By Jon Chown
SANTA CRUZ — County of Santa Cruz has released its proposed $1.29 billion budget for the 2026-27 fiscal year, the first budget presented by new County Executive Officer Nicole D. Coburn.
Nicole D. Coburn
According to a letter Coburn released at the same time, the budget protects essential public services, avoids layoffs and maintains core operations despite a projected $23.2 million General Fund deficit and growing financial pressure from federal policy changes, labor costs and inflation.
The proposed budget includes an $844.1 million General Fund and supports 2,682.28 full-time equivalent positions. That is a reduction of 57.88 funded positions from the current fiscal year, though officials said no employees would lose their jobs because the eliminated positions are vacant.
“When we began developing the FY 2026-27 Proposed Budget, the County faced a projected General Fund deficit of approximately $23 million — one that, absent corrective action, was forecast to exceed $67 million in subsequent years,” Coburn wrote.
According to her letter, federal policy changes under H.R. 1, also known as the “One Big Beautiful Bill Act,” are reducing funding and increasing costs for public health, behavioral health and social services programs.
“This budget arrives at a difficult moment,” Coburn’s budget overview states. “Unprecedented federal policy changes under H.R. 1 are reducing funding for programs that thousands of Santa Cruz County families depend on, and those reductions will deepen in the years ahead.”
To close the budget gap, the county used a combination of spending cuts, hiring restrictions, increased revenues and one-time funding sources. The plan includes a countywide hiring freeze on vacant General Fund positions, targeted reductions in services and supplies, and the elimination of nearly 58 vacant jobs across county departments.
The largest staffing reductions are in the Health Services Agency, which would lose 23.1 vacant positions, and the Human Services Department, which would lose 25.5 vacant positions. Coburn wrote that those departments face the greatest financial pressure from reduced federal funding.
The budget also increases revenue through higher reimbursement rates at County Health Centers and a new parking fee pilot program at County Parks.
According to Coburn, the county will use $43 million in one-time resources to balance the budget, including $30.8 million from General Fund reserves and $12.2 million from department trust funds and other non-recurring sources.
As a result, county reserves are projected to fall from 12.5% to 10.4% of General Fund expenses.
“This approach has a cost,” the budget document states. “These resources will not be available in FY 2027-28.”
Coburn warned that the projected deficit could exceed $67 million in future years unless the county finds long-term solutions through new revenues, spending reductions or changes to county services.
“The structural imbalance persists,” the budget states. “The most significant ongoing structural drivers are labor cost growth … and the escalating impacts of H.R. 1 on County health and human services programs.”
Coburn called the budget a temporary solution while the county works on broader financial reforms.
“I want to be clear that this budget is a stopgap,” Coburn wrote. “We have challenging work ahead of us, and the Board of Supervisors, County staff, community partners, and members of the public will need to work together on solutions.”
Despite the financial challenges, the budget continues funding for several county priorities.
The county plans to maintain a $2 million Measure K investment for road paving, culvert repair and striping. Another $1 million in Measure K funding will support parks and environmental projects, with $200,000 allocated to each supervisorial district.
The budget also includes $1 million from Measure K for housing projects and another $1 million for homelessness reduction programs. County officials said the homelessness investments have helped reduce the number of unhoused people through new facilities and services.
Funding will continue for the 701 Ocean Street Housing Viability Study, which officials described as one of the county’s most significant affordable housing sites.
The budget also funds the county’s AI Elevation and Standardization Workplan 2026, including enterprise software licensing, staff training, technical support and pilot projects aimed at modernizing county operations.
“These investments are not luxuries,” Coburn said. “They will allow us to make the best and highest use of our staff, focusing on solving problems and improving services.”
The county is also moving forward with the formation of an Enhanced Infrastructure Financing District in unincorporated areas to help fund infrastructure and economic development projects.
County officials said additional risks remain, including uncertainty over future federal reimbursements for storm recovery costs and potential reductions in state funding tied to the governor’s May budget revision.
“The State of California must step up,” Coburn said. “Counties, including Santa Cruz County, cannot absorb the fiscal consequences of federal policy choices alone.”
Public budget hearings are scheduled for June 10 and June 24 at the South County Government Center in Watsonville and June 11 at board chambers in Santa Cruz.
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The proposed budget is available at sccbudget.us.