County Asks Voters to Approve Half-cent Sales Tax as Federal Cuts Hit Safety Net

Measure on the Nov. 3 ballot would raise about $27 million a year for five years

By Mary Andersen

Santa Cruz County voters will decide this November whether to pay slightly more at the register to keep local health and safety-net services from buckling under federal funding cuts.

At a special meeting Aug. 4, the county Board of Supervisors voted unanimously to place a temporary half-cent sales tax on the Nov. 3 ballot and to formally declare the county in a state of fiscal distress. The measure needs a simple majority to pass.

What it would cost

If voters approve it, the tax would run five years and raise roughly $27 million annually. Shoppers in Santa Cruz, Scotts Valley and Watsonville would see the rate rise from 9.75% to 10.25%. In Capitola it would go from 9.25% to 9.75%, and in unincorporated areas from 9.5% to 10%.

The increase would not apply to groceries, prescription medications, diapers, feminine hygiene products or other necessities.

Although cities run their own budgets, the measure covers the whole county because California assigns counties the job of delivering safety-net programs everywhere within their borders, city limits included.

Why now

County officials point to H.R. 1, the federal budget law enacted in July 2025, along with the end of Affordable Care Act subsidies, tougher enrollment rules for Medi-Cal and a shift of administrative work onto local governments. Staff estimate those changes will cost the county and its community partners more than $150 million in higher expenses and lost revenue over the next five years.

Board Chair Monica Martinez framed the vote as a local answer to decisions made in Washington. “This is coming before the board because of one reason, and that’s because we have a federal administration that is targeting our vulnerable populations and is attempting to dismantle the Affordable Care Act,” said Martinez. “We have many residents who ask, ‘What can we do; what can we do to stand up against this federal administration?’ This ballot measure is an opportunity for them to do something. This is an opportunity for our community to step up and say that we support those who are vulnerable in this community. We do not want our safety net to fall apart; we do not want people to fall through the cracks.”

The coverage numbers are substantial. State officials expect 1.1 million Californians to lose Medi-Cal; some researchers put the figure closer to 3 million by 2028. The Central California Alliance for Health, which serves Medi-Cal patients in five counties including Santa Cruz, projects regional enrollment will fall 27%. County staff estimate the local provider network could eventually lose $200 million a year.

The emergency-room impact

Those losses would not stay confined to people who lose insurance. When patients drop coverage, they tend to skip preventive care and show up later in emergency rooms, which are federally required to treat everyone regardless of ability to pay. That means longer waits and more uncompensated care at Dignity Health Dominican Hospital and Watsonville Community Hospital. And pressure to recover those costs elsewhere, often through higher rates for insured patients.

Supervisor Kim De Serpa said the local system is already strained. She was among the patients who had to change doctors in recent months as physicians left area networks amid rising costs and failed contract negotiations.

Where the money would go

Revenue would flow into the county’s General Fund, giving supervisors flexibility to redirect it as needs shift. That structure also means no fiscal oversight committee is required, though spending decisions would still move through the county’s usual budget process, with public hearings and a chance for residents to weigh in.

Supervisors also adopted a written list of likely spending areas: emergency medical response and health care, treatment for mental illness and addiction, hunger relief, keeping residents housed, addressing homelessness, and other core services.

County Executive Officer Nicole Coburn cautioned that the tax amounts to triage rather than a replacement for the money being lost.

The measure needed permission from Sacramento before it could go forward. Santa Cruz County had already reached the state ceiling on local sales taxes, so it took Senate Bill 762, co-authored by Sen. John Laird, to let jurisdictions at that limit add another half cent. The Senate gave the bill final approval Aug. 3, and Gov. Gavin Newsom signed it Aug. 17. Nothing stands between the measure and the ballot now. The decision rests with voters.

Read arguments for and against Measure E on the November 2026 ballot.