County executive warns of major federal funding risk, proposes reserves and position deletions in recommended budget

Santa Clara County Chief Executive James Williams on Monday presented a recommended FY2025-26 budget that he called "structurally balanced" while warning of "multiple layers of uncertainty" from federal and state actions that could sharply reduce county revenue.

Williams told the Board of Supervisors the county faces three principal federal-revenue risks: Medicaid ("the swimming pool"), social-services funding ("the bathtub") and other federal grants ("the bucket"). He said the county has assumed no current changes to Medicaid revenue in the recommended budget but stressed the board should be prepared to revisit the plan if Congress or the state moves to impose work requirements, more frequent Medi-Cal redeterminations, or other cuts. He cited a House Republican proposal unveiled the same morning that would cut about $715 billion from Medicaid over a decade as an example of the scale of possible impact.

To manage near-term risk, the administration proposes removing about $70 million in at-risk recurring federal grant revenue from the base and backfilling roughly $59.6 million with ongoing general fund and recognizing $15.8 million as one-time revenue through the federal fiscal year end. The recommended budget also creates a federal- and state-revenue-loss reserve and maintains a 5% contingency reserve. Williams said the gross appropriation budget totals about $3.6 billion.

The recommended budget includes 179 position deletions (about 23,000 FTE are in the full budget); administration says more than 80% of the deletions affect vacant posts and that for many filled roles the affected employee can be placed in an equivalent classification elsewhere. Where same-class vacancies are not available, employees will be offered placement in other vacancies, with two-year reinstatement rights noted for some classifications.

Williams said the budget keeps core safety-net services front and center and increases general-fund support for some public-health and homelessness-related activities. He also flagged the county's exposure to state-level budget choices and urged the board to be prepared to advocate in Sacramento. County Budget Director Ezekiel Vega and department staff walked supervisors through the five-year forecast, projecting a potential structural deficit of about $280 million in FY2026-27 and larger gaps thereafter if nothing changes.

Several supervisors praised the transparency of releasing the recommended budget early and asked for continued engagement with departments and community partners as the board considers amendments. Williams and Vega said the county will continue to monitor federal activity closely and return with more refined estimates as federal and state proposals become clearer.