I am pleased to present the Fiscal Year 2024-25 Proposed Budget. The Proposed Budget makes prudent investments in Board priorities and follows sound financial practices allowing us to maintain the County’s reserves and excellent bond rating. These fiscally responsible practices have served us well and will help the County to navigate the fiscal challenges we face in the coming years.
This year’s $1.126 billion Proposed Budget includes a $754.2 million General Fund that prioritizes community services through support for our workforce and careful investments in programs consistent with the Strategic Plan. As part of supplemental budget actions, we will present additional community investments through Measure K (a 1/2 cent sales tax in the unincorporated area). We thank the voters of Santa Cruz County for their support and view the result as an endorsement of the work the Board is doing to make Santa Cruz County a healthier, more vibrant and more inclusive place to live, work and play.
Challenges Due to Natural Disasters and State Mandates
Unreimbursed Disaster Costs. The County faces stiff financial challenges due to storm repair costs from seven presidentially declared disasters since 2017, with $144 million in unreimbursed costs – roughly the equivalent of an entire year of General Fund property tax revenues. This has left us with little capital to address new and emerging challenges and requires us to borrow an estimated $85 million to maintain cash balances and assure the continuity of services to the community. Unfortunately, this will limit the County’s options and financial flexibility as we move forward to meet the challenges ahead of us, including addressing deferred maintenance at our facilities and on our roads and emerging priorities or new and unfunded mandates from the State.
Behavioral Health Initiatives. In the coming year, the County will be implementing the Community Assistance, Recovery, and Empowerment (CARE) Act and CalAIM (California’s transformation of the Medi-Cal system), two significant changes intended to provide help to individuals with behavioral health issues including substance use disorder. In addition, the State has imposed a cap on the number of annual referrals a county may make to the Department of State Hospitals system for individuals charged with a felony but ruled Incompetent to Stand Trial. We expect there to be additional costs as we work to implement these programs and will maintain contact with our legislative delegation to help ensure County staff have the financial support needed to make these programs a success. Proposition 1 will also bring new challenges, with Gov. Gavin Newsom promising an accelerated implementation of the significant changes included in that measure. Proposition 1 will have major impacts to the County’s allocation of Mental Health Services Act funds.
State Budget Deficit. We are closely monitoring the State Budget situation. The Legislative Analyst’s Office is now projecting a State deficit of $73 billion, necessitating cuts that are already being felt by our departments. This is largely because of a decline in expected income tax revenues due to cuts in the tech industry, which is undergoing a metamorphosis as many businesses prepare for the oncoming challenges and opportunities presented by the expansion of artificial intelligence technologies. However, there is no easy way to predict when California’s income tax revenues might rebound, injecting a significant amount of uncertainty into State finances during the coming years.
Noteworthy Investments and Accomplishments
South County Services. We do want to take a moment to celebrate our work. The South County Government Center is opening, marking one of the largest investments in equitable services in County history. Establishing a second headquarters building to serve South County residents will improve the delivery of services while reducing greenhouse gases for both County staff and the clients we serve – no longer will South County residents be forced to travel north to access many critical services. In addition, this is a fiscally prudent investment, in that we are consolidating various county leases for office space and in the end the County will actually save money from this investment.
Investments and Opportunities. We recently celebrated the reopening of the Recovery Center, which provides a safe space and point of connection for residents who may be struggling with substance use disorder, while freeing up valuable public safety resources. Construction of the Sheriff’s DNA Laboratory is also nearing completion and once accredited will help speed the delivery of justice for sexual assault survivors and others impacted by crime.
In the past year, we also launched Age Well Santa Cruz County, our effort to create a Master Plan on Aging to help ensure people of all ages and abilities are engaged, valued and afforded equitable opportunities to thrive. And in March, we debuted the final improvements to Willowbrook County Park in honor of Sgt. Damon Gutzwiller – a memorial and seating area to reflect on Damon’s memory, who was taken from us while serving the only community he’s ever known. The sacrifice of Damon and his family will never be forgotten.
Service-Enriched Shelters. We have made progress addressing homelessness in the community, with a 22 percent overall reduction in those experiencing homelessness according to the most recent Point-In-Time Count. We are implementing a planned shelter expansion that greatly enhances our ability to deliver results to the community and those experiencing homelessness. Under development are three low-barrier navigation shelters in South County, Mid-County and in the City of Santa Cruz. We value and thank our partners working to develop these critical facilities with us and look forward to opening them in the coming year. Measure K will help us do this, and we thank the community once again for their support.
Looking Forward to 2024-25 and Beyond
Despite significant challenges, we are happy to celebrate our successes. We also look forward to the creation of a new Strategic Plan to guide our efforts in the coming years. We invite everyone to examine our budget and our strategic objectives through our award-winning budget website, which demonstrates how the Proposed Budget is integrated with our Strategic and Operational plans.
We also want to thank our dedicated County staff. Despite many challenges, they have stepped up to serve the community, including during times of great need such as natural disasters, often going beyond the call of duty to assure the safety and security of our residents. Santa Cruz County is resilient and focused on meeting the challenges ahead of us. The leadership and guidance of the Board of Supervisors is an important part of that work, and we look forward to working with you in the coming fiscal year.
Respectfully submitted,
Carlos J. Palacios
County Administrative Officer