Trump era offers only uncertainties for Santa Clara County budget
SAN JOSE — It’s been a five-year financial boom for Santa Clara County government, which bounced back from the fiscal slash-and-burn of the Recession and is now poised to consider a $6.5 billion budget. But officials say it comes with an asterisk, and that’s tied to what they call a big question mark in Washington D.C.
There are the known potential hits — the threatened punitive withholding of funds from “sanctuary” jurisdictions, and potentially devastating fallout should the Trump administration successfully eliminate his predecessor’s health care plan.
And County Executive Jeff Smith said that in addition to those risks, there’s a fear of what could come next in terms of hits to federal funding, which amount to more than a quarter of the county budget.
“There’s a lot of uncertainty; what we’re talking about now is what’s already on the table but we know the Trump administration will throw more stuff out there,” said Smith, who will be leading budget discussions with the Board of Supervisors next week before it goes forth for approval in June. “Some of it will be intentional, some will be out of sheer stupidity so we really don’t know what’s coming around the next corner.”
Smith believes there’s little chance of the latest health care repeal getting through the Senate as currently drafted — it’s contentious, with a firestorm igniting on Monday when a health care committee of 13 senators was created that contained no women. And after a judge issued a preliminary injunction on the sanctuary threat last month there have been indications that “there’s very little likelihood” that the feds will prevail in punitive take-backs, Smith said.
But the litigation is expected to take a year or more, which would put the county at risk of taking a considerable hit if things don’t go as expected.
“We put money away in reserves for some of the uncertainty,” Smith said, “but of course if the worst case scenario happens there’s no way we could put enough into reserves to make up losing $2 billion.”
The proposed budget calls for $266 million in reserves, nearly 40 percent more than what was allocated for the current year.
Cynthia Kroll, chief economist for the Association of Bay Area Governments, said that while the a large punitive strike against sanctuary areas is appears unlikely, there are other ways that the feds could withhold funds.
“While some funding is through simple formulas, there are a lot of competitive mechanisms as well,” she said. “That might make it harder to get if you are not a favored region for those in Washington D.C.”
The county started to restaff and rebuild lost services starting in 2012 after making drastic cuts during the Recession. At that time, the budget was about $4 billion — a level it had maintained since 2009. San Francisco’s 2009 budget was $6.6 billion, growing to $9.6 billion last year. That’s a 69 percent increase compared to the 62 percent growth seen in Santa Clara County, where last year’s budget was $6.1 billion.
This year’s budget staffs 20,000 positions — 5,000 more than five years ago, the bulk at Valley Medical Center and in healthcare as well as finance and government operations. One-time funds of $1 billion are earmarked for infrastructure and new technology systems. Smith said two areas of emphasis will be improving the jails, bringing in “state of the art” services to inmates that put a priority on keeping people out of jail; and continuing a mission to solve the county’s homelessness crisis.
There’s also an area of concern unrelated to the Trump administration: The regular economic ups-and-downs. And there are indications the upside has peaked.
“This has been one of the longest post-Recession recoveries seen in modern times,” said county Assessor Larry Stone. “And we must always be mindful that we have cycles like everyone else.”
Stone said that in Silicon Valley, the rises and falls “tend to be steeper.”
“We tend to lead in both directions,” Stone said. “Most economists that I follow indicate that in no later than mid-2018 we’re going to have a recession. And we hope that it will be a soft-landing recession.”