Budget Updates

By Daniel Nielson, Director

Update #5 & 6 6/18/2025 & 7/3/2025

Update 6 additions in blue.

County of Santa Barbara update

Yesterday the Board of Supervisors approved the County’s budget, inclusive of $3.4 million in one-time funding for our Department.  As was noted during the hearings, our budget for the coming fiscal year is already facing a deficit as the May Revise predicts that we will have $1.5 million less in Realignment Revenue (sales tax and vehicle license fees) in the coming year than was forecasted by the Governor in January and on which our budget was crafted.  

We will be returning to the Board of Supervisors in September or October to update the Board on our budget for the 25/26 fiscal year (inclusive of impacts from the May Revise and as yet to be determined Federal impacts), to address our structural imbalances due to less than sufficient growth in our funding streams compared to increasing costs over multiple years, and to provide the Board with an early forecast of how we see ourselves headed into the FY 26/27 budget.

State Update

The Legislature passed a budget and is now in negotiations with Governor to come to an agreement on what he will sign.  The Legislature lessened some of the proposed impacts on clients contained in the May Revise related to Medi-Cal and IHSS, but I will wait to detail those matters when we see the final agreement.  There will still be impacts of some sort. 

The state agreed on a budget that reinstated assets tests for Medi-Cal (and therefore IHSS) but at a much higher level that what the Governor had proposed ($130,000).  The “co-pay” for undocumented people on MediCal will be $30 per month instead of $100 per month when that goes into effect.  The undocumented population that is still covered on Medi-Cal lose dental benefits in July of 2026.

There is nothing in the State Budget that addresses the workload impacts of decisions made today in the Federal Budget (like semi-annual renewals for Medi-Cal, tracking work requirements, etc.).  We assume that will be dealt with in the coming months and in the Governor’s January budget proposal.       

Federal Update

On the Federal front the Senate is working on their version of a bill which will then have to be negotiated with the House.  While they are making some changes from what the House passed, some things are being left the same including the shifting of CalFresh Administrative and Benefits cost to the states and counties, work requirements in order to receive benefits and decreased level of federal funding going to the states to pay medical providers.  The Senate seems to be planning to allow a bit of time before some changes are implemented while the House is focused on more immediate implementation.  In either event, the fiscal impact on the State of California and the County of Santa Barbara would be of very significant proportions (in the billions of dollars at the state level and the millions of dollars at the county level).    

The Federal Budget was passed today and will be signed into law this week.  The social safety net is significantly impacted with some of the highlights listed below:

• Work requirements for CalFresh recipients for people with dependents 14 and over – potentially starting this year.

• Significant costs of CalFresh program administration and program benefits being pushed to the states (and the counties in California).  At least a $2 million impact on our County in increased cost of CalFresh Administration if current sharing ratios hold.  No idea yet of how much of the cost of CalFresh Benefits the state will shift to the counties – or if they will simply reduce benefits. 

• Work requirements for Medi-Cal recipients – starting in December 2026.  Estimated that MediCal roles in California will reduce by 12% over 10 years.  Fewer people covered by Medi-Cal means more uninsured people seeking care at clinics and hospitals with no means of reimbursement for those expenses.  This will make it harder to access care. 

• Reduces Federal money available to the states which is used to pay providers and hospitals – starting in 2028.  Estimated 20.1% decrease in federal funds starting in 2028. 

• People receiving health coverage through Covered California will have reduced (or eliminated) subsidy levels and will no longer be able to have automatic renewals.  

We will continue navigate our challenges as a team, united in our common values and maximizing the resources we do have to the benefit of the people we serve.

Update #4 5/19/2025

Last week the Governor released his May Revise (the changes to the budget he proposed in January) and over the weekend the House of Representatives made progress in moving forward a budget bill.  Activities at both levels still have a long way to go.  

• At the state level the Governor and Legislature now must negotiate over the next 4-5 weeks on what they want to budget to look like for the coming year.  

• At the federal level the House has to pass a bill at some point that will then go to the Senate and after the Senate changes it to what they want, negotiations between the House and Senate will occur.  They have to agree on something that will get through the Reconciliation process in the Senate if they hope to pass it without support from the Democrats.  Then the President will decide if he will sign it.  This process will go into July, at least.

County of Santa Barbara changes since last update:

None.  We still anticipate that the Board of Supervisors will support the CEO recommendation of $3.4 million in one- time funding for our budget when they pass the budget in June.  We still plan to return to the Board of Supervisors in the fall (September or October) with an updated perspective on our budget and services for FY 25/26 after state and federal budget decisions have been made.

