Santa Clara County Faces $470 Million Deficit, Averting Layoffs Through Strategic Restructuring
Santa Clara County is grappling with a significant $470 million budget shortfall for the upcoming fiscal year, triggering the largest midyear budget adjustment in over a decade. County leaders are currently focused on closing a $200 million gap, while a remaining $270 million deficit looms in the upcoming budget process.
The Board of Supervisors voted unanimously on Tuesday to mitigate the financial crisis by reshuffling 60 employees – primarily from the public hospital system – into other county roles, successfully avoiding layoffs. In total, 365 full-time positions have been eliminated, with 305 of those being currently vacant across various departments. County officials have also identified $60 million in additional revenue projections to help alleviate the budget strain for fiscal year 2026-27.
Despite these efforts, a substantial financial challenge remains. “These are very tough cuts,” stated a senior county official to employees during the meeting. “We’ve worked to find placements for those affected and fill open positions so that no one in this county is being laid off.”
This fiscal predicament arrives even after voters approved Measure A, a five-eighths cent sales tax increase intended to generate $330 million in annual revenue until 2031. The measure was initially proposed to counteract the effects of federal spending cuts enacted under H.R. 1, often referred to as President Donald Trump’s “One Big Beautiful Bill.”
According to County Executive James Williams, Measure A was a key component of a broader, three-part strategy to address the anticipated financial gap. However, even with the added revenue stream, county leaders anticipate a worsening structural deficit in the coming years. The 2027-28 fiscal year is projected to bring another $500 million in funding losses. Rising salary and benefit costs, driven by future pension obligations, retiree health contributions, and increasing health insurance expenses, are also contributing to the financial pressure.
District 4 Supervisor Susan Ellenberg emphasized that the situation would be considerably worse if the county hadn’t proactively reduced certain expenses in recent years. “We saw the economy turning and the slowdown in property tax revenue growth,” Ellenberg explained during the meeting. “Without the choices we made over the last couple of years, the situation would be exponentially worse.” She stressed the importance of transparent communication with all stakeholders – patients, clients, service recipients, community partners, employees, and the public – regarding any potential changes.
However, not all supervisors were in complete agreement with the proposed solutions. District 5 Supervisor Margaret Abe-Koga raised concerns about a $1 million increase in funding for the county’s lobbying team, the Office of Intergovernmental Relations, amidst widespread departmental cuts. “In light of the cuts we’re looking at, it’s hard for me to support adding money into something like the lobbying office,” Abe-Koga said. She suggested that direct engagement with state legislators by elected officials could be a more effective advocacy strategy.
Williams responded by stating he has initiated discussions with each supervisor’s office to coordinate strategy briefings. He defended the funding increase as a strategic investment to highlight the critical role of Northern California’s largest public hospital system and advocate for increased state funding. “It is a one-time investment and an effort we believe has the potential to pay significant dividends,” Williams asserted. He further emphasized the vital importance of lobbying the state to ensure continued support for the 6% of California hospitals that are publicly owned – facilities that provide over 50% of the state’s burn and trauma care.
The county’s financial future hinges on securing additional state support and navigating a complex economic landscape. .
