SLO County introduces $1.2B budget — but ‘higher level’ of uncertainty lingers
San Luis Obispo County has managed to balance its recommended budget, but it faces a volatile fiscal future as state and federal actions continue to disrupt the county’s finances.
The county was on track to have a nearly $1 million budget deficit in March, but it closed the gap by eliminating 22 jobs, many of them limited-term positions, according to the fiscal year 2026-27 recommended budget that was presented to the SLO County Board of Supervisors on Tuesday.
The total proposed budget for fiscal year 2026-27 sits at $1.2 billion.
The recommended governmental funds budget, which funds government services and programs, for fiscal year 2026-27 is $1.01 billion, a 4% increase or approximately $41 million more than last year. Within that, the proposed general fund budget — containing core government services — is nearly $830 million, a 2% uptick from the previous year.
The 2026-27 recommended budget represents a slightly more rosy outlook compared to the last fiscal year when the county faced a $38 million deficit and had to cut nearly 155 jobs, though many were already vacant, The Tribune previously reported.
The county said the biggest issue impacting its general fund budget is “constrained revenue growth with expenditures outpacing revenue,” according to a PowerPoint presentation.
SLO County’s assistant chief executive officer Lisa Howe said the recommended budget faces more elevated uncertainty that prior years due to the proposed state budget and HR 1, also known as the One Big Beautiful Bill Act.
“(Both) include changes that may shift additional costs and responsibilities to counties without corresponding long-term funding support,” Howe told The Tribune. “This has created a higher level of fiscal uncertainty than typically seen in recent budget cycles, particularly in areas tied to health and human services and other state-federal programs.”
HR 1 shakes up social safety net programs by enforcing tighter eligibility rules and expanded work requirements. Once implemented, the bill is expected to trigger more administrative burdens that will raise costs at the county level. The Big Beautiful Bill also cuts contributions to federal programs, such as Medi-Cal and CalFresh, that may require states, and in turn counties, to take on more of the costs.
At the state level, Gov. Gavin Newsom proposed giving counties $262 million in one-time funds to tackle the additional workload caused by HR 1 requirements. However, the California State Association of Counties estimated that counties would actually need more than double that — around $600 million every year — to handle the new duties.
The county will also continue to be constrained by the state’s lack of funding to address homelessness as well as increased criminal justice and behavioral health costs due to Proposition 36. Howe said rising inflation amid global economic and geopolitical conditions could also affect the budget.
“We are really not recommending significant new positions or growth, because we fully anticipate fiscal year 2027-28 to be more constrained than we are seeing this year,” Howe said during the presentation.
Paired with salary and benefit increases over the next few years, SLO County could face a nearly $10 million deficit with a 3.4% growth rate or $40 million deficit with a 6% growth rate by fiscal year 2029-30, according to the presentation.
SLO County takes conservative approach to recommended budget
The 2026-27 fiscal year represents the county’s second year of its financial rebalancing and resilience initiative.
The county switched to a baseline budget framework — a more conservative approach — which requires departments to craft budgets within an established target, as well as internally rebalance funds if over budget.
The county previously projected a $13.6 million baseline budget surplus for the fiscal year 2026-27, but that number was later revised to $16.6 million. According to the staff report, that surplus “does not represent new discretionary capacity,” since the additional funds will be used to restore some jobs and services that would have been cut otherwise.
Departments were able to submit “add-back requests” to keep existing services and roles that go over the recommended baseline budget. Similarly, departments turned in “budget augmentation requests” to ask for new resources or positions.
County departments submitted 66 add-back requests, totaling $14.5 million worth of general fund support and about 49 positions for fiscal year 2026-27. The county also received 68 budget augmentation requests, adding up to $10.7 million and 46 new positions, according to the presentation.
However, if all requests were approved, it “would result in a structural imbalance, demonstrating that the baseline does not fully fund current service levels,” the staff report said.
Ultimately, the county recommended adding back $10.8 million in one-time funding, primarily to public protection, health and human services and community services programs. That means a net decrease of 22 positions compared to last fiscal year’s adopted levels.
Howe said limited-term positions will primarily be on the chopping block, such as those that were specifically created “for a defined period of time and funded with temporary or time-limited funding sources that are now ending,” she said in an email.
“As those funding sources expire, the associated positions are also scheduled to end,” Howe added.
Per state law, counties must adopt a balanced budget each year. For fiscal year 2026-27, SLO County’s ongoing budget priorities include public safety, fiscal stability, meeting legal mandates and debt service requirements.
Other top areas of focus are economic development, homelessness, mental health and housing, as well as resiliency — which includes emergency preparedness, infrastructure and water — and organizational effectiveness, according to the presentation.
Beyond salary expenses, the recommended budget includes a $3.5 million increased expense for the county’s Cal Fire services contract, for a total of $35 million and 121 full-time positions, the staff report said.
Supervisor Dawn Ortiz-Legg said she was pleased by the uptick in funding for fire services but also acknowledged overall, “we’re not growing, we’re not growing enough.”
SLO County DA, supervisor clash over budget
Following the budget presentation, SLO County District Attorney Dan Dow said the county was on “formal notice” if they don’t fund two new positions and add back three previously cut roles at the DA’s Office.
According to the recommended budget, the District Attorney’s Office is set to receive nearly $19.5 million in general fund support, just over $924,000 more than it received during fiscal year 2025-26.
If supervisors fail to fund these five positions, Dow said the District Attorney’s Office would struggle to carry out its independent investigative prosecutorial duties, hinting he may take legal action if that occurred.
“Government code and court precedent are clear that underfunding that materially impairs the district attorney’s mandated duties crosses a constitutional line,” Dow said during public comment. “And I’m not making a threat, I’m merely pointing out a legal reality, and I’m stating it for the record here today.”
After Dow’s comments to the board, Supervisor Bruce Gibson immediately responded calling the three-minute speech “an impressive display of posturing.”
“You’re going to have your chance to make your case when we get to budget hearings in June, but I have to ask, with your formal notice to the Board of Supervisors, are you threatening to sue the county if you don’t get your way?” Gibson asked.
“It’s not a threat. It’s a legal reality,” Dow replied.
During public comment, COLAB SLO County Executive Director Greg Haskin also encouraged the county to set aside additional funds for the DA’s Office and to prioritize more funding for transportation, