Orange County officials present tentative FY2026 budget, warn of growing long‑term funding gap

County budget staff presented a tentative Fiscal Year 2026 operating plan on July 16 that proposes a total countywide budget of roughly $8.2 billion for the coming fiscal year, while warning commissioners that multi‑year financial models show a potentially large funding gap over the next five years if current trends continue.

Kurt Peterson, the county’s budget presenter, told the Board the county remains in good financial condition and retains strong credit ratings, citing steady reserves, long‑range revenue and expenditure modeling, and ongoing revenue monitoring. But he emphasized the difference between next‑year affordability and longer‑term pressure: the tentative FY2026 plan balances the coming year’s spending but shows a structural “funding gap” that grows in later years as fixed costs, capital projects, and slower revenue growth converge.

Peterson said the FY2026 proposed total — presented as $8.2 billion — includes large interfund transfers and one‑time pass‑through items that inflate the headline number, including a sizable provider participation fund for hospitals. The general fund remains the primary vehicle for property‑tax supported services; Peterson said the general fund budget is increasing by about 7.6 percent year‑over‑year and identified public safety (largely the sheriff and fire services) as the single largest driver of property tax‑supported spending.

Why it matters: county staff said they use five‑year revenue and expense models and regular monitoring to detect future shortfalls. Under current assumptions Peterson showed, the models project sustained pressures that would require either revenue action (new or higher fees/taxes) or substantial cuts in services over the next several years. “If nothing else changes, that gap is going to grow,” he said. He also noted the board cannot increase final millage rates in September; tentative rates approved now can only be lowered at the final September vote.

What is driving the pressure: Peterson pointed to several recurring themes. New capital projects — notably planned expansions at the convention center, a new animal services facility, and other large buildings — create multi‑year cash requirements. Labor and benefit costs (including recent public safety pay increases and state retirement rate changes), higher cybersecurity and software licensing costs, and rising construction prices also push budgets upward. At the same time, some revenue sources that counties rely on — notably the state half‑cent sales tax share — are projected to be flat or slightly down in FY2026, reducing cushion for pay and capital needs.

Staff and commissioners discussed possible responses. Commissioners and the county administrator emphasized efficiency reviews, continued use of technology to reduce costs, and working with state and federal partners for policy solutions. Several commissioners suggested exploring new revenue tools — including targeted user fees or proposals to the state legislature — while others stressed protecting core public safety and infrastructure spending. Peterson said staff had already identified some near‑term operating efficiencies in department budgets and that many of the county’s largest programs would still come forward for more detailed hearings over the coming days.

What’s next: The budget presentation continues across multiple department hearings through the week and into the fall public hearings required by state law. The county will publish the proposed millage and tentative budget before August 1 so property appraisers can mail TRIM notices; final adoption is scheduled for September public hearings. Staff told commissioners they will return with more granular options for bridging the gap — including cost containment measures and possible revenue options — before the board sets final budget choices in September.