding are estimated to be between $5 million and $17 million over the next four years.
• Increased infrastructure and roadway investments, including costs associated with maintaining aging County buildings and facilities.
• Expanded services required by unfunded mandates such as the CARE (Community Assistance, Recovery, and Empowerment) Act, CalAIM (California Advancing and Innovating MediCal), and other recent legislation.
• Rising pension liabilities due to underperformance in the California Public Employees' Retirement System (CalPERS) investment portfolio.
• Continued stability in property tax and vehicle license fee–in-lieu property tax growth.
• owered projections for future sales tax growth.

Table 5 below summarizes the key assumptions included in our forecast.

Financial Consequences of Climate-Based Disasters. Since 2017, Santa Cruz County has experienced numerous federally-declared disasters that caused hundreds of millions of dollars in damage to County infrastructure. Barring a shift in the speed at which local governments are reimbursed for the costs of disaster response and recovery, future County response will be limited by available resources and the pace of infrastructure recovery will be slowed. In addition, recent discussions on delaying federal disaster reimbursement to California local governments may severely impact the County’s financial forecast. In May 2024, the County issued debt to finance $80.3 million in costs paid by the County for the 2020 CZU Fires and 2023 Storms that remain unreimbursed. At that time, that County had $125.3 million in unpaid claims from FEMA and the Federal Highway Administration (FHWA).

The 2024 financing was structured with a conservative estimate of the timing for federal reimbursements. Staff expected that by 2026-27, the reimbursements would be used to pay off debt to equal our planned annual debt service costs. However, due to ongoing uncertainty in the federal budget for FEMA and potential for extended delays in federal reimbursements, the County faces the risk, starting in 2026-27, of incurring an average annual increase of $4.2 million in debt service costs.

Chart 2, County of Santa Cruz Federal Disaster Claims, illustrates that $89.8 million of total disaster claims remain unpaid. As compared to January 2025, this is a decrease of $1.2 million from a downward revision of amounts previously included for estimated submissions.

The Proposed 2025-26 General Fund Budget maintains the current reserve level of $98.1 million, or 12.7%.

Chart 3: General Fund Reserves summarizes the County’s total “Committed” and “Assigned” reserves, and includes a comparison to the average reserve levels of peer counties. The chart also illustrates how reserves would decrease if the $40.7 million in reserves designated to support services and projects for Medi-Cal and Medicare populations were no longer available. Under this scenario, the reduced reserve level would be sufficient to cover only 2.9 payroll cycles.

FEDERAL BUDGET (last updated April 24, 2025)

Santa Cruz County relies on federal funding to provide essential services that protect public health, support vulnerable residents, strengthen the local economy, and maintain infrastructure. Medi-Cal, CalFresh, Behavioral Health, Child Welfare Services, Housing Assistance, Disaster Recovery, Public Health Emergency Response, Workforce Development, and Transportation Infrastructure all rely on significant federal support and approximately one-third of County residents depend on federally funded health or human services programs.

Shifts in federal policy and budget priorities threaten services provided by the County and its partners, risk community well-being, and could negatively impact the local economy. Reductions in federal funding levels, cost shifts to counties, delayed appropriations, new compliance requirements, and legal challenges expose the County to significant risks.

Current Impacts

Several federal funding and policy changes are already impacting County residents, with the most significant potential impacts yet to materialize:

• Passport Identification Restrictions: New guidance from the Department of State requires the County Clerk to destroy passport application forms that utilize a gender “X” marker and replace them with a new form that does not have an option outside of a gender binary. This policy is the subject of ongoing litigation.
• Voter Eligibility and Elections Administration: Executive Order (EO) 14248, titled “Preserving and Protecting the Integrity of American Elections” requires proof of citizenship to register to vote in federal races and mandates all mail-in ballots must be received by Election Day. As of March 31, 2025, at least two lawsuits have been filed to challenge the order. The federal Safeguard American Voter Eligibility (SAVE) Act intends to require proof of United States citizenship for an individual to register to vote in elections for federal office, and for other purposes. In addition, this legislation requires all voter registration to occur in-person, creating a significant workload burden. While the focus of the SAVE Act is to ensure only citizens register to vote in elections, the passing of this bill will also disenfranchise eligible voters who have undergone legal name changes, have disabilities, and/or live in rural areas among others.
• National Initiative to Address COVID-19 Health Disparities Among Populations at High-Risk and Underserved, Including Racial and Ethnic Minority Populations and Rural Communities (CERI): This $323,000 grant was used by HSA to increase the accessibility of services and was cancelled by the federal government, resulting in a loss of $78,000 in unspent funds. Additionally, $26k of these grant funds was set aside to support the Microenterprise Home Kitchen Operations (MEHKO) pilot in Environmental Health. With no other funding source to supplant the loss, the MEHKO pilot project is canceled. HSA will continue to sustain the 1.0 FTE position partially funded through this grant.
• Immunization and Vaccines for Children – COVID Supplemental Round 4: This $875,000 California Department of Public Health (CDPH) grant was supported by federal pass-through funds from the Centers for Disease Control (CDC) to support access to COVID-19, influenza and other vaccine-preventable diseases and supported 4.7 FTE spread across 16 positions. The cancellation of this grant will result in the loss of $330,000 in FY 2024-25. PH will utilize other grant funds to sustain services for the remainder of the fiscal year, impacting availability of grant funds for FY 2025-26.
• Epidemiology and Laboratory Capacity (ELC) - Enhancing Detection and Enhancing Detection Expansion: This $466,000 CDPH grant supported by pass-through funds from U.S. Centers for Disease Control supported the detection and prevention of emerging infectious diseases. While this grant was fully expended prior to cancellation, the County will not receive new funding.
• Building Resilient Infrastructure and Community Grant (BRIC22): FEMA has notified the Office of Response, Recovery and Resilience that this grant was cancelled, allowing only $1.1 million to complete Phase I environmental planning to proceed. Phase 2 would have provided over $20 million for wildfire risk mitigation, including home hardening, defensible space and evacuation route fuels reduction. A second BRIC 22 grant in the amount of $420,000 to conduct initial studies for improving the Pajaro levee system near the wastewater treatment plant was also cancelled.

Anticipated Impacts

The County anticipates additional potential risks that may translate into service reductions, delayed initiatives, and local funding and policy pressures. The following are major categories of risk:

• Behavioral Health Realignment: California is aligning Medi-Cal behavioral health services under new federal waiver authority. The County is consuming staff and consultant resources to plan for this complex system transformation amid uncertain long-term reimbursement structures.
• Public Assistance Program Changes: Proposed federal changes could reduce funding, limit access, and impose new work requirements for benefits, increasing administrative workload without additional resources. For Medi-Cal alone, an estimated 30,000 individuals—one in three current enrollees—are at risk of losing coverage, and up to $140 million in leveraged funds may be reduced if program eligibility is tightened or existing grants are canceled. Changes in CalFresh administrative requirements and eligibility reviews could increase staff workload without commensurate growth in federal administrative funding. These changes may create fear and confusion, particularly among undocumented and LGBTQ+ residents, deterring them from accessing essential services, and could increase local demand for food banks and emergency assistance.
• Housing and Homelessness: Federal housing voucher funding is not keeping pace with local housing costs. The County's housing programs are experiencing higher administrative costs due to regulatory complexity and landlord participation challenges. Furthermore, the Housing for Health Division and partners provide a range of services including housing assistance for more than 4,000 people that involve at least some level of federal funding. Some of these funds may be at risk, particularly with cuts to federal agencies that oversee these programs.
• Disaster Recovery: Changes in FEMA cost-share policies and public assistance eligibility criteria are increasing local match requirements for disaster recovery, including wildfire and storm response efforts. This puts at risk the repayment plan for the 2024 disaster bonds.

Financial Consequences of Climate-Based Disasters

Since 2017, Santa Cruz County has experienced numerous federally declared disasters that caused hundreds of millions of dollars in damage to County infrastructure. Barring a shift in the speed at which local governments are reimbursed for the costs of disaster response and recovery, future County response will be limited by available resources and the pace of infrastructure recovery will be slowed. In addition, recent discussions on delaying federal disaster reimbursement to California local governments may severely impact the County’s financial forecast. In May 2024, the County issued debt to finance $80.3 million in costs paid by the County for the 2020 CZU Fires and 2023 Storms that remain unreimbursed. At that time, that County had $125.3 million in unpaid claims from FEMA and the Federal Highway Administration (FHWA).

The 2024 disaster bond financing was structured with a conservative estimate of the timing for federal reimbursements. Staff expected that by 2026-27, the reimbursements would be used to pay off debt to equal our planned annual debt service costs. However, due to ongoing uncertainty in the federal budget for FEMA and potential for extended delays in federal reimbursements, the County faces the risk, starting in 2026-27, of incurring an average annual increase of $4.2 million in debt service costs and may be required to provide for the repayment of $6.5 million to the Internal Service Fund that provided a short-term loan to the County Road Fund.

Table 6, County of Santa Cruz Federal Disaster Claims, illustrates that $89.8 million of total disaster claims remain unpaid. As compared to January 2025, this is a decrease of $1.2 million from a downward revision of amounts previously included for estimated submissions.

Without federal policy stability or continued funding, the County anticipates increased food insecurity and housing instability, delayed access to mental health and substance use disorder treatment, reduced capacity to respond to public health emergencies and natural disasters, greater disparities in health, education, and economic outcomes for vulnerable populations. These impacts also have the potential to further impact non-county anchor institutions such as hospitals, universities, and community-based organization service providers. Federal efforts to restrict body autonomy, voter registration, and election administration are significant concerns that are being monitored closely.

STATE BUDGET (last updated May 20, 2025)

On May 14, 2025, the Governor released the May Revision in compliance with the statutory deadline. The May Revision proposes $321.9 billion of state spending, including $226.4 billion from the General Fund. The May Revision proposes $12 billion in reductions or 5.3% from the January proposal. Unlike the last two years, during which the state also faced budget deficits, this year’s approach includes a significant number of reductions to ongoing programs that result in greater savings in future years. The May Revision does not provide funding for mandated costs for counties to implement Proposition 36 and does not provide funding for the next round of Homeless Housing, Assistance and Prevention (HHAP). Following are the summarized changes of the Governor’s May Revision from the Proposed Budget Governor Gavin Newsom released on January 10, 2025.

May Revision Impacts

$5 billion in total reductions for 2025-26, growing to $14.8 billion by 2028-29:

• Enrollment Freeze for Full-Scope Medi-Cal Expansion for Undocumented Adults, Adults 19 and Older: $86.5 million in 2025-26, growing to $3.3 billion in 2028-29. This freeze on new enrollment to full-scope coverage for individuals, regardless of immigration status, aged 19 and over, effective no sooner than January 1, 2026.
• Medi-Cal Premiums, Adults 19 and Older: : Implementation of $100 monthly premiums for individuals with certain statuses, those who will eventually qualify for federal funds and individuals enrolled in the Medi-Cal full-scope expansion aged 19 and over, effective January 1, 2027. Estimated General Fund savings are $1.1 billion in 2026-27, increasing to $2.1 billion.
• Medi-Cal Asset Test Limits: $68.6 million in 2025-26, growing to $765.2 million in 2028-29 for individuals with certain statuses, those who will eventually qualify for federal funds, and individuals enrolled in the Medi-Cal full-scope expansion.
• Elimination of Long-Term Care Benefits, Adults 19 and Older: $333.3 million in 2025-26, growing to $800 million in 2026-27 for individuals with certain statuses, those who will eventually qualify for federal funds, and individuals enrolled in the Medi-Cal full-scope expansion.
• Elimination of Dental Benefits, Adults 19 and Older: Elimination of full-scope dental coverage for Medi-Cal members with certain statuses, those who will eventually qualify for federal funds and individuals enrolled in the Medi-Cal full-scope expansion aged 19 and over, effective July 1, 2026. This population will continue to have access to restricted-scope, emergency dental coverage.
• Elimination of Prospective Payment System Payments to Federally Qualified Health Centers and Rural Health Clinics: $452.5 million in 2025-26, growing to $1.1 billion in 2026-27. This applies for state-only funded services provided to individuals with certain statuses, those who will eventually qualify for federal funds and individuals enrolled in the Medi-Cal full scope expansion. Clinics would receive reimbursement at the applicable Medi-Cal fee-for-service rate and at the Medi-Cal managed care rate.
• Specialty Drug Coverage for Weight Loss: $85 million in 2025-26, growing to $680 million in 2028-29.
• Cap In-Home Supportive Services Overtime and Travel Hours at 50 Hours: $707.5 million in 2025-26, growing to $893.4 million in 2028-29.
• Require Provider Mandates for Quality Incentive Payment Incentive Eligibility: $221.7 million ongoing beginning in 2026-27.

