Santa Clara officials warn HR1 cuts would threaten county hospitals; $5.08¢ sales tax proposed

Santa Clara County Supervisor Otto Lee and Santa Clara Valley Health Care officials told the Milpitas City Council on Sept. 16 that federal changes grouped under “HR 1” would sharply reduce Medicaid (Medi‑Cal) and nutrition program funding, potentially forcing deep cuts to county health services.

“HR 1 really has punched a huge hole in our county's social safety net and poses a great fiscal threat,” Supervisor Otto Lee said during a presentation to the council. County leaders described a multi‑pronged response that includes placing a temporary 5.08¢ general sales tax on the November ballot, referred to in materials and public comments as Measure A.

County and hospital officials said the federal law would reduce reimbursements to providers and impose new eligibility and reporting rules that could push hundreds of thousands of Californians — including many county residents — off coverage. Paul Llorens, chief executive officer for Santa Clara Valley Health Care, told the council the county’s Medicaid funding is roughly $2.3 billion and that the county could lose about $1 billion of revenue to the health system if HR 1’s provisions take effect as drafted. “We expect to lose half, $1,000,000,000 of the $2,000,000,000 of the revenues that your health care system receives,” Llorens said.

Why this matters: County officials said the cuts would strain emergency departments, trauma care and specialty services that are concentrated in the county safety net. Llorens noted Valley Medical Center operates a Level I adult trauma center and the county runs multiple trauma and burn services; county hospitals receive the majority of trauma transports in the area. Supervisor Lee said the Board of Supervisors acted unanimously last month to place the 5.08¢ sales tax measure on the ballot as one part of a broader response to an estimated county budget shortfall.

Details and local impact: County staff gave numerical estimates of projected deficits during the presentation. Slides and spoken remarks cited an immediate deficit to the public health system of about $200 million this fiscal year and a $513 million deficit the following year; projections the presenters attributed to HR 1 and related state responses grow in later years (presentations referenced a multi‑year exposure into the hundreds of millions and, in some slides, more than $1 billion). The county estimates the proposed sales tax would raise roughly $330 million per year if approved by voters. Local figures mentioned during the presentation included about 16,000 Milpitas residents reliant on Medi‑Cal and about 4,800 Milpitas residents on CalFresh.

Services at risk and regional context: Presenters described services already restored by recent county action: the county’s acquisition of Regional Medical Center earlier in 2024 allowed the county to reopen a Level II trauma center, STEMI (heart) services and stroke care on day one, officials said. Presenters warned that cuts could imperil similar services across the county, not just at public hospitals.

Public response and council questions: Dozens of Milpitas residents and service providers spoke after the presentation. Community speakers ranged from health‑care workers and advocates to young students. Several urged local support for the county measure. Council members asked detailed questions about how any new revenue would be allocated; Supervisor Lee and Llorens responded that the proposed sales tax would deposit into the county general fund rather than being statutorily dedicated to hospitals, and that the county intends to use the revenue to offset cuts across hospitals, public safety and other county services. "If it's for a specific purpose, the law says you need two‑thirds [approval]," Supervisor Lee said, explaining the choice to place a general‑fund measure on the ballot.

What’s next: County officials said they are pursuing three main strategies: internal cost reductions and efficiency measures; requests for state support to backfill losses to public hospitals; and local revenue (the ballot measure). Council members asked about timelines, five‑year projections and other contingency plans; county officials said they and the Board of Supervisors will continue public outreach and legislative advocacy.

Ending: Council members thanked the presenters. No formal Milpitas City Council vote was recorded on the county measure at the Sept. 16 meeting; the county Board of Supervisors had already placed the sales tax measure on the November ballot, according to presenters and public comments.