Proposed 2026-27 Budget

Overall Budget Summary

The Proposed Budget recommends a reduction of staffing to 554.5 full-time equivalent (FTE) positions, a decrease of 25.5 FTE vacant positions from the prior year and includes negotiated salary and benefit increases. Appropriations total $197,541,747, funded by revenues of $163,793,525, a General Fund Contribution of $27,229,454, a District Sales Tax Contribution of $2,000,000, the one-time use of General Fund reserves assigned to HSD of $4,290,528, and a use of Other Fund Contributions of $228,240.

The budget reflects a challenging fiscal environment shaped by declining federal and state funding, rising operational costs, and increasing service demands driven by state and federal policy changes. Consistent with the department’s mission, County priorities, and state and federal mandates, the budget preserves critical protective services and prioritizes access to health and nutrition benefits that help residents meet basic needs and connect to broader support systems. While reductions were necessary, they were done thoughtfully to balance the mandates carried out by staff, the contributions of community partners, and the realities of reduced program funding and evolving workload pressures.

Compared to the prior year Adopted Budget, the budget decreases expenses by $306,260, decreases revenues by $4,536,289, and deletes 26.81 FTE vacant positions, which is offset by an increase of 1.31 FTE positions to correct Benefits Rep Trainee positions. The budget reflects reduced contract expenses and deletion of vacant positions, partially offset by salary and benefit increases associated with Board-approved cost-of-living adjustments for remaining staff. The proposed revenue decrease primarily reflects program and funding adjustments across the department. The budget also includes several program and technical adjustments across divisions, including changes in grant funding, service levels, and staffing aligned with current operational needs.

The net result of the Proposed Budget is an overall net decrease of $4,230,029.

H.R. 1 Safety Net Impacts:

A key cost driver is the increase in CalFresh administrative costs resulting from cost-sharing changes under the H.R. 1 federal budget reconciliation bill, signed by President Trump on July 4, 2025. The bill decreased the federal government’s share of administrative funding from 50 percent to 25 percent for the Supplemental Nutrition Assistance Program (SNAP), known in California as CalFresh. In Santa Cruz County, total CalFresh administrative costs are estimated at $30.3 million in Fiscal Year (FY) 2026-27, an increase of $6.3 million over FY 2025-26, primarily related to increased operational costs which are spread amongst various HSD programs. The State of California is anticipated to provide a maximum of $11.4 million, leaving the County responsible for an additional $4.9 million to administer the CalFresh program. The Proposed Budget accounts for this $4.9 million increase, assuming no additional State support.

Operational Budget Impacts:

The Proposed Budget reflects increased internal service and operating costs that are now more fully represented in departmental budgets, resulting in a net increase of $16.8 million. These costs include $9.3 million in salary and benefit increases driven by negotiated adjustments to maintain competitive compensation in a high cost-of-living region, as well as increases in liability and property insurance ($2.2 million) and Information Services charges to support the county’s new human resources system ($1.5 million). In addition, the budget incorporates $3.8 million in new ongoing costs associated with debt service and depreciation for the 500 Westridge facility in Watsonville. The inclusion of these costs provides a more complete representation of the department’s full cost of operations.

These combined cost pressures are partially offset through the deletion of vacant positions and reductions in contracts.

Social Services

The Proposed Budget for Social Services recommends a reduction of staffing to 522.50 FTE positions, a decrease of 21.50 FTE vacant positions from the prior year and includes negotiated salary and benefit increases. Appropriations total $127,320,609, funded by $116,518,177 in revenues, a General Fund Contribution of $9,802,432 that includes a portion of the one-time use of General Fund reserves, and a District Sales Tax Contribution of $1,000,000.

Within Social Services, the budget includes a minor increase in funding for CalFresh administration, though not sufficient to offset the increased costs from cost-sharing adjustments. Funding for Family and Children’s Services and Adult Protective Services increased to continue programs serving children and a growing aging population. These divisions continue work on the Family First Prevention Services Act, Master Plan for Aging, and California Advancing and Innovating Medi-Cal (CalAIM) implementation.

Social Services staffing is decreasing to 522.50 FTE positions through the net reduction of 21.50 FTE vacant positions across the Employment Benefit Services Division (EBSD), Family and Children’s Services (FCS) Division, Adult and Long-Term Care (ALTC) Division, and Administration (Admin) Division. These reductions, though necessary to achieve budget goals, will increase workload for remaining staff, reduce administrative and analytical capacity, and may result in longer processing times and reduced service responsiveness.

