Proposed 2026-27 Budget

Overall Budget Summary

The Proposed Budget recommends a reduction in staffing to 638.75 full-time equivalent (FTE) positions, including negotiated salary and benefit increases. Overall, staffing decreases by 28.70 FTE compared to the prior year, including 5.60 FTE vacant positions in mid-year budget adjustments and 23.10 FTE vacant positions in the Proposed Budget. These changes reflect the deletion of vacant positions and rightsizing efforts to better align staffing with available funding and program priorities while maintaining required services.

Appropriations total $321,565,662, funded by revenues of $298,766,280 that include transfers in of one-time trust funds of $17,087,429 that currently reside in General Fund reserves and are intended to support HSA client populations, a General Fund Contribution of $22,367,557, a District Sales Tax Contribution of $400,000, a one-time reliance of additional reserves of $20,250, and Other Fund Contributions of $11,575. The planned total use of $17,107,679 in trust funds and reserves would reduce General Fund reserves assigned to the department to support program operations, capital needs, and increased facility and operational costs.

The net result of the Proposed Budget is an overall net increase of $11,385,491 funded by an increase of $6,742,839 in Intergovernmental Revenues, $3,644,936 in charges for services, $225,648 in miscellaneous revenues, $138,319 in licenses, permits, and franchise fees, $748 in fines, forfeitures and assessments. These increases are offset by a decrease of $89,943 in Revenue from Use of Money, $712,694 in General Fund Contribution, and $10,000 in Other Fund Contributions.

The Proposed Budget reflects ongoing structural cost pressures driven by negotiated salary and benefit increases, rising costs for services and supplies, and increased internal service charges. At the same time, key State and federal revenue sources do not increase at the same pace. To maintain mandated services and ensure patient and community safety, the budget includes targeted reductions to vacant positions, operational adjustments across divisions, and increased revenue from requested increases in Medicare reimbursement rates.

Budget changes are largely driven by increasing demand for services, particularly within Behavioral Health and Health Centers, as well as higher personnel and operational costs. HSA continues efforts to optimize revenue opportunities, improve operational efficiency, strengthen coordination across programs, and align services with available funding.

Behavioral Health

The Behavioral Health Division Proposed Budget recommends a reduction of staffing to 241.05 FTE positions, including negotiated salary and benefit increases. Overall, staffing decreases by 11.75 FTE compared to the prior year, including deletion of 14.0 FTE vacant positions, partially offset by the addition of 2.25 FTE positions through administrative transfers from Administration Division, to align staffing with available funding and operational priorities.

Appropriations total $185,554,379, funded by revenues of $166,859,803 that includes a transfer in of one-time trust funds of $5,873,412 that currently reside in General Fund reserves and are intended to support HSA client populations, a General Fund Contribution of $18,694,576. The planned use of $5,873,412 would reduce the General Fund reserves assigned to the department to support program operations, capital needs, and increased facility and operational costs.

Total revenues increase by $4,395,251, driven primarily by higher Medi-Cal funding, Behavioral Health Services Act revenues, and 1991 Realignment funding. These increases are partially offset by declines in certain program revenues, including opioid settlement-related funding and other State and federal sources, reflecting ongoing changes in funding structures and reimbursement methodologies.

Total expenses increase by $4,807,140. Salary and benefit costs increase significantly due to negotiated compensation adjustments and efforts to stabilize and retain the workforce. Services and supplies costs increase due to higher medical services, including Institutes for Mental Disease placements, physician services, prevention programs, and outside hospital expenses, reflecting increasing service demand and client acuity. These increases are partially offset by reductions in contracted services and a decrease in intrafund transfers associated with the completion and realignment of major capital and programmatic funding.

The Behavioral Health Division budget reflects continued growth in service demand, increasing client acuity, and ongoing structural adjustments to align staffing and resources with funding constraints. The division continues to implement changes in response to State policy reforms and evolving Medi-Cal requirements while maintaining access to critical mental health and substance use disorder services.

Health Centers

The Health Centers Division Proposed Budget recommends a reduction of staffing to 198.25 FTE positions, including negotiated salary and benefit increases. Overall, staffing decreases by 6.20 FTE compared to the prior year, including 5.60 FTE vacant positions in midyear budget adjustments and 0.60 FTE vacant positions in the Proposed Budget, to align staffing with available funding and operational priorities.

