Santa Clara County officials say critical safety-net services could abruptly end as early as next month, as congressional lawmakers prepare to vote on a plan to trim trillions in spending over the next decade — and cut off billions of federal dollars flowing west to Silicon Valley.
The Board of Supervisors is weighing the “devastating impacts” to the county’s $12 billion budget, forecast in a set of dramatic county memos published ahead of Tuesday’s meeting. The discussion is happening at the same time U.S. House Speaker Mike Johnson plans to hold a vote on a budget plan calling for $2 trillion in cuts to help pay for increased military and immigration enforcement spending. The county relies on federal funding for about one-third of its annual budget, or approximately $3.6 billion.
“The County faces its most uncertain budget outlook since the initial year of the pandemic. And, in many ways, the long-term risks facing the County now are significantly greater than they were in 2020,” reads one memo from county officials to supervisors.
The County Executive’s Office is recommending one major spending reduction — cutting the amount of one-time grants or sponsorships to community groups and nonprofits in each district. These spending decisions are known as inventory items. Last year supervisors — citing a $250 million budget deficit — capped inventory spending at $1 million per district. The county is recommending supervisors reduce spending to $500,000 per district.
Supervisors only have a say in how approximately 20% of the county’s total revenues are spent, or about $2.5 billion. The rest is earmarked for services mandated by either the state or federal government.
Yet even the county’s “discretionary” revenues are used to fund mandated or necessary public programs with no guaranteed funding source, such as jail corrections and reforms, child welfare and public defender services, elections, property tax assessment and in-home supportive services. The federal government requires state governments to fund and provide a set of mandated services. California passes those mandates to counties. Oftentimes, state and federal governments expect services to be paid by counties directly. These are considered unfunded mandates, such as various mental health services.
Supervisor Margaret Abe-Koga pointed out inventory funds often fluctuate depending on budgets over the years. But the new federal administration could spell unease for community groups that rely on grants.
“Communication and collaboration will be key as we move forward in this new funding environment,” Abe-Koga told San José Spotlight.
The county already faces a structural budget deficit that widened to $250 million last year, fueled by a slow housing market with elevated interest rates, inflation and a tight job market.
Revenue and expenditure projections for next fiscal year are still being evaluated. County Executive James Williams is expected to submit his budget proposal in May, with hearings and a vote in June.
Even absent major federal spending cuts, a mid-year budget memo from the county’s top department heads said taxpayer general fund revenues are on track to fall short by about $37 million which is needed to sustain the current level of county operations through June 2026.
“With hundreds of millions (or more) in federal revenue dollars at risk of disruption or reduction of funding to the County. The County could easily find itself $100 million to $500 million in structural budget deficit next fiscal year depending upon the decisions made in higher levels of government,” the memo reads.
Supervisor Betty Duong said it’s essential county leaders ensure lifesaving medical and social services continue for the county’s nearly 2 million residents.
“During this time, I want to fortify the county’s systems to weather any storm coming our way,” Duong told San José Spotlight.
Contact Brandon Pho at [email protected] or @brandonphooo on X.
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