Quick Take
Santa Cruz County faces a hefty deficit going into annual budget hearings. County supervisors weighed in Tuesday on what’s most important in the 2026-27 fiscal year as leaders and staff prepare to propose a budget in the coming months.
The Santa Cruz County Board of Supervisors is grappling with projections of serious financial hardship over the coming year.
The latest forecasts project a $23.2 million deficit for the 2026-27 fiscal year, and a long-term structural deficit that could reach $67.5 million by 2028-29 in the absence of mitigating actions. Staff implemented travel and hiring restrictions and requested that departments find options to balance their respective budgets. The supervisors acknowledged that budget cuts are inevitable.
A staff report lays out four guiding principles. They are: to maintain legally required and revenue-generating services and staffing; to balance cuts so no one department has to shoulder disproportionate reductions; to address workload and cost shifts that don’t depend on general-fund dollars; and to choose long-term fixes that address the major projected deficit.
“We don’t want to get into the weeds about individual line items in the budget,” said County Executive Officer Nicole Coburn. “It’s really about, at a high level, what is important to the board.”
Coburn said the county could also declare a fiscal emergency, but that it has weathered financial strife in the past.
“We’ve been through a Great Recession, the housing bubble and COVID, so we’ve experienced having to right-size a budget,” she said. “We know we can do this, it’s just going to take some time.”
“I can’t say we didn’t see this coming,” said Supervisor Manu Koenig. However, he observed a difference between previous budget crises, when causes were temporary, and now, when the county’s deficit is driven mostly by inflation. He said the county has to pay its employees more, and staff and leadership knew this could lead to financial struggles.
“The unfortunate reality is, if staff is more expensive, we just won’t be able to afford as many staff,” he said. “It’s sad, but true.”
Koenig said the county should resist the temptation to defer capital expenditures or infrastructure maintenance: “We need to actually increase those if we’re going to stave off much greater liabilities in the future from collapsing infrastructure.”
Coburn added that in the long term, the county is supporting state Sen. John Laird’s Senate Bill 1078, which would let the county impose a sales tax of up to 0.5% for general or specific programs, even if it brings the total local sales tax rate over the limit of 2%.
Supervisor Kim De Serpa said the budget outlook is “disheartening” and that economic development and focusing on serving aging populations should be top priorities.
Public safety, including the public defender, district attorney and sheriff’s department, is also a priority for her constituents, she said. “They don’t want to have to wait longer for a deputy to respond if there’s a problem or a fire truck that needs to go out,” she said.
Supervisor Justin Cummings touched on the upcoming year’s funding to community-based organizations. The board has notified organizations that the county can’t guarantee that funding in the upcoming fiscal year. He said the board could use that funding to fill specific needs, but that would come with difficult decisions on which programs to cut.
Cummings also said focusing on housing and homelessness is key, because it’s more expensive to get people off the streets than keeping them housed: “Maintaining legal protections is extremely important, whether it’s rental assistance or deposit assistance, these things can actually get people into housing and hopefully keep them housed.”
Cummings said the federal government is in part to blame for the financial strife, as sales tax revenues have dwindled amid lower tourism rates due to immigration enforcement concerns. However, he is hopeful that flipping Congress in the November midterm elections could help the local situation.
“We’re going to be making difficult decisions in this budget cycle, but my hope is that it’s a one-off, or maybe two-year-off, and moving forward we can make ourselves whole in the not-so-distant future,” he said.
Board Chair Monica Martinez said safety-net services and health care, including oral health and behavioral health, should remain priorities. She said it’s time for the supervisors to push hard at the state and federal level for as much relief as possible, as well as with community partners that could see a reduction in services.
“Each of us has political capital with our providers or with our partners who care about the same things we care about,” she said. “That’s the role of a leader in the community, so I’m hoping that we can do that in order to help our safety net remain whole as much as we can.”
Coburn said that the county plans to release a budget proposal by the end of April or the beginning of May, ahead of public hearings on the budget set for May 5. Later hearings are set for June.
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