$5.3 billion from internal borrowing solutions for 2025-26:

• Proposition 35 Support for Medi-Cal Rate Increases: $1.3 billion in 2025-26 and $263.7 million in 2026-27.
• Medical Providers Interim Payment Fund Loan: $3.4 billion due to extending the repayment deadline.
• Unfair Competition Law Fund Loan: $150 million in 2025-26.
• Labor and Workforce Development Fund Loan: $400 million in 2025-26.

$1.7 billion in funding solutions for 2025-26:

• Greenhouse Gas Reduction Fund for CAL FIRE Support: $1.5 billion in 2025-26, growing to $1.9 billion in 2028-29.

In addition to these solutions, the May Revision includes triggers for two future spending commitments of $456.1 million in 2027-28 contingent upon sufficient resources to support these commitments:

• California Food Assistance Program Expansion: $117.2 million in 2027-28, growing to $163.2 million in 2028-29.
• Foster Care Tiered Rate Structure Trigger: $338.9 million in 2027-28, growing to $522.1 million in 2028-29.

The May Revision includes other funding proposals that may be of interest to the County, including:

• Federal Accountability Workload: $14.4 million ongoing ($13.3 million General Fund and $1.1 million Special Fund) and 44 positions to defend California against adverse federal actions. The anticipated workload includes, but is not limited to, defending environmental protections, negative impacts of tariffs, reproductive choice, and termination of federal grants that Congress directed be provided.
• California Housing and Homelessness Agency: The administration proposes establishing a new California Housing and Homelessness Agency (CHHA) to create a more integrated and effective administrative framework for addressing the state’s housing and homelessness challenges. CHHA will be responsible for coordinating state housing and homelessness efforts, which includes addressing the full spectrum of Californians’ housing needs, from efforts to prevent and end homelessness, to supporting low-income renters and first-time homebuyers.
• Medi-Cal: The May Revision reflects a net $1.9 billion increase in Medi-Cal expenditures, which are covered by the Medi-Cal Provider Interim Payment Loan, in 2024-25 compared with the Governor’s Budget. This is in addition to the $2.8 billion General Fund early action appropriation assumed in the Governor’s Budget.
• Behavioral Health Workforce Initiative: The May Revision includes $1.9 billion ($143 million Behavioral Health Services Fund, $808 million Designated State Health Program Funding, and $950 million federal funds) for the Department of Health Care Access and Information to implement the Behavioral Health Workforce Initiative beginning in January 2026.
• Incompetent to Stand Trial Infrastructure Grant Program: A reduction of $232.5 million one-time General Fund included in the 2022 Budget Act from unspent grant funds for counties to increase residential treatment housing capacity for individuals designated Incompetent to Stand Trial.
• Child Care Cost-of-Living Adjustment: A reduction of $60.7 million General Fund in 2025-26 and ongoing to suspend the child care cost-of-living adjustment in 2025-26.
• Streamlining the CalWORKs Program: The May Revision includes statutory changes to the CalWORKs program, resulting in efficiencies for families and counties. These changes include: (1) expanding the allowable welfare-to-work activities, (2) making Job Club an optional welfare-to-work activity, (3) simplifying the curing of sanctions, and (4) replacing the county welfare-to-work reporting requirements with administrative data extracts.
• CalAIM Justice-Involved Initiative: $21.5 million in 2025-26 and $11 million ongoing in increased reimbursement authority, an increase of 65 positions in 2025-26 and ongoing, and a reduction of $6.2 million General Fund in 2025-26, an increase of $3.8 million General Fund in 2026-27, and a reduction of $11 million General Fund ongoing to support full implementation of the California Advancing and Innovating Medi-Cal Justice-Involved Initiative and account for additional federal reimbursements.
• Safe Battery Energy Storage Systems: $3.7 million Public Utilities Commission Utilities Reimbursement Account (PUCURA) in 2025-26 and 2026-27, and $2.9 million ongoing PUCURA and 12 positions in 2027-28 to support compliance and enforcement of safety standards for large-scale, electric grid connected battery energy storage systems.
• Community Renewable Energy and Storage: A reversion of $33 million General Fund for programs funding community renewable energy projects at the California Public Utilities Commission.
• Business and Consumer Services Agency: The administration proposes establishing a new Business and Consumer Services Agency (BCSA) to strengthen the state's ability to protect consumers by providing dedicated leadership and oversight across a wide range of industries. The BCSA will be responsible for regulating over four million licensed professionals and businesses.