State of California changes/updates since January:

Medi-Cal 

• No new enrollments for Medi-Cal for undocumented adults 19 and older, effective January 1, 2026. DSS currently has approximately 29,000 undocumented adult clients who, if they fail to renew or fail to meet criteria for renewal, would be removed from the program at that time they failed to renew or meet criteria.

• Elimination of Long-Term Care (effective January 1, 2026) and dental benefits (effective July 1, 2026) for undocumented adults 19 and older.

• Reinstatement of Medi-Cal asset test limits for seniors and disabled adults, and for IHSS program (effective January 1, 2026), which will reduce the number of people eligible for Medi-Cal and the IHSS program.

In-Home Supportive Services (IHSS)

• Elimination of IHSS as a benefit for undocumented adults 19 and older (effective January 1, 2026).  DSS currently has 57 clients who would be impacted by the elimination of this benefit.

• Reinstatement of Medi-Cal asset test limits for seniors and disabled adults, and for IHSS program (effective January 1, 2026), which will reduce the number of people eligible for Medi-Cal and the IHSS program.

CalWORKs and Welfare-to-Work 

• No negative impacts.

CalFresh 

• No negative impacts.

Child Welfare

• Emergency Child Care Bridge (childcare vouchers for children in foster care) reduction. Local impact will depend on reduction methodology.

• Family Urgency Response System (crisis response) reduction. Local impact will depend on reduction methodology.

Realignment Growth

• Realignment revenues are projected to be lower than originally projected in January. 

• Growth in both 1991 and 2011 Realignment is significantly lower in FY 2024-25 relative to January budget.

• Growth in both 1991 and 2011 Realignment is below the January budget in FY 2025-26.

• The negative impact on the DSS FY 2025-26 budget is estimated at $1.55 million compared to what we had planned based on the budget proposed by the Governor in January.

Federal Level Update/Changes since Budget update #3

House reconciliation proposals introduce major structural changes to Medicaid and SNAP, aiming to cut over $930 billion in federal spending ($700 billion would come from Medicaid, $230 billion from SNAP reforms). Significant workload impacts on staff in the local Medi-Cal and CalFresh programs would result if these changes occurred.

Medicaid (Medi-Cal)

Coverage & Eligibility

• 6-Month Redeterminations (currently on 12-month cycle): Requires states to conduct eligibility redeterminations at least every 6-months (effective October 1, 2027—significant pressure in the House to make the effective date now rather than 2027).

• Expiration of Tax Credits for Insurance Purchase through the Marketplace (Covered California): The subsidies are scheduled to expire at the end of the year, and the Congressional Budget Office estimates that more than four million people will lose coverage as a result.

Work Requirements

• Mandatory Work Requirements (ages 19–64): Adult Medi-Cal recipients will be required to work 80 hours/month (work, a work program, an education program or community service) with limited exceptions (effective January 1, 2029—significant pressure in the House to make the effective date now rather than 2029).

SNAP: California-Specific Impacts

Cost-Sharing Requirements 

• SNAP (CalFresh) Benefit Cost-Sharing: California’s current payment error rate of 13.4% places it in the highest penalty tier, requiring a 25% state share of SNAP benefits beginning FY 2028. Currently there is no state share on SNAP benefits. It is unknown what part of this increase the state would push to the counties.

• Administrative Cost Increase: Raises the state’s share from 50% to 75%, placing additional strain on the California budget and local administration. It is unknown what part of this increase the state would push to the counties.

Eligibility and Benefit Changes

• Expanded Work Requirements: Extends work requirement eligibility to adults up to age 64 (currently age 54) and includes parents with children age 7 and older.

• Decrease Deductions: Decreases deductions for household expenses used in determining benefit level.

• Thrifty Food Plan Freeze: Prevents benefit increases tied to increases in food costs.

Administrative Enforcement

• Zero Error Tolerance: Reduces the acceptable administrative error margin from $37 to $0. This change will increase audit risk and enforcement costs at both state and county levels.

We will provide another update in about five weeks. 

Keep up the good work.  We make a life changing difference to people in our community each and every day.

Update #3 4/17/2025

Yesterday the Board supported the CEO’s recommendation that they fill our budget gap for the next fiscal year.  Final action on that recommendation will occur in June when they adopt the budget.  
As I previously explained in my prior two budget updates, the next stop on our budget journey this year will be the May Revise from the Governor in the first part of May.  The Executive Team is meeting on May 16th to assess the impact of the May Revise on our Department and we will update you on how things look during the week of May 19th.  Remember that the May Revise is just the Governor’s updated budget proposal and that discussion has to then happen with the Legislature to get to the point of a final state budget at the end of June.  The County’s budget for next year will also be adopted in June.

Remember also that we are watching for actions at the Federal level in the coming days, weeks and months that we expect will impact CalFresh, MediCal and CalWORKS (and possibly other programs).  We know nothing more than we did the last time I updated you and it is anyone’s guess regarding the dollar amount of those cuts and how they would be implemented (services versus administration of those services, or both).

