Quick Take
Officials plan to use nearly $43 million from Santa Cruz County's general fund reserves and departmental trust funds to help keep safety-net services available and avoid employee layoffs. The first of several county budget hearings is scheduled for Tuesday.
Santa Cruz County officials say they’ll need to pull from the county’s reserves this upcoming fiscal year to help weather financial challenges caused by lower revenue and less federal funding.
According to a staff report, the county plans to use nearly $43 million in combined one-time funding from its general fund reserves and departmental trust funds to help avoid employee layoffs and keep safety-net services that are provided by the Health Services Agency.
Santa Cruz County has operated under “sharp fiscal constraints” for a while and is also seeing a reduction in sales tax revenue as more people shop online, Nicole Coburn, the county’s executive officer, wrote in an opinion piece published Sunday in Lookout’s Community Voices section. The county receives only 13 cents of every property tax dollar, she wrote in the piece.
Following cuts to federal funding last summer, the financial challenges have only intensified to an “unsustainable degree,” Coburn wrote. The first of four county budget hearings is scheduled for May 5 in Santa Cruz.
In March, the county projected a $23.2 million deficit for the 2026-27 fiscal year, and a long-term structural deficit that could exceed $67 million by 2028-29 in the absence of mitigating actions. The county implemented travel and hiring restrictions and asked that departments look for ways to balance their respective budgets.
The county also will eliminate a total of 57.88 full-time, though vacant, positions across departments. Many of the vacant positions being eliminated were from county health and human services.
Last year, the health agency laid off four of its employees as a result of budget constraints – a number that would have been greater had the Santa Cruz County Board of Supervisors not redirected more than $500,000 from roads and housing initiatives to the agency.
The use of general fund reserves comes at a cost, however. County staff are projecting the reserves to decline from 12.5% to 10.4% of its general fund expenses, below the average for California counties. It’s also below the board of supervisors-approved target of 15%.
The move would reduce the county’s existing reserves to $87 million. Currently, the county has nearly $107. 8 million in its general fund reserves. At least $30.8 million will be used from the reserves and the $12.2 million from departmental trust funds to help balance the budget.
Typically, reserves are used as a “rainy day” fund for natural disasters – such as wildfires and severe flooding – to help manage cash flow and as a cushion against economic downturns. How much a government agency has in its reserves also acts as a signal to credit rating systems about financial flexibility.
To rebuild reserves back to 15%, staff say, will “require a combination of revenue growth, cost restraint and structural fiscal alignment” starting with the 2027-28 fiscal year. The county is also developing a multiyear plan to restore its reserves.
Spokesperson Jason Hoppin told Lookout that the county is supporting a coordinated request to the state through the California State Association of Counties for $1.9 million for the 2026-27 budget to help counties, including Santa Cruz, stabilize safety-net programs following federal funding cuts.
Hoppin said the county also could look for other ways to increase economic development, which he said has been overlooked historically.
But a main goal, he said, is to avoid cuts to its workforce.
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