Santa Clara County officials warn HR 1 will cut more than $1 billion from safety-net programs, threaten hospitals and food aid

Santa Clara County leaders told the Finance and Government Operations Committee on Oct. 16 that the federal law known in the meeting as HR 1 will sharply reduce federal funding for Medicaid and SNAP and produce immediate and growing shortfalls to county services.

Chairperson Betty Young of the Finance and Government Operations Committee said the law, signed July 4, 2025, and related federal actions will produce “more than a billion dollars in ongoing annual cuts to our county’s budget once fully in effect,” and that the county must begin identifying where its operations are being hit and what mitigation options exist.

County Executive James Williams said the county is already seeing impacts this fiscal year. “The cuts and impacts from HR 1 hit us immediately this current fiscal year,” Williams told the committee, summarizing slides that showed about $200 million of impact this year, more than $500 million in the next fiscal year and more than $1 billion thereafter. He said the county has a three-pronged mitigation approach: partnering with the state, identifying internal budget reductions and efficiencies, and relying in part on Measure A, a five-eighths cent sales tax placed on a special election ballot by the Board of Supervisors.

Bert Margolin, an outside federal consultant introduced by county staff, described HR 1 as “the largest cut to Medicaid in the history of the program,” saying the package will reduce special financing arrangements that counties and public hospitals use to make up the gap between Medicaid base payments and the cost of care. Margolin said the law also expands work requirements and other enrollment barriers that will reduce program enrollment and federal reimbursements.

Kelly Brooks Lindsey, representing the county at the state level, briefed supervisors on California’s exposure: state agencies estimate up to 3 million Medi-Cal members could lose coverage from new work requirements, another 400,000 could be disenrolled from redetermination processes, and more than $30 billion in federal funding to the state is at risk each year. She also said the state’s managed-care-organization (MCO) tax — which in the current-year budget provides billions of dollars — could be disallowed under changed federal rules.

Health system leaders described how those cuts would translate into service disruptions locally. Paul Lorenz, chief executive officer of Santa Clara Valley Health & Hospital System, said the system operates four hospitals, 15 major health centers and performs roughly half of all county 911 transports. He said the system’s $4.6 billion operating budget depends on roughly $2 billion in Medi‑Cal-related funding and that the health system expects to lose about $1 billion of that funding over the course of HR 1’s implementation. “We are looking at a $200 million revenue shortfall for the current year and upwards of $500 million next fiscal year,” Lorenz said.

Speakers from emergency medical services and behavioral and public health described operational ripple effects. Nick Clay, director of the Emergency Medical Services Agency, said reduced access to primary care will push more patients into 911 and emergency departments, lengthening transport and transfer times and increasing demand for ambulances and emergency beds. Dr. Monica Roy, acting deputy public health officer, gave medicine‑and‑public‑health examples — from families unable to afford inhalers to long‑term rises in disability from delayed care — and warned that cuts to federal public‑health expertise and grants (including layoffs at federal agencies referenced in the meeting) reduce county and state partners’ ability to respond.

Social‑service and food‑system staff described programmatic details and planned mitigation. Employment and Benefit Services staff reported that the county serves about 133,000 people through CalFresh and more than 400,000 through Medi‑Cal. Under HR 1, work and reporting changes could affect roughly 55,000 CalFresh adults and about 120,000 Medi‑Cal adults aged 19‑64; some waivers the state previously used are unlikely to be granted. County staff described a multi‑pronged outreach and enrollment strategy that includes a dedicated client engagement unit, expanded training sites, multilingual mailings and data monitoring. Office of Sustainability staff warned that reductions in CalFresh would reduce local economic activity — studies cited in the presentation show SNAP funds can generate up to $2 of local economic activity for each $1 spent — and put pressure on farmers, markets and food banks.

County leaders stressed constraints and next steps rather than new policy decisions at the meeting. Williams said the county has asked the health system to identify $200 million of ongoing savings mid‑year, and that the board’s unanimous placement of Measure A on the special‑election ballot provides some additional revenue (estimated by staff at about $330 million over the measure’s early years). Williams and supervisors said the county is increasing advocacy with Sacramento and Washington, coordinating with other public hospital systems, and preparing internal budget options that emphasize protecting the most vulnerable.

No new ordinances or formal policy changes were adopted at the hearing; the committee heard presentations and public comment and directed staff to continue mitigation planning and communication. Two members of the public urged continued nonprofit‑county partnerships and support for Measure A; a Campbell councilmember said local governments must prepare for “an impending humanitarian crisis.”

The committee scheduled continued discussion of county budget adjustments and asked county executive staff to present a more robust budget process and updated fiscal projections to the committee before the end of the calendar year.

Ending: Officials described the meeting as an opening to a series of deeper budget discussions. Williams urged residents and partners to “come together as a community to do everything that we can to fight back,” and supervisors said they expect continued hearings and staff reports as the county develops mitigation plans.