Santa Clara County Faces Financial Challenges from Federal Budget Cuts
Santa Clara County is experiencing significant financial impacts due to recent changes in federal funding, amounting to a loss of $223 million this fiscal year alone, primarily from Medicaid. This is just the beginning of what could be a tough financial period for a county that operates four public hospitals and 15 clinics.
The repercussions are linked to a decision by Congressional Republicans to cut $1 trillion from the federal Medicaid program over the next ten years. In Santa Clara County, around one in four residents depends on Medi-Cal, California’s version of Medicaid, which supports low-income and disabled individuals.
Although new eligibility requirements won’t take effect until December 2026—potentially putting millions at risk of losing health coverage—County Executive James Williams has indicated that the county is already feeling the pressure. The cuts and freezes in Medicaid-related funding have begun to hit the county’s budget immediately.
Part of the lost funding previously helped cover the gap between what hospitals spend on services and what Medicaid reimburses. Williams explained that these supplemental payments are crucial for hospitals like the Santa Clara Valley Healthcare System, which serves a large number of Medi-Cal patients.
In light of these funding shortfalls, officials are searching for ways to cut $200 million from the healthcare budget for the current fiscal year ending in June 2026. This marks one of the most significant mid-year budget adjustments in over a decade. Williams emphasized the urgency of the situation, stating that the county must take action now instead of waiting for more substantial financial losses in the future.
The county anticipates that the financial strain will intensify, with a projected loss of $506 million in Medicaid funding for the fiscal year 2026-2027. Decisions about where to implement the necessary spending cuts are yet to be made, but county leaders have hinted at looking for redundancies across the healthcare system.
Recently, the Regional Medical Center in East San Jose resumed labor and delivery services, following a five-year hiatus, but this came at the expense of closing the maternity ward at O’Connor Hospital. Paul Lorenz, CEO of Santa Clara Valley Healthcare, mentioned that this shift was strategic, aiming to improve service delivery for the community.
However, residents can expect longer wait times and other challenges, which may become evident in the coming months.
There may be a glimmer of hope if voters support Measure A on November 4. This proposed sales tax increase could generate $83 million for the current fiscal year to help offset Medicaid funding losses, leaving a shortfall of $139 million. For an entire fiscal year, it could yield around $330 million.
Board of Supervisors President Otto Lee expressed concern that vital services, including the newly reopened maternity ward, could be at risk due to these cuts. He highlighted ongoing efforts to protect essential services, such as behavioral health and homeless support programs, but warned that these financial struggles would impede progress.
Supervisor Margaret Abe-Koga pointed out that previous budget cuts have already targeted less critical areas, and now is the time to thoroughly assess the budget and identify new revenue sources. She underscored her commitment to efficiency, ensuring that every dollar is utilized wisely.
Supervisor Susan Ellenberg noted that simply operating more efficiently may not be enough to close the budget gap. Difficult decisions might be required, potentially leading to cuts in effective programs that are not legally mandated.
She emphasized that Santa Clara County has been a leader in innovative and progressive programs that benefit the community, and reverting to only mandatory services would represent a significant setback in the county’s history.
