Santa Clara County closes deficit but can’t escape budget cuts

Santa Clara County officials are bridging a massive deficit through an infusion of new revenue and realigned costs to balance the upcoming fiscal year’s $12.4 billion budget. But it will still require painful cuts.

The county’s May 1 budget proposal manages to close half of its $250 million gap through several tactics. One is the ability to shift more patients over to Medi-Cal to take weight off the county’s own primary care access program. Other solutions include an increase in building permit fees, selling unused vehicles and other equipment and the use of restricted monies instead of taxpayer dollars. The county’s top boss, CEO James Williams, has called it a stunning feat.

“It’s a big deal. A very big deal. It’s unusual,” Williams told San José Spotlight. “That did help us avoid much, much more by way of cuts and reductions. That being said, a lot of the cuts are difficult.”

Cuts will be steep. County officials want to reduce spending across all departments by $118 million. Much of that will be achieved through removing vacant jobs.

But it will also cut resources for vulnerable residents, such as reduced supplies for childhood lead prevention efforts and wastewater testing for new diseases.

The county will also shrink its participation in a statewide child services program known as First 5, which could result in reduced home visitation services to high-risk children, including those in foster care and children who are pregnant or parenting a child.

On the flip side, the county health system — more than 52% of the total budget — will see its budget increase by $735 million to roughly $6 billion, compared to $5.4 billion last year. That includes $40 million for seismic improvements to Santa Clara Valley Medical Center and $60 million for tenant improvements to Valley Health Center San Jose. Public safety and justice will see more than $1 billion in appropriations — a $51 million increase from last year.

Specific departments seeing decreases include the District Attorney’s Office, which would see its appropriations drop by $2.4 million. The proposed budget states that could result in reduced capacity for the investigation of cases and victim services. San José Spotlight previously reported on the DA’s concerns about the number of domestic violence cases overwhelming prosecutors.

Williams said the county’s financial challenges won’t go away in the coming years.

A key driver of the structural deficit is the slower pace of property tax rolls — the largest source of county discretionary revenue. Fewer home sales and Prop. 13 — which only allows a reassessment when there’s actual change in ownership of property — have had an effect. But the county is also gearing up for a fight with the state over excess property tax money.

“The State is seeking to divert nearly $38 million a year in local discretionary revenue from our County to cover costs the State should bear,” Williams wrote in his budget message.

In addition, Regional Medical Center will cut crucial trauma, stroke and heart attack services in East San Jose. That will require county leaders to spike investments from the general fund to meet the resulting surge in demand at county hospitals — something the current budget doesn’t reflect. The deficit has also brought the county into a dispute with several of its hospital labor unions.

“This year, we are working with fewer dollars than we have in nearly a decade, and will have to make real, strategic cuts — cuts that will leave everyone, myself included, frustrated and unhappy,” Board of Supervisors President Susan Ellenberg told San José Spotlight.

Ellenberg said it’s her goal to prioritize safety net services.

“These core services will be my non-negotiables,” Ellenberg said. “Everything else is on the table.”

Contact Brandon Pho at [email protected] or @brandonphooo on X, formerly known as Twitter.