Appropriations total $63,636,418, funded by revenues of $63,644,097 that includes a transfer in of one-time trust funds of $4,016,238 that currently reside in General Fund reserves and are intended to support HSA client populations, and a credit of $7,679 to apply to other division budgets. The planned use of $4,016,238 would reduce the General Fund Reserves assigned to the department to support program operations, capital needs, and increased facility and operational costs.

Total revenues increase by $8,465,208, driven by higher outpatient clinic revenues and Medi-Cal Administrative Activities (MAA) revenues, partially offset by reductions in certain federal grant revenues.

Total expenses increase by $8,518,818, primarily due to higher salary and benefit costs and increased services and supplies, including expanded dental services and higher pharmacy costs. Internal service charges and equipment investments also contribute to cost growth, partially offset by reductions in intrafund transfers following completion of prior-year capital projects.

The division continues to focus on improving reimbursement, expanding service capacity, and maintaining access to care for underserved populations.

Public Health

The Public Health Division Proposed Budget recommends a reduction of staffing to 94.8 FTE positions, including negotiated salary and benefit increases. Staffing decreases by 3.4 FTE compared to the prior year, as a result deleting 4.4 FTE vacant positions, partially offset by the addition of 1.0 FTE position, to align staffing with available funding and operational priorities.

Appropriations total $26,153,809, funded by revenues of $24,090,281 that includes a transfer in of one-time use of Public Health Realignment Trust Fund reserves of $250,072, and a General Fund Contribution of $1,813,456. The planned use of $250,072 would reduce the Public Health Realignment Trust Fund reserves assigned to the department to support program operations.

Total revenues increase by $1,828,299 due to higher MAA revenues, State Realignment funding, and grant revenues, partially offset by reductions in select federal programs and certain fee-based revenues.

Total expenses increase by $2,223,931, driven by higher salary and benefit costs, increased programmatic and medical service costs, and higher internal service charges.

The division continues to prioritize communicable disease response, emergency preparedness, and community health improvement while adapting to evolving funding and program requirements.

Environmental Health

The Environmental Health Division Proposed Budget recommends a reduction of staffing to 41.0 FTE positions, including negotiated salary and benefit increases. Staffing decreases by 2.0 FTE compared to the prior year, to align staffing with available funding and operational priorities.

Appropriations total $14,593,156, funded by revenues of $13,633,471, a General Fund Contribution of $948,110, and Other Fund Contributions of $11,575. The net result of the Proposed Budget is an overall net increase of $489,371 funded by an increase of $381,421 in miscellaneous revenues, $98,319 in licenses, permits and franchise, $131,292 in charges for services, and $1,748 in fines, forfeitures, and assessments, partially offset by decreases of $124,775 in intergovernmental revenues, an increase of $11,366 in General Fund Contribution, and a decrease of $10,000 in Other Fund Contributions.

Total revenues increase by $488,007, driven primarily by fee adjustments across regulatory programs, including Consumer Protection, Hazardous Materials, Land Use, and Water Resources, partially offset by reduced intergovernmental revenues.

Total expenses increase by $489,371, reflecting higher salary and benefit costs and increased internal service charges, partially offset by reductions in services and supplies.

The division continues to operate a cost-recovery model while maintaining mandated regulatory services and improving operational efficiency.

Health Benefits

The Health Benefits Division Proposed Budget recommends a reduction of staffing to 10.0 FTE positions, including negotiated salary and benefit increases. Staffing decreases by 4.0 FTE compared to the prior year, to align staffing with available funding and operational priorities.

Appropriations total $2,447,323, funded by revenues of $2,373,052 and a General Fund Contribution of $74,271. The net result of the Proposed Budget is an overall net decrease of $4,353,964 funded by a decrease of $4,543,473 in intergovernmental revenues, which is partially offset by an increase of $189,509 in General Fund Contribution.

Total revenues decrease by $4,543,473, primarily due to the expiration of the Providing Access and Transforming Health (PATH) and Capacity and Infrastructure Transition, Expansion and Development (CITED) grant funding and the elimination of $4.5 million in State funding, which is partially offset by a modest increase in MAA revenues.

Total expenses decrease by $4,353,964, driven primarily by reductions in services and supplies associated with the conclusion of grant-funded programs. These decreases are partially offset by ongoing medical care costs, internal service charges, and cost allocation adjustments.

The division transitions from grant-funded program expansion to a more sustainable baseline level of operations while continuing to support access to care for vulnerable populations.

