Proposed 2025-26 Budget

Overall Budget Summary

The Proposed Budget includes status quo staffing of 64.0 full-time equivalent (FTE) positions, including negotiated salary and benefit increases. Appropriations total $26,076,209, funded by revenues of $26,583,572 and fund balance of $507,363. The ISD budget includes both an Internal Service Fund (ISF) budget and General Fund budget. The General Fund portion supports the Radio Shop, with total appropriations of $777,499, funded entirely by revenues. In the ISF budget, revenues are supplied by direct charges to County departments for performing various services.

The Budget recommends an expenditure increase of $5,363,198 due to key changes that include a $2,314,516 increase from a change in accounting standards, which adds an additional non-cash amount for inferred capitalization and liability amounts and depreciation to subscription software costs, $838,286 increase to support implementation of the new Workday Human Resources and Payroll System, with costs offset by department charges, and $711,344 increase to support technology solution research and early development, now funded through a revised Technology Service Fee structure. Additionally, the ISD budget includes a $468,124 increase from higher Microsoft licensing costs, ensuring continued access to essential software like Office 365 and SQL Server, and $373,323 increase from a change in facility charges to properly reflect the cost of facility services and utilities.

Total revenues increased by $5,865,466 primarily from an increase of $5,155,292 for an Internal Service Fund (ISF) accounting change representing departmental purchases of hardware and software, an increase of $395,945 in programming revenue, and an increase of $415,711 in 2025-26 Cost Allocation Plan changes.

Loss of Cybersecurity Support Services: Changes to the Department of Homeland Security (DHS) will eliminate critical cybersecurity resources, including monthly cyber hygiene reports, penetration testing, elections security reviews, and access to security experts. Replacing these services with third-party vendors could cost at least $25,000 to $30,000 annually, with additional unknown costs for elections security assessments and policy development. Without these resources, the County faces increased cybersecurity risks, reduced threat intelligence, and higher vulnerability to cyberattacks, potentially disrupting operations and requiring additional funding for security measures in future budgets.

Uncertainty in Broadband Funding: The Broadband Equity, Access, and Deployment (BEAD) Program is a $42.45 billion federal initiative under the Infrastructure Investment and Jobs Act (IIJA) aimed at expanding high-speed internet access across the nation, particularly in unserved and underserved communities. Since January 20, 2025, uncertainty surrounding the IIJA funding has intensified due to recent executive actions. Although the initial funding freeze was subsequently rescinded, significant confusion and uncertainty persist regarding the BEAD program and the funding criteria. While there is no direct impact on County services, the County Broadband Strategy for expansion of broadband to unserved and underserved areas of the County would be severely impacted by the elimination or reduction of BEAD funding, leaving areas lacking adequate broadband.

Impact of Tariffs on County Operations: Rising tariffs are expected to increase costs for technology upgrades, hardware procurement, software licensing, and telecom services, directly impacting County operations. Critical security upgrades, such as the Windows 11 migration, are essential to maintain compliance and prevent vulnerabilities. Existing projects, including OneDrive integration, may face delays, affecting cost savings and efficiency. Aging equipment replacement is necessary to avoid failures and security risks, but higher hardware costs and vendor pricing uncertainties may hinder procurement. Increased tariffs on networking equipment, HVAC systems, and essential telecom services could further strain budgets, impacting emergency response capabilities. To mitigate these risks, the County must prioritize essential technology purchases, negotiate vendor agreements, and explore bulk purchasing where feasible to maintain operational continuity and financial stability.

AI Adoption and Governance Challenges: By adopting artificial intelligence (AI) to enhance public services, the County faces growing challenges in security, data governance, and regulatory compliance. AI is requiring the County to proactively address vulnerabilities, ensure ethical AI use, and adapt to evolving legal frameworks. A need for formalized governance and review of potential applications will be required to ensure that the current AI policy is adhered to with vendor selection of solutions by departments. Due to the speed of emerging technology, the cost of adopting AI solutions is in flux and will need to be tracked for cost savings versus investment. It is anticipated that AI will continue to allow process improvements and better analysis, which has the potential to generate fiscal savings in future years.

Implementing the Countywide Radio System: Santa Cruz County is working to upgrade its public safety communication system by implementing the Next Generation Project 25 (P25) radio system. This system is crucial for improving radio system stability and coordination among first responders, law enforcement, and emergency services on a single unified system. Migration to the P25 system will also be required to meet new state law enforcement mandates around encryption of radio traffic. While the new system is expected to improve public safety and emergency response, careful planning and investment are necessary to address operational challenges around governance, cost sharing, and site improvements. The current estimated cost from the Request for Proposals put the overall system cost at $22-28 million and the projected implementation timeline at 36-48 months.