‘It takes over your life’: County CEO Carlos Palacios on duty, disaster and the decision to step down

Last week, Carlos Palacios, Santa Cruz County government’s top executive, announced he would retire in December. He hangs up his flat cap after what will be more than eight years atop the local bureaucratic hierarchy, and just shy of four decades of public service. 

As Palacios and I sat down in a vacant board of supervisors chamber early Monday morning — he at his typical perch toward the front left of the room — I asked which moments over the past eight years most immediately come to mind when he looks across the empty dais and the rows of chairs reserved for residents and county staffers.

Palacios, 63, wore mahogany, big-framed glasses by Gucci and a sleek pair of black leather Chelsea boots, which combined to make a fashion statement that contrasted with his otherwise subdued, business casual attire. As he pondered the question, he crossed one leg over the other, grabbed his knee with both hands and looked toward the ceiling.   

“I think back to when I got appointed in 2017, it was of course a happy moment, a joyful moment,” Palacios said. “But, at the same time, I felt the huge weight of responsibility on my shoulders.” 

County executive officers across the country are called to meet the uniquely stressful and varied demands of running a government operation. Yet, even from a distance, Palacios’ run feels particularly harrowing. He was promoted as the county was still recovering from more than $130 million in damages from January 2017 winter storms, and had to lead an already cash-strapped ship. 

Only a few years later, Palacios had to navigate the county through cuts, furloughs and emergency response to the pandemic. Yet, that marked only the first catastrophe of 2020: by August, the Santa Cruz Mountains were ablaze as the CZU wildfire grew into the most destructive in county history. The January 2023 storms and the breach of the Pajaro River levee that March marked another pair of federally declared disasters, punctuated by more extreme weather and a disaster declaration the following winter. 

Palacios now steps away in the midst of another, intermittently boiling crisis: the Trump administration’s obsession with slashing government programs, and congressional spending bills that could upend local social safety nets across the country. Palacios believes that by staying until December, he will be able to help the county navigate the most consequential changes posed by President Donald Trump and congressional Republicans. However, he acknowledges that whoever succeeds him will have a significant challenge on their hands. 

This interview has been edited for length and clarity. 

Lookout: I’ve often heard that, for people who are called to their careers by a sense of responsibility, the most difficult thing is knowing when to leave. How did you know your time is up? 

Carlos Palacios: Well, 38 years is a long run. We’ve seen at the federal level people maybe staying too long in office. And I’ve always been cognizant of never wanting to stay longer than I had energy and ambition and enthusiasm for the job. And so I still have it, but I know that it’s getting close after 38 years. 

I think it’s important to step aside and let a new generation take over, you know, younger people, new ideas, new energy. It’s a huge responsibility. I mean, it does take over your life and so you end up sacrificing a lot of time with your family. You sacrifice your own hobbies, things you love to do. So that’s another thing, this just gives me time while I’m still young and I still have energy to pursue some of my own goals and hobbies. 

Lookout: Many people I’ve spoken with said your retirement has been imminent for a while now. Why did you decide to announce it now as opposed to last year, or next? 

Palacios: I wanted to wait until I was ready and felt it was the right time in my life. I still have plenty of energy, and I’m still doing good, but it just started to feel right from my personal perspective. But professionally, I knew last year that there was going to be a changeover on the board of supervisors, and I thought it would be good to have this new board select the CEO since this is the person that they’re going to work with for maybe the next decade. I also thought it would be good to give the new board of supervisors time to gel over a year, as opposed to having to make the decision right when they took office.

Lookout: This role is the top government job in the county, leading a county operation that covers everything from mental health stabilization to mosquito abatement. It’s high-pressure and high-stress. Why did you want this role back in 2017?

Palacios: I think you take a job like this, the overriding concern is to make a difference, yeah, to make the community better than from when you came, so that’s always driven me in my career. I think that’s what drives all of us in government: We want to make the community better. I also had a deep commitment to South County and Watsonville, and I felt like, given that I lived in Watsonville, and that I was the city manager for almost 20 years there, I felt that I wanted to impart that South County lens in a stronger way on the county government.

Lookout: How did that South County divide feel when you were a city manager in Watsonville? Has it improved?

Palacios: I used to think that county was very focused on the city of Santa Cruz. Not even Mid-County, but just the city of Santa Cruz. But I think that’s changed, and the driver has been the board of supervisors itself, which views equity as one of its main goals, and they are much more attuned to South County. There’s always work to do, but it’s a continual thing that needs to be continually worked at. 