In short, we had a successful day yesterday, but the budget journey is far from over this year.  
Keep up the good work.  You were all complimented by the Chair of the Board of Supervisors, Chair Capps, yesterday in her comments during our presentation – as well as by other Supervisors.

Update #2 4/4/2025

One month ago, I wrote to you with an initial update on budget issues at the Federal, State and Local levels.  Today I am writing to provide updates.

Federal Level

The Senate is expected to begin the process this week of coming up with a budget plan that is closer to what the House passed a few weeks ago.  If they develop one that gets the necessary votes, then interaction with the House will occur to try to get to an agreement between both houses of Congress.  While we do not know what the final result will be, some reductions to Medicaid (MediCal), TANF (CalWORKS), and SNAP (CalFresh) are expected.  Even if both the Senate and House pass identical versions of a Reconciliation bill, the specifics of how the targeted cost savings will be achieved will have to be worked out.  The programs could be shrunk by reducing the population that is eligible to be served, by imposing work requirements, by reducing benefit levels, etc.  We won’t know until we know.  Some of the actions to reduce the cost of the programs could actually increase our workload with documenting and verifying work requirements being an example.

What we do know is that funding for multiple non-profits and governmental organizations has been impacted with the “pause” of funding occurring in some areas as well as the termination of funding in other areas.  Significant levels of staff reductions are being carried out at the Federal agencies that serve the poor, including Health and Human Services.  Services provided by local government and non-profits are already being impacted by the President’s executive orders and the subsequent actions of his newly appointed department heads in carrying out those directives.  Foodbanks are not receiving shipments, funding for various work in clinics is being withheld, etc.  We can expect to see our clients experiencing impacts as they seek services from other providers, even though nothing has changed regarding our services as of this writing.

State Level

There is no factual update to what I provided last month which is restated in the following five bullets.  However, speculation abounds related to the impact of the Los Angeles area fires on the state’s budget; the possibility that the state might have to reduce or eliminate the MediCal program for undocumented people due to costs and/or due to pressure from the Federal government to not serve undocumented people; the possibility that benefits to people served by the MediCal program might have to be adjusted due to revenue constraints (this has happened in prior years due to budgetary constraints); etc. We simply don’t know anything new at this point and will likely not know anything new for another 4-5 weeks.

• The Governor issues a budget proposal in January of each year and then updates it in May with what is known as the ‘May Revise.’  This year the Governor, anticipating significant activity at the federal level, cautioned that the May Revise could look significantly different than the January budget proposal.  He was anticipating the significant policy and budget actions that have started to take place at the federal level.

• We use the proposed budget in January to inform the creation of our department’s budget as we prepare to submit our first draft to the CEO office at the beginning of February (as indicated below).

• After the May Revise the Governor and Legislature continue negotiations and agree on a budget by the end of June.

• We use the May Revise to adjust our budget projections but then adjust again after we see where the Governor and Legislature land in June.

• Advocacy groups and associations (like CWDA) play an important role in this process, informing the Governor and the Legislature about needs, impacts to programs and services related to proposed increases or decreases in the budget and desired priorities within what is always a limited budget.  

County Level

The following reminds you of what I previously said before, with the current updates in blue:

• We start working on our budget in October of each year.  

•  In the beginning of February of each year we begin engagement with the CEO office in discussions about our budget.

•  April 14 starts the week of Budget Workshops where Departments present their proposed budgets as they stand at that point to the Board of Supervisors, and the Board provides input to the CEO.  We will be presenting our budget on April 16th.  We are going to the Board with a budget gap that the County Executive Officer is recommending be filled by the Board of Supervisors to allow us to go into the next fiscal year with status quo level of staffing.  

•  At the beginning of May, the Governor will release the ‘May Revise’ or the revision to the budget proposal he put out in January.  At that time all Departments review for positive or negative impacts compared to what was proposed in January.

•  Around the end of May, the CEO will publish the Recommended Budget for the next fiscal year.

•  On June 17 the Board of Supervisors will start Budget Hearings and a County budget will be adopted.

• It is our plan to return to the Board of Supervisors in the fall (likely September) to do an in depth presentation to the Board on all Departmental impacts from the May Revise, the legislative impacts from Congressional decisions, any impacts from regulatory decisions made by the President’s Cabinet (the heads of the Federal departments), and to look at the structural challenges we have regarding revenues and expenditures in our Department.

As you can see, the budgeting realities of all three levels of government are interconnected.  We will be on a journey this year through the April Budget Workshops, to the May Revise, to the passing of the final budget in June, to a revisiting of our budget structure and Federal/State programmatic and budgetary impacts in the fall.  

