Santa Cruz County Battles Health Agency Cuts as Federal Actions and Economic Turmoil Intensify

SANTA CRUZ — Given forecasts of significant economic instability ahead and a sharp decline in financial backing from the federal government, county personnel in Santa Cruz have offered initial insights into suggested reductions to the budget affecting regional healthcare provisions. This has sparked considerable opposition from residents.

Although the official budget review process for the county isn't set to start seriously until June, the recent Board of Supervisors meeting highlighted significant effects expected at the Health Services Agency during the upcoming fiscal year. By this week, the local entity had already begun addressing these issues. proposed cutting The equivalent of 74.4 full-time employee roles have been allocated for the 2025-2026 fiscal year budget. This figure encompasses nearly 12 positions currently filled by county staff members with the remainder being unfilled vacancies.

The reductions come primarily from The cuts include the county’s health centers, as well as both the public health and behavioral health departments. Additionally, one administrative role will be eliminated.

County Executive Officer Carlos Palacios initiated the informational item by stating that these reductions primarily resulted from decreased healthcare funding provided by state and federal bodies, delays in receiving reimbursements for disaster aid, overall economic instability worldwide, and potential risks to federal financing.

I've spent 38 years in state and local government," stated Palacios. "Never before have we experienced such levels of uncertainty and turmoil at the federal level as we're seeing today. To be honest, I must say this has never happened during my tenure.

Palacios explained that the county has already lost two federal public health grants totaling $408,000, which supported nearly six full-time employees; they managed to retain these positions by reallocating funds from elsewhere. Additionally, federal authorities are contemplating significant cuts to Medicaid funding along with stricter eligibility criteria. County workers report that 90,000 local residents rely on Medi-Cal, and up to 30,000 people—most of them homeless—could potentially be stripped of their benefits should these measures go into effect.

In addition to this, the county remains due over $90 million in claims from the Federal Emergency Management Agency. Furthermore, they face additional yearly expenses of approximately $4.2 million in debt servicing as they await payment. Simultaneously, federal officials are considering increasing the criteria needed to qualify for disaster aid, and President Donald Trump has suggested alternative approaches. eliminating the agency altogether.

In total, the Health Services Agency anticipates a reduction of $11.1 million in income, not including possible effects resulting from forthcoming changes in federal policies expected over the next few months.

“If the economic environment and fiscal conditions were not what they currently are, we wouldn’t be discussing these levels of cuts as outlined today,” stated County Budget Director Marcus Pimental. “These aren’t measures we would have chosen willingly; however, they’re necessary steps to maintain financial stability and achieve a balanced operational budget while focusing on essential mandatory services.”

Swift backlash

The county's proposed budget of approximately $1.2 billion must safeguard vital services through careful spending decisions, as stated by budget officials on Tuesday. This includes reducing staff levels which will lower the total number of full-time equivalent employees to around 2,724.

However, the county's collective rationale didn't stop a substantial counteraction. The session started with over two hours of public comments imploring the board to implement the reductions as remotely connected to frontline service providers for the community as they could be. One of the groups incensed by this suggestion was the county’s biggest labor union, SEIU Local 521.

The suggested reductions aren't merely about eliminating positions; they also tear apart the preventive measures that maintain the well-being and stability of our community," stated Max Olkowski-Laetz, president of SEIU's Santa Cruz chapter, to the Sentinel. "The frontline workers form the core of initiatives designed to stop issues from escalating into full-blown crises. While reducing their numbers might appear as a financial saving for the county, this approach could have catastrophic long-term consequences for families, public health, and overall security. What we truly require is county leadership capable of recognizing that trimming back prevention efforts not only harms those who rely on such support but often leads to higher expenses when dealing with emergencies later on.

Olivia Martinez, who leads SEIU’s Region 2 encompassing Santa Cruz County, mentioned that the county’s longstanding laboratory and X-ray services, operational for five decades, are slated for termination but will be transferred to other areas instead.

This can’t occur within our community," stated Martinez. "This is unacceptable.

A number of community members attended to support behavioral health service providers such as the Mental Health Client Action Network of Santa Cruz, known as MHCAN, along with New Life Community Services' Gemma program. Both organizations face significant cuts in county funding under the proposed budget.

Shutting down MHCAN will ultimately lead to significantly higher expenses for you compared to what you would save over time," stated Tyler Starkman, the organization's Executive Director. "It is completely impossible to accommodate the 100 individuals you aim to house by 2026 unless we provide assistance.

Providing options

Supervisors Justin Cummings and Manu Koenig showed backing for the local initiatives but simultaneously acknowledged the harsh fiscal situation they face.

Cummings ordered—and the rest of the board agreed—that staff should come back in June with possible strategies to keep funding for the Mental Health Client Action Network, Gemma, X-ray and laboratory services, the county’s Commission on Justice and Gender, along with a suicide prevention coordinator role that had been slated for reduction among the county positions.

It will certainly give us several alternatives to think about," Cummings stated. "I strongly support the effort to ensure we maintain certain services and at least evaluate what impact this might have on our budget and where potential financing could be sourced.

Requested by Koenig to tackle some of the public's worries, outgoing The Health Services Agency Director, Mónica Morales, stated that the organization has implemented reductions at the managerial level, specifically by eliminating an assistant director role within the current fiscal year’s budget. She admitted that maintaining internal X-ray and laboratory services would be ideal; however, she noted that these were among several difficult decisions they had to face.

This is definitely not our preferred choice," stated Morales. "However, we understand the necessity of keeping primary care services operational. It’s crucial.

The review of the Health Services Agency budget is scheduled for June 3.