Quick Take
Santa Cruz County leaders held their first State of the County address Tuesday evening, providing residents an overview of recent successes but also serious financial challenges that lie ahead for the county.
Santa Cruz County officials touted progress in mental health care, homelessness and parks during Tuesday’s State of the County address. But the county’s worsening financial outlook overshadowed those wins.
County Executive Nicole Coburn told community members that the county is projecting a $30 million general fund shortfall for the next fiscal year – a gap that could grow to approximately $285 million over the next six years if the county does not make significant changes.
“We have made real progress,” Coburn said. “The financial environment around us is changing, and we need to build a stronger local foundation for the future.”
Coburn added that changes in federal funding create a second challenge for the county. Earlier this year, county staff estimated that federal changes could result in more than $150 million in increased costs and a reduction in revenue for the county and its community partners over the next five years.
“Those are serious numbers, but they are only part of the story,” Coburn said.
The county board of supervisors declared fiscal distress in August following a tough budget season, which used nearly $43 million in combined one-time funding from its general reserves and departmental trust funds to help avoid employee layoffs and keep its safety net programs.
The five-member board also approved placing a five-year, half-cent sales tax increase on the ballot this November. The tax increase is intended to rescue the county from its dire financial situation and help maintain community lifelines, including mental health care, food security initiatives and vital health services.
County staff estimate the sales tax would generate roughly $27 million annually beginning in the 2027-28 fiscal year.
“This is not a one-year budget problem,” Coburn said. “It’s a structural challenge that requires a structural response. We have already started that work.”
Coburn said the county has implemented hiring and travel restrictions, and all departments are determining where services can be redesigned or consolidated. She added that the county is also pursuing economic development strategies to help strengthen the local tax base over time.
“None of these strategies alone closes a cumulative gap of this size,” she said. “They give us a path to start bending the curve, and we will be transparent about the choices and trade-offs along the way.”
Coburn said the goal is not to just balance the county budget, but also ensure the county is on a “more sustainable path.”
“The challenge ahead is not simply to spend less or raise more,” Coburn said. “It is to build a stronger foundation for the future, one that uses public resources wisely, improves how the government works, supports economic opportunity, invests strategically in infrastructure, and generates the capacity needed to sustain the services and quality of life Santa Cruz County residents value.”
Here are a few more takeaways from the State of the County update:
- The county’s new youth behavioral health facility in Live Oak, called Hope Forward, has served nearly 145 youth under the age of 20, according to County Supervisor Monica Martinez. Nearly 77% of the youth admitted were able to be successfully discharged home.
- Since December 2024, the county has experienced a 12% decline in Medi-Cal enrollment; that could grow to 32%, which equates to 25,000 Santa Cruz County residents.
- The county is also participating with the City of Scotts Valley to establish an “enhanced infrastructure financing district” to help finance roads, water and sewer infrastructure, wildfire resilience and affordable housing.
- Valle del Pajaro County Park is the first new county park in more than 20 years.
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