Santa Clara County warns HR1 cuts will shrink Medi‑Cal care; urges voters to back temporary sales tax

Santa Clara County officials told the Palo Alto City Council on Sept. 29 that HR1, a federal law signed July 4, will sharply reduce funding for Medi‑Cal and SNAP and threaten the county's health system unless voters approve a temporary local sales tax measure.

Supervisor Margaret Abe-Koga and County Executive James Williams, joined by public health staff including Dr. Sarah Cody, outlined a three‑part county strategy: press the state to protect public hospitals, restructure county services and place a five‑eighths‑cent temporary sales tax (Measure A) on the ballot. Williams described HR1 as “the single largest withdrawal of federal support for social safety net programs in our nation's history.”

The county says the cuts will be substantial and layered: more than $1 billion a year could be removed from local health‑care revenues as HR1 takes effect, while nearly $200 billion was cut nationally from SNAP. Williams told the council that Medi‑Cal currently supplies more than half of Santa Clara Valley Health Care's revenue and that the system — which runs two of the county's three trauma centers, the only comprehensive burn center in the region and a nationally ranked rehabilitation center — would face severe operational strain if funding falls.

Why it matters: The county estimated that one in four Santa Clara County residents relies on Medi‑Cal and about 133,000 residents rely on CalFresh food assistance. In Palo Alto, county officials said roughly 10% of residents are on Medi‑Cal and the county has recently opened a North County clinic that can perform about 14,000 visits per year. County leaders said reductions would reverberate across all hospitals and clinics in the region because the health‑care system is tightly integrated.

Details and county plan - Measure A: The Board of Supervisors voted unanimously in August to place a temporary five‑eighths‑cent general sales tax on the ballot; county staff estimate it would raise roughly $330 million a year, a partial but significant offset to the projected losses. - Restructuring: County executives said they will pursue internal cost reductions, operational changes in service lines and revenue‑cycle improvements within Santa Clara Valley Health Care. - State advocacy: County officials said they are also pressing the state to preserve public hospital systems and help backfill some losses, noting that public hospitals make up about 6% of state hospitals but provide more than half of trauma and burn care and train a large share of physicians.

County leaders warned of specific mechanisms in HR1 that will hit the county disproportionately. Williams cited cuts and caps to payments that support hospitals serving a high share of Medi‑Cal patients (so‑called disproportionate share or safety‑net payments) and said the law also froze elements of recently passed state funding (Proposition 35) that had not yet received federal approval.

Public health and behavioral health impacts Dr. Sarah Cody, representing county public health, said consequences would extend beyond inpatient care. “If the measure doesn't pass and the county can't generate the 300 plus million dollars to fill the billion dollar hole, the county will have no choice but to close hospitals,” Cody said during public comment. County staff also noted that about a quarter of the county's behavioral health budget depends on Medi‑Cal revenue and that other behavioral‑health funding streams have also been weakened.

Implementation and timeline County executives told the council the cuts begin to take effect in the current fiscal year and accelerate in subsequent years as additional changes phase in. They said one of the most damaging elements of HR1 are new work‑requirement rules that, without robust automated verification systems, could remove coverage from millions of eligible beneficiaries; Williams noted that Congress authorized only $200 million nationally for states to build the necessary data systems. The county said the law gives states short deadlines for implementation (a Senate provision moved a compliance date to December 2026), which complicates efforts to avoid inadvertent coverage losses.

Council reaction and public comments Several council members thanked county leaders for prompt action. Council member Julie Lythcott‑Haines called the county's effort “leadership in the face of some odds that feel quite overwhelming.” Council member Cory Stone asked specific questions about impacts on county‑funded local programs, such as Allcove and Homekey projects; county staff said behavioral health and many homelessness supports will face severe pressure.

Multiple public speakers urged the council to endorse Measure A and to encourage voter support. Dr. Dean Winslow, a Palo Alto clinician and former county hospital chair of medicine, and others said cuts would raise emergency department boarding and could force closures that affect all patients.

What remains open County officials emphasized that Measure A would not close the funding gap but would be a vital part of a broader, multi‑pronged response. They asked cities, community organizations and residents to engage with the county's messaging and to be prepared for additional budget adjustments as staff work to balance services against declining revenue.

Looking ahead The Palo Alto City Council was scheduled to receive a separate item next week giving the council the opportunity to consider taking a position on November ballot measures; multiple speakers at the Sept. 29 meeting urged the city to endorse Measure A.

Ending County officials left the council with a direct appeal: preserve the county's public health infrastructure now to avoid service losses that would affect patients across the region. County staff said they will return to the Board of Supervisors in October with a broader fiscal plan and to begin detailed midyear actions.