EBSD provides benefits and employment training programs and supportive services including cash aid programs, such as California Work Opportunity and Responsibility to Kids (CalWORKS), General Assistance, CalWORKS Employment Services, Medi-Cal Health benefits, and CalFresh Nutrition benefits to low-income individuals and families. Staffing changes include the correction to properly reflect 160.0 FTE Benefit Representatives through the addition of 2.0 FTE Benefit Representatives Trainees and deletion of 6.0 FTE vacant positions, consisting of 3.0 FTE Office Assistant (OA) III, 1.0 FTE Employment & Training Specialist II, 1.0 FTE Sr Social Worker (SW) I/II, and 1.0 FTE Sr Social Worker, reducing staffing to 252.0 FTE positions. EBSD workload will increase due to new redetermination and eligibility requirements as a result of H.R. 1, and restoring positions within EBSD would be a priority given any additional state support.

FCS supports children and youth who are at risk of or who have been abused and/or neglected. The division focuses on child safety, child and family well-being, and permanent homes for children. In FCS, the budget deletes 8.5 FTE vacant positions, consisting of 2.0 FTE OA III, 1.0 FTE Office Assistant III/II, 1.0 FTE Sr Case Data Clerk, 2.5 FTE Sr Social Worker FCS/APS/SW II, 1.0 FTE Social Worker Supervisor II FCS/APS, and 1.0 FTE Sr/Assoc/Asst Human Services Analyst, reducing staffing to 83.5 FTE positions. FCS continues to achieve strong outcomes for children and families, with fewer children entering care and high timeliness and permanency, though reduced staffing may impact the division’s ability to sustain these results over time.

ALTC assists older adults and people with disabilities to maximize self-sufficiency, safety, and independence and provides protective and case management services and resource information that offers a choice of community services and care options. Staffing is reduced by 2.0 FTE vacant OA IIIs to 68.0 FTE positions. ALTC continues to meet growing demand with strong timeliness, even as referrals and service utilization increase significantly; staffing reductions have been minimized to reflect the needs of the growing older adult population, though capacity will continue to be monitored.

Admin provides support for the department's programs and employees in the areas of fiscal, information technology, facility services, personnel, staff development, centralized contracting, business analytics, evaluation of the quality of programs, organizational development, welfare fraud investigation, civil rights, and community services. In Admin, the budget deletes 7.0 FTE vacant positions, consisting of 1.0 FTE Sr Accounting Tech, 1.0 FTE Quality Improvement Manager, 1.0 FTE Sr Departmental Admin Analyst, 2.0 FTE Staff Development Trainer, 1.0 FTE Admin Aide, and 1.0 FTE Sr/Assoc/Asst Human Services Analyst, reducing staffing to 119.0 FTE positions.

Housing for Health

The Proposed Budget for Housing for Health recommends a reduction of staffing to16.0 FTE positions, a decrease of 4.0 FTE vacant positions from the prior year and includes negotiated salary and benefit increases. Appropriations total $16,461,113, funded by revenues of $11,618,925, a General Fund Contribution of $3,613,948 that includes a portion of the one-time use of General Fund reserves, a District Sales Tax Contribution of $1,000,000, and a use of Other Fund Contributions of $228,240.

Within Housing for Health, the Proposed Budget reflects a net reduction in expenses and revenues driven primarily by the completion of one-time projects, reduced contract spending, and declines in several state and federal funding sources.

Expenses decrease by $4.9 million, largely due to reductions in Bringing Families Home, Home Safe, and Housing and Disability Advocacy Program Targeted Strategic Investments, as well as the completion of one-time projects.

Revenues decrease by $3.7 million across multiple programs, including Bringing Families Home, Home Safe, Housing and Disability Advocacy Program Targeted Strategic Investments, Encampment Resolution Funding, Transitional Housing, CalWORKS Housing and Move-In Program, Housing and Urban Development, and Permanent Local Housing Allocation. These reductions are partially offset by $3.4 million in increased funding for Medi-Cal Administrative Activities (MAA), Housing Opportunities for Persons with AIDS (HOPWA), and CalWORKS Housing and Move-In Program (CHAMP).

Housing for Health also manages $1.25 million in Collective of Results and Evidence-based funding to support three navigation centers, the Santa Cruz Armory shelter, and homelessness prevention services in the southern area of the County.

Housing for Health Special Projects reflect a $2.7 million decrease in expenses and a $2.9 million decrease in revenue due to the completion of the building phase of two housing projects.

Staffing decreases to 16.0 FTE positions through the deletion of 4.0 FTE vacant positions, including 2.0 FTE Social Worker I/II, 1.0 FTE Departmental Admin Analyst, and 1.0 FTE Housing for Health Manager.

