Santa Cruz County budget includes 3% COLA, absorbs portion of embezzlement costs; officials propose voter measure to raise expenditure limit tied to mine

The Santa Cruz County Board of Supervisors' adopted FY2025‑26 budget includes a 3% cost‑of‑living adjustment for employees, absorption of a county share of embezzlement losses, and continued funding for mandated services, finance staff said during an Aug. 6 presentation.

Jesus Chavez presented the budget details and identified line items and schedules required by state law, saying the county's general fund for FY2025‑26 is approximately $43,752,000 and special‑revenue funds total about $87,000,000. Chavez told the Board the county is estimating roughly $74,600,000 in total operating revenues for the coming year across funds and that overall receipts are lower than the prior year mainly because some ARPA funding has expired.

On personnel costs, Chavez said the budget recommends a 3% cost‑of‑living adjustment that the Board approved during the tentative budget and asked that the COLA be included on the Aug. 22 pay date. He also said health‑care costs rose about 4.5% and the county plans to absorb that increase.

Chavez addressed the county's absorption of recent embezzlement losses, describing the budget process as unusually challenging this cycle. "This is my tenth budget with the County, and this is the most ... challenging, mostly because of the absorption of the embezzlement," he said. He later clarified the county's portion of the loss is about $8,900,000 that the county will absorb as part of the recovery process.

Chavez and staff explained mandated transfers out of the general fund, including what he described as "means of effort" payments to the jail district and juvenile detention. He presented the jail‑related transfers and said those obligations change each year using statutory formulas; at one point Chavez stated a total means‑of‑effort figure of "$68,700,000" as presented during the briefing.

County Manager Mauricio Valdez and Deputy County Manager Chris Young said the county will monitor revenues and expenditures closely and highlighted a separate, potential action: raising the county's expenditure limit to allow the county to spend additional revenues expected from a centrally assessed mining operation (identified in the meeting as South32's potential activity in the county). Valdez said preliminary numbers are being developed and that officials plan a public process and a targeted 2026 election to ask voters to raise the local expenditure limit so the county can spend the new centrally assessed revenues for infrastructure and community projects. "We're gonna work and form a committee... we're gonna put it out for the voters targeting 2026," Valdez said.

Why it matters: The COLA, health‑care absorption, and embezzlement costs affect the county's fiscal flexibility and staffing costs. A successful expenditure‑limit increase, if voters approve, would permit the county to spend new centrally assessed tax revenue from the mine on roads, bridges, community buildings and other infrastructure without raising local property tax rates, county staff said.

Board members asked for clarity on what is mandated versus discretionary spending; Chavez responded that roughly the large share of the general fund supports mandated services (courts, sheriff, public defenders, health and welfare) and that parks make up a small portion of the general fund. Staff also emphasized the role of grants and special‑revenue funds in supporting discretionary projects.

(Ending) Staff said they will continue quarterly monitoring of revenues, move forward with public outreach if they pursue an expenditure‑limit ballot measure in 2026, and return to the Board with updates as projections solidify.