County adopts foundational budget principles as staff begins work to close a multiyear structural gap

Santa Cruz County officials presented foundational budgeting principles on March 10 to guide development of the FY 2026-27 proposed budget amid a projected multiyear structural shortfall. Staff outlined short-term actions already taken—such as a hiring and travel freeze—and medium- and long-term strategies including fee and cost-recovery studies, revenue measures (including a state-level emergency sales-tax authorization bill), strengthened advocacy on HR 1 impacts, and efforts to expand local economic development.

The presentation framed four lead principles: preserve legally mandated services while minimizing discretionary backfill; prioritize core safety-net services (health care, food, housing); shift workload and costs through grants, fee recovery and more efficient operations; and build fiscal capacity via targeted revenue strategies and organizational changes. Staff projected an approximately $23 million gap in the coming fiscal year, with a potential larger exposure of tens of millions if HR 1-related federal funding reductions materialize.

Supervisors discussed priorities including roads and deferred capital (with some urging not to defer capital projects to avoid costlier long-term liabilities), public safety service levels and overtime impacts, workforce retention, behavioral health and programs for unhoused residents, and the potential role of board discretionary funds and core nonprofit support. Several board members urged expedited advocacy to state and federal partners. The board voted 5-0 to move the recommended actions and asked staff for follow-up reports and recommendations on how to implement the principles in the May proposed budget.

Staff will return with the proposed FY 2026-27 budget in May; staff also flagged that some measures to generate revenue or structural changes will require multi-year work.