Entitlements

The Proposed Budget for Entitlements recommends total appropriations of $47,920,539, funded by revenues of $30,573,108 and a General Fund Contribution of $17,347,431 that includes a portion of the one-time use of General Fund reserves. Entitlements provides direct cash assistance payments to eligible residents, and payments to In-Home Supportive Services (IHSS) providers. The budget includes negotiated increases of $826,185 for IHSS provider health insurance and $211,366 for General Assistance payments. This division does not have staff.

WIOA, Veteran’s Services, Public Guardian

The Proposed Budgets for Veteran’s Services (4.0 FTE positions), Workforce Innovation Opportunities (5.0 FTE positions), and Public Guardian (7.0 FTE positions) recommends status quo staffing level and includes negotiated salary and benefit increases. Appropriations for these divisions total $5,839,486, funded by revenues of $5,083,315 and a General Fund Contribution of $756,171.

Medi-Cal and CalFresh Workload Increases: Over the next 18 months, HSD will experience significant workload increases driven by multiple federal and state policy changes impacting Medi-Cal and CalFresh (SNAP) programs. These changes increase administrative complexity for both clients and staff, requiring additional verification, eligibility processing, and ongoing case management. Collectively, these policy shifts are equivalent to an additional 17 FTE positions in workload, without corresponding funding, creating sustained operational pressure.

New Child Welfare Case Management System: The transition from the legacy CWS/CMS system to the new statewide CARES platform represents another major operational shift. As the first system replacement in nearly 30 years, this change will require extensive staff training, system adaptation, and implementation support to ensure continuity of child welfare services.

Older Adults in Santa Cruz County: Santa Cruz County’s aging population continues to grow, increasing demand for services that support older adults. This demographic shift, combined with broader policy changes affecting health, nutrition, and housing supports, is driving additional workload across multiple programs without an adequate sustained funding source.

Housing System Supports Declining: State funding continues to decrease and relies heavily on time-limited allocations, limiting the County’s ability to sustain programs that support outreach, shelters, transitional housing, one-time flexible housing financial assistance, and services to help people secure and keep permanent homes. Additionally, counties like Santa Cruz that have successfully decreased homelessness are inadvertently penalized through lower funding levels. Without alternative funding sources, there may be significant program reductions or closures in 2027.

At the federal level, potential policy changes to HUD-funded programs and eligibility requirements threaten the foundation of recent progress in reducing homelessness. These changes could reduce access to permanent housing solutions and shift resources toward less effective, short-term interventions, increasing costs while producing poorer outcomes.

General Assistance Program Changes: The County is evaluating potential changes to the General Assistance (GA) program that would significantly simplify program access and administration and would better align the program with its goal of providing temporary assistance while supporting connections to employment, Supplemental Security Income (SSI), and other long-term resources. Changes would be intended to preserve access to core support, promote timely connections to employment and other services, and help ensure the program remains sustainable over time.

CalAIM Implementation: CalAIM is intended to drive system transformation by expanding Medi-Cal services, improving data sharing, and supporting more coordinated, person-centered care. These efforts create opportunities for innovation and improved service delivery, including enhanced care management and cross-system coordination. Through CalAIM grant funding, HSD, in partnership with other departments, is leaning into the potential to improve services through consent-driven data sharing and coordination. However, implementation also introduces ongoing workload and administrative complexity, with continued uncertainty around long-term funding. The current federal CalAIM waiver is expected to expire in the coming year, and without renewal, there is a risk of losing funding needed to continue system improvements, technology investments, and program integration efforts. Progress made under CalAIM may be difficult to maintain without stable, ongoing support.

Artificial Intelligence in Human Services: Artificial intelligence (AI) is increasingly being built into the statewide tools that counties use to connect residents with food, health care, cash aid, and other supports. CalSAWS, the California Statewide Automated Welfare System, supports all 58 counties and core programs including CalFresh, CalWORKs, Medi-Cal, General Assistance, and Foster Care. It includes functions such as eligibility determination, benefit calculation, case management, and information management. CalSAWS is approaching AI as a service-improvement tool that supports, rather than replaces, county staff. Current and emerging uses include generative AI call-summary assistance, county readiness activities that include staff training, and user acceptance testing. CalSAWS has implemented in at least one county (Fresno) the use of conversational AI through Amazon Lex voice and chatbot technology to help customers authenticate, navigate interactive voice response systems, understand intent, maintain context, and automate routine tasks, while using analytics and daily bot reports to improve self-service over time. For the County of Santa Cruz Human Services Department, this means AI will likely become part of the operational environment for benefits access, call-center workload management, reporting, and customer service.