Lookout: There’s never a perfect time to retire —

Palacios: Yes, it seems like there is always some crisis. 

— but it does feel like you’re leaving at a moment many view as one of the most consequential for local government in recent memory, with the massive upending of federal dollars in Washington, D.C. Do you view it that way? 

Palacios: Maybe. We just don’t know what the government is going to do. If those cuts do go through, the consequences would be very severe for local government and especially for health and human services. On the other hand, who knows? The budgets are being rigorously debated right now. The cuts may be significantly reduced, or they may even be postponed. We just don’t know. 

Lookout: That’s a lot of not knowing. Do you feel like this level of uncertainty is of a different intensity or is this part and parcel of the government way?

Palacios: I don’t think in my career we’ve had this level of uncertainty at the federal level. We’ve had economic crises before. I’ve been through so many recessions, and those create economic uncertainty — and cuts. Then you have natural disasters. We had to issue a $91 million bond last year just to cover our cash flow. That’s big amounts of money going to that and a lot of uncertainty. This, here, is new in that usually it’s the economy or a disaster that’s causing uncertainty and the government has to react to it, but this time it’s the government itself that is causing it. 

Lookout: Did you wrestle with any sense of responsibility to help usher the county through this moment?

Palacios: It’s one of the reasons I decided to stay until December, because I wanted to get through the entire first year of the new administration, because I knew that it would be the most consequential. Typically, the first year of a new administration brings the most change, at least historically. There’s no doubt that my successor is going to have to deal with these pressures and questions, but that’s just part of the job. 

Lookout: Do you think the county is better off with a fresh perspective as it navigates these significant, top-down changes in government? 

Palacios: I do think that there is a benefit to having new ideas, new perspectives and new energy. In Watsonville, as city manager, I tried to reinvent myself constantly. I was there for two decades, and I really tried to keep fresh energy, and I tried to be open to new ideas, but ultimately I am who I am, and my ideas were the same. At the end of 20 years, I knew I had to leave because I felt like the organization was just getting tired of me and hearing the same ideas because, again, I am who I am. 

You know, for eight years I’ve been the CEO. That’s enough time to make a change. Now it’s great timing for someone with new ideas and new energy.

Lookout: This last budget season was a difficult one, with fights over layoffs and cuts to the county’s Health Services Agency. Your administration received some criticism for not offering alternatives to the cuts after being asked multiple times by the board of supervisors. And then, in the middle of all of it, the director of the Health Services Agency left for a new job. How did you view what will be your last county budget process?

Palacios: No one likes to do cuts, it’s always a difficult thing. There really was no way around it. And so I think that, you know, absent those HSA cuts, we would have had a status quo budget, and given the uncertainty we’re in, I thought that was quite an achievement. I think that these are difficult decisions. No one likes to do it. I’m hoping that by the fall, we don’t have to do more, but it’s very possible, and that’s why I thought it was so important that we have a balanced budget and we correct the structural imbalance.

Lookout: Would you do it the same way? Did you feel the process was adequate? 

Palacios: We did the process the best we could. There’s always going to be criticism of the cuts. There’s always going to be unhappiness and I totally understand it. 

Lookout: One of the major criticisms over the past five years has been the pace of the rebuild after the CZU fire. Do you feel the county has done everything it could to ease the process for people trying to rebuild?

Palacios: No, I think we can do better. But the county spent almost $6 million on the contract with New Leaf Inc., specifically to help those folks who are trying to rebuild. That’s a big commitment. For sure we can do better, we want to do better, but having said that, it’s enormously complex to build in the mountains, in the middle of the forest in one of the most landslide-prone counties in the nation. And we have state laws about clean water, septic and fire codes. 

Has the state gone too far in regulating? Probably. I’m a big fan of the book called “Abundance” by Ezra Klein and Derek Thompson, and it talks about the overregulation in states like California. I think they’re correct that the state is probably too regulated. 

Lookout: It seems like the big fights in recent years have often involved the county’s labor union, SEIU 521. Do you think there is a fractured relationship between the union and county management that needs to be mended? 

Palacios: I don’t think it’s broken. We got through negotiations without a strike. I think what we see is just normal tension between an employer and management and employees, and it’s been that way since I started more than 30 years ago. Can we always do better in doing outreach to the union? We can, and we should. 

Lookout: The board of supervisors is poised to conduct a national search for your successor. But you’ve been succession planning, and word is there are internal candidates who might be interested. Do you think the county is better off with a fresh perspective or a promotion from within?

Palacios: That’s completely up to the board and something I would never take a stance on. It needs to be completely the board’s decision.

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