Administration

The Administration Division Proposed Budget recommends a reduction of staffing to 53.65 FTE positions, including negotiated salary and benefit increases. Overall, staffing decreases by 1.35 FTE through administrative transfers to Behavioral Health, compared to the prior year, to align staffing with available funding and operational priorities.

Appropriations total $29,180,577, funded by revenues of $28,165,576 that includes a transfer in of one-time trust funds of $6,947,707 that currently reside in General Fund reserves and are intended to support HSA client populations, and a General Fund Contribution of $1,244,823. The planned use of $6,947,707 would reduce the General Fund reserves assigned to the department to support program operations, capital needs, and increased facility and operational costs.

Total revenues increase slightly by $29,255, with increases in MAA revenues offset by reductions in rents, conference room rentals, and miscellaneous revenues.

Total expenses decrease by $299,805, reflecting higher salary and benefit costs and increased internal service and insurance costs, offset by the completion of major capital projects and related financing reductions.

The division continues to provide essential fiscal, operational, and infrastructure support across HSA.

Behavioral Health Services Act Implementation: The transition from the Mental Health Services Act (MHSA) to the Behavioral Health Services Act (BHSA), following the passage of Proposition 1, reduces overall funding to counties and significantly restructures behavioral health funding. Under BHSA, county funding decreases by approximately 5% due to increased State retention and is redirected to new priorities, including a required 30% allocation for housing interventions. The new structure eliminates dedicated funding for prevention, early intervention, workforce development, and innovation, and expands requirements to serve individuals with substance use disorders across all program areas. BHSA also introduces extensive new reporting requirements across all Behavioral Health revenue sources.

These changes reduce program flexibility and require significant restructuring of services and funding strategies. The Behavioral Health Division anticipates reductions in funding for community-based organizations and programs supporting prevention, early intervention, community services, workforce development, innovation, and treatment. The division must realign resources to meet new requirements while continuing to address increasing demand for behavioral health services.

Youth Crisis Center: The Behavioral Health Division continues to advance the opening of the Youth Crisis Center, Hope Forward/Esperanza Adelante, which includes an 8-chair Crisis Stabilization Unit (CSU) and a 16-bed Crisis Residential Program (CRP) licensed as a Short-Term Residential Treatment Program; however, multiple State certification and licensing requirements have delayed the opening to the second half of Fiscal Year (FY) 2025-26. On April 2, 2026, the CSU opened with four chairs operational. Services will continue to ramp up to full capacity in the CSU and expect the CRP to open in the next several months. With dual program operational status, the facility is projected to incur approximately $5.5 million in annual net operating costs, requiring a sustainable funding strategy amid ongoing State and federal funding changes. The division plans to support operations through BHSA funding, federal financial participation, and commercial insurance reimbursement.

Health Centers Financial Sustainability and Revenue Alignment: The Health Centers Division continues to implement a multi-year fiscal sustainability framework to address structural funding gaps and rising operational costs. Key strategies include optimizing the Federally Qualified Health Center (FQHC) Prospective Payment System (PPS) rate, improving clinical visit efficiency and scheduling, and strengthening cost containment through enhanced contract oversight and operational efficiencies. The division also plans to expand partnerships with local FQHCs to increase referrals for diagnostic services, including x-ray services, to improve care coordination and access.

While the Proposed Budget includes Intergovernmental Transfer (IGT) revenue to address current funding gaps, long-term sustainability depends on achieving a PPS rate adjustment to increase reimbursement levels. Successful implementation of this strategy would reduce reliance on IGT funding and better align ongoing revenues with operational costs. Without these improvements, the division may face continued financial pressure to maintain access to primary care, integrated behavioral health, and specialty services for Medi-Cal beneficiaries and other underserved populations.

Increase in Uninsured and Underinsured Residents: Demand for indigent care services continues to increase as the number of uninsured and underinsured residents grows. While precise quantification is challenging due to evolving federal and State policy changes, including potential Medi-Cal eligibility impacts, the County anticipates upward pressure on enrollment in safety-net programs and uncompensated care costs. This trend places strain on County-operated services, particularly within Behavioral Health and Health Centers, where care must be provided regardless of ability to pay. Increased uncompensated care reduces available resources for other programs and may require additional County support to maintain essential services.

In response, HSA is actively reviewing its indigent care program, MediCruz, and evaluating alternative models such as the County Medical Services Program (CMSP). CMSP provides an opportunity for eligible counties to pool resources toward meeting Welfare and Institutions Code 17000 requirements through a shared service model. An assessment of CMSP eligibility criteria, potential service impacts, and anticipated County costs is currently underway. If current trends continue, the County will face ongoing financial pressure to sustain mandated services in future fiscal years.