We have many unknowns facing us as well as those we serve, and we will just have to take it one step at a time.  No one is in a position to predict the future, so it is important to stay grounded in the facts we do know and stay focused on the work in front of us.  The Executive Team will continue to update you as things actually happen that actually impact us.

I am very grateful to the County Executive Officer and her team as they work collaboratively with us regarding our budget challenges and for her recommendation to the Board of Supervisors that they fill our budget gap.

We will provide another update in approximately two weeks.

Update #1 3/3/2025

Since we are in the midst of our annual budget planning process at the local level, but also in the midst of a possible Federal government shutdown at the end of next week, as well as efforts being made in Washington D.C. that, if successful, will impact the County Health and Human Services programs – I thought I would try to give a very high level overview of issues and timelines at each level based on how things look today.  Keep in mind that about 93% of our department’s funding comes from the federal and state governments.

Federal Level

Executive Orders and subsequent policy direction coming out of Washington D.C.  could and likely will impact service delivery and funding for many Health and Human Services programs across the country and in our county.  We have yet to have any communication from our state partner, the California Department of Social Services, on any changes to our programs, but we monitor daily in anticipation.  The vast majority of our federal funding flows through the state so we will be looking to the state to interpret and communicate any changes that would impact us related to those funds and programs.  For the very small part of our funding that comes directly from the Department of Labor, we will continue to interact with them directly.  Some members of congress are trying to reduce the size of the Medicaid (MediCal) program, the TANF (CalWORKS) program, and the SNAP (CalFresh) program, as well as other parts of the safety net - but any changes to the programs we deliver are likely months out as they will be the subject of intense negotiations.    

At this time, we know the federal government will shut down on March 14th if Congress and the president don’t agree on a Continuing Resolution of some sort to continue funding to the federal government.  One of the problems with that for some members of Congress is that a “clean” CR that funds the government at existing levels through the end of September does not take into account all the cuts that the Elon Musk’s DOGE team and the newly appointed Cabinet have made to federal programs in the past six weeks – so some members of Congress are opposed to continuing government funding at the current level for the remaining months of the federal fiscal year because that wouldn’t account for the “savings” they believe is being achieved.  

If a government shutdown does occur the state will let us know what, if any, of the impacts on California will be covered by California for a short time – and what they don’t have the fiscal ability to help with at all.  CalFresh is an obvious example of a program that will be impacted, and benefits will not be issued as normal in April if the shutdown happens and then continues into April.  The government shutdown that occurred during the first Trump administration lasted 35 days and was the longest in history.

State Level

The Governor issues a budget proposal in January of each year and then updates it in May with what is known as the ‘May Revise.’  This year the Governor, anticipating significant activity at the federal level, cautioned that the May Revise could look significantly different than the January budget proposal.  He was anticipating the significant policy and budget actions that have started to take place at the federal level.

We use the proposed budget in January to inform the creation of our department’s budget as we prepare to submit our first draft to the CEO office at the beginning of February (as indicated below).

After the May Revise the governor and legislature continue negotiations and agree on a budget by the end of June.  

We use the May Revise to adjust our budget projections but then adjust again after we see where the Governor and Legislature land in June.

Advocacy groups and associations (like CWDA) play an important role in this process, informing the Governor and the Legislature about needs, impacts to programs and services related to proposed increases or decreases in the budget and desired priorities within what is always a limited budget.  

County Level

We start working on our budget in October of each year.  

In the beginning of February of each year we begin engagement with the CEO office in discussions about our budget.

April 14 starts the week of Budget Workshops where Departments present their proposed budgets as they stand at that point to the Board of Supervisors, and the Board provides input to the CEO.

At the beginning of May the Governor will release the ‘May Revise’ or the revision to the budget proposal he put out in January.  At that time all Departments review for positive or negative impacts compared to what was proposed in January.

Around the end of May the CEO will publish the Recommended Budget for the next fiscal year.

On June 17 the Board of Supervisors will start Budget Hearings and a County budget will be adopted.

As you can see, the budgeting realities of all three levels of government are interconnected.  As decisions are made that impact our Department the Executive Team will let you know, and at those times will do our best to let you know what those changes mean and don’t mean.  Many policy directions given at the federal level have already been met with challenges in court and many courts have issued temporary restraining orders on those actions.  

It is possible that in the coming months the Executive Team will be communicate to you on a topic and then two days later provide an update that slightly or significantly adjusts the prior communication.  It’s just the world we are going to be living in for a few months.  Remember the early days of Covid when guidance and directions seemed to change on a daily basis?      

We have gone through many significant changes in this Department over the 12 years I have been here.  I have seen time and again that we have the capacity to handle anything that comes our way.  We care about our community, and we care about each other.