SANTA CRUZ >> With predictions of severe economic volatility on the horizon and a precipitous drop in support from the federal government, Santa Cruz County staff have provided an early look at proposed budget cuts impacting local health services amid a wave of pushback from the public.

The county’s formal budget review process won’t begin in earnest until June, but Tuesday’s Board of Supervisors meeting drew attention to the outsized impacts that will be felt within the Health Services Agency this coming fiscal year. As of this week, the local agency has proposed cutting the equivalent of 74.4 full time employee positions for its 2025-2026 fiscal year budget. That total includes almost 12 positions actively held by county employees while the rest are vacant.The reductions come primarily from the county’s health centers, public health and behavioral health divisions, while one administrative position will also be cut.

County Executive Officer Carlos Palacios kicked off the informational item by explaining that these cuts were forced largely because of reduced health care funding from state and federal entities, delayed reimbursement of disaster assistance, global economic uncertainty and federal funding threats.

“I’ve been in state and local government now for 38 years,” said Palacios. “I don’t know that we’ve ever had so much uncertainty and chaos at the federal level as we have right now. In fact, I can say we never have.”

The county, Palacios elaborated, has already had two federal public health grants abruptly pulled that were worth $408,000 and funded almost six full-time staff positions that the county managed to save by grabbing from other funding sources. Moreover, federal officials continue to consider massive funding reductions and a narrowing of eligibility requirements for Medicaid, or Medi-Cal as it’s known in California. According to county staff, 90,000 county residents are on Medi-Cal and at least 30,000, most of whom are unhoused, could lose coverage if the federal actions are enacted.

On top of all that, the county is still owed more than $90 million in claims from the Federal Emergency Management Agency with compounding costs added through debt services to the tune of about $4.2 million per year while it waits. Meanwhile, federal leaders have talked about raising the qualification requirements for disaster relief whereas President Donald Trump has floated eliminating the agency altogether.

Overall, the Health Services Agency is facing a decrease of $11.1 million in revenue and that figure doesn’t factor in the potential impacts from the federal policy shifts likely to play out in the coming months.

“Were the economic climate and federal climate different, we wouldn’t be talking about this level of reductions that are contained here today,” said county Budget Manager Marcus Pimentel. “This is nothing we wanted to see, but it’s something we must do to sustain ourselves financially for a balanced operating budget and prioritizing our delivery of mandated services.”

Swift backlash

The county’s overall $1.2 billion proposed budget is forced to protect essential programs with strategic investments, budget officials explained Tuesday, including the staff reductions that would bring down the county’s total employee count to about 2,724 full-time equivalents.

But the county’s shared reasoning wasn’t enough to prevent a significant backlash. The meeting began with more than two hours of testimony from audience members urging the board to make the cuts as far away from those delivering services directly to the community as possible. Among those outraged by the proposal was the county’s largest union, SEIU Local 521.

“The proposed cuts don’t just eliminate jobs — they dismantle the preventative services that keep our community healthy and stable,” SEIU’s Santa Cruz Chapter President Max Olkowski-Laetz told the Sentinel in a statement. “Frontline staff are the backbone of programs that prevent crises before they happen. Slashing these roles may look like it saves money for the county, but the long-term cost to families, public health, and safety will be devastating. We need county leadership that understands that cutting preventative services isn’t just cruel to the people we’re supposed to protect, it almost always ends up costing us more in emergency services down the line.”

Olivia Martinez, director of SEIU’s Region 2, which includes Santa Cruz County, said the county’s laboratory and X-ray services that are on the chopping block have been offered for 50 years and now will get outsourced to other regions.

“This cannot happen to our community,” said Martinez. “This is not OK.”

Many members of the public also showed up to advocate for behavioral health service providers Mental Health Client Action Network of Santa Cruz, or MHCAN, and New Life Community Services’ Gemma program, which will both have their county funding slashed in the proposed budget.

“Closing MHCAN will basically cost you a lot more money than it’s going to save you in the long run,” the organization’s Executive Director Tyler Starkman said. “There is absolutely no way you’re going to be able to house the 100 people you want to house within 2026 without our help.”

Providing options

Supervisors Justin Cummings and Manu Koenig both expressed support for the local programs while also recognizing the bleak financial reality.

Cummings instructed — and the rest of the board supported — staff to return for the budget hearings in June with potential options to maintain funding for the Mental Health Client Action Network, Gemma, X-ray and lab services, the county’s Commission on Justice and Gender as well as for a suicide prevention coordinator position that was on the county’s list of position cuts.

“It will at least provide us with options to consider,” said Cummings. “I’m very supportive of trying to make sure we keep some of those services and at least have a look to see what it could mean (for the budget) and where funding could come from.”

Asked by Koenig to address some of the public’s concerns, outgoing Health Services Agency Director Mónica Morales said the agency has made cuts at the executive level, namely an assistant director position that was eliminated in this fiscal year’s budget. She also acknowledged that it is best to have the in-house X-ray and lab facilities, but said it is just one of the many hard choices the agency has to make.

“This is not something we want to do. Absolutely not,” said Morales. “But we also know that we have to maintain primary care services. We have to.”

The Health Services Agency budget will be reviewed again June 3.