Quick Take
Santa Cruz County faces deep cuts to health and housing programs as state and federal budget proposals threaten critical funding, compounding local strains such as FEMA’s $90 million unpaid disaster tab. Officials warn more service reductions could follow later this year.
That the Federal Emergency Management Agency still owes Santa Cruz County $90 million in disaster reimbursements — without a clear path for repayment — went from a central fiscal frustration in 2024 to more of a side note during Tuesday’s budget discussions, signalling some severe money challenges ahead for the local government.
Last year, stiffed by FEMA for response costs from the CZU wildfires and back-to-back years of winter storm disasters, county supervisors looked at the government’s inability to fund road repairs and facility upgrades and claimed they had never seen such a dire budget situation.
This year, some of the most vulnerable county residents stand to lose access to critical programs that provide wide-ranging health care and housing, as the state and federal governments — which together source about half of the county’s more than $1 billion budget — have promised wide-ranging cuts.
On Tuesday, Santa Cruz County’s health and human services officials told the board of supervisors that the $12 billion budget deficit announced by Gov. Gavin Newsom last week, and President Donald Trump’s spending proposal moving through Congress will have definite local impacts. The update comes as the county is already facing proposed layoffs, the closure of multiple public health clinics and the elimination of local funding for social programs focused on mentally ill adults and formerly incarcerated women reentering society.
“This is crazy,” Supervisor Manu Koenig (District 1) said during the meeting. “The safety net is being cut in every way imaginable. … Here we are, turning around and pulling the floor out from under people. This is insanity.”
For instance, undocumented adults not already part of the state’s Medi-Cal system would no longer be eligible to join the subsidized health care plan for low-income residents, and those within it will have to pay $100 per month to maintain their coverage beginning in 2027. The state also wants to eliminate a temporary housing program for disabled and vulnerable adults and is proposing strict caps on Medi-Cal reimbursements to in-home supportive care employees for overtime.
On the federal side, Trump’s spending bill making its way through Congress would slash a county rental assistance program by half. The program helps subsidize rental housing costs for people facing homelessness, and is what county human services director Randy Morris called the “hub of the wheel” in how the local government addresses homelessness. A 50% funding cut, Morris said, would cause a “major crisis.”
Morris also pointed to the Trump proposal to require states to fund up to 25% of the federally financed Supplemental Nutrition Assistance Program, or SNAP. California administers SNAP, formerly known as food stamps, through its CalFresh program. Last year, CalFresh provided $24 billion worth of benefits. Should Trump’s budget pass as is, California could be looking at a surprise $6 billion bill for SNAP by the end of this year, which could trickle down into further budget upheaval this fall.
“We would not be surprised if we have to come back to you and propose additional modifications to [county] services later this year,” Health Service Agency Director Mónica Morales told supervisors on Tuesday, referencing a broad uncertainty about how the state and federal budgets will shake out.
Morris said there would be a mad dash to sign as many undocumented adults onto Medi-Cal before Jan. 1. However, he said the $100-per-month premium proposed to take effect in 2027 could undo much of that effort due to the expense.
The county’s Health Services Agency, which has so far been hit hardest by financial turmoil, is due to come back to the supervisors on June 3 with a finalized budget proposal.
Supervisor Justin Cummings (D3) urged the HSA staff to consider prioritizing programs that cannot be replicated elsewhere in the community, whether by nonprofits or other organizations. He has been vocally supportive of the Santa Cruz-based Mental Health Client Action Network (MHCAN), a clubhouse-modeled day center that caters to mentally ill adults, whose funding is proposed to be eliminated.
The county is due to vote on its budget June 10. However, what the state ends up passing in its budget on June 15 — and possibly further amends in August — and how the federal government’s fiscal plan shakes out this fall will have direct impacts on the county, and it’s likely the supervisors will have to reconvene to further modify its spending.
“This is a very dynamic situation,” assistant county executive officer Nicole Coburn told supervisors Tuesday.
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