Rising Program Expenses: Program expenses continue to increase across multiple service areas due to higher utilization, increasing acuity of client needs, and rising costs for specialized services. Behavioral Health costs, including placements in Institutes of Mental Disease facilities, continue to grow and are largely outside of County control. These costs are driven by service demand, regulatory requirements, and limited placement availability. Continued growth in program expenses may require future budget adjustments or service prioritization.

Extensive Non-Core Services: HSA provides several services beyond core mandated programs to address local needs and service gaps. These discretionary services include administrative support functions, community wellness and prevention initiatives, health education and outreach efforts, pilot and grant-funded projects, workforce development activities, and community-based partnerships that are not fully reimbursable through state or federal funding.

While these services support important community outcomes and help address gaps in the safety net, they often rely on limited or unstable funding sources. As costs increase and revenues remain constrained, sustaining these non-core services becomes more challenging and may require reevaluation of service levels or funding strategies in future budgets.

Increasing Operational Costs: Operational expenses continue to rise due to negotiated salary and benefit increases, higher costs for services and supplies, and increased internal service charges, including cost allocation plan charges, facility costs, and information technology services. These factors contribute to ongoing structural cost growth. Because many revenue sources do not increase at the same rate, HSA must continue to identify efficiencies, implement cost containment strategies, and adjust services to maintain a balanced budget.

Federal and State Policy Changes: Changes in federal and state policy continue to create uncertainty for County health programs. Medi-Cal program changes and Behavioral Health payment reforms affect reimbursement methodologies, eligible services, and administrative requirements. Emerging policy discussions regarding Medi-Cal work requirements may also impact eligibility, continuity of coverage, and administrative processes, creating additional uncertainty for both clients and program operations. Proposed federal legislation, including HR 1, may further impact funding, program flexibility, and administrative workload. These changes require ongoing monitoring and adaptation to maintain compliance, financial sustainability, and access to services.

Medicare Telehealth Policy Uncertainty: Medicare currently allows FQHCs to receive full reimbursement for telehealth services, including audio-only and video visits, at the PPS rate. These flexibilities are authorized through December 31, 2027; however, their long-term status remains uncertain. If these policies are not extended or made permanent, Health Centers may experience revenue reductions and decreased service accessibility for patients who rely on telehealth.

Medi-Cal Behavioral Health Integration: The California Department of Health Care Services plans to integrate the Medi-Cal Specialty Mental Health Plan and Drug Medi-Cal Organized Delivery System, with implementation anticipated in FY 2027-28. While the goal is to streamline administration and reduce duplication, the financial and operational impacts remain unclear. There is concern that administrative reimbursement may decrease even as workload remains the same. The Behavioral Health Division continues to prepare for this transition, but uncertainty remains until additional State guidance is provided.

Public Health Capacity and Emerging Threats: Reductions in federal and State funding are limiting the Public Health Division’s ability to respond to emerging health challenges. At the same time, demand for services is increasing due to rising communicable disease cases, including tuberculosis and high-risk syphilis, as well as ongoing concerns related to vaccine-preventable diseases.

The spread of health misinformation continues to reduce public trust in vaccines and evidence-based interventions. Emerging threats, including zoonotic diseases such as H5N1 (Avian Influenza), require coordinated, cross-sector responses. The division continues to implement a One Health approach to strengthen collaboration across human, animal, and environmental health systems. Without sustained resources, these combined pressures may lead to worsening health outcomes and increased disparities over time.

Artificial Intelligence in Service Delivery: HSA continues to expand the use of artificial intelligence (AI) to improve service delivery, data management, and operational efficiency across divisions. Environmental Health uses AI to enhance program effectiveness, including large-scale data updates and improved monitoring capabilities, while Health Centers leverage AI-enabled tools within the EPIC OCHIN system to support clinical decision-making and streamline provider workflows. HSA is also exploring the use of secure AI agents to assist providers and staff with documentation, care coordination, and administrative functions, with a focus on improving efficiency while maintaining high standards of care.

As AI adoption expands, HSA will work closely with the Information Services Department and County Executive Office to align with the County’s AI governance, including updating policies related to appropriate use, data security, patient privacy, and regulatory compliance. While current implementation focuses on targeted, low-cost use cases, future expansion may require investments in system integration, workforce training, and infrastructure to support scalable, secure, and compliant AI-enabled services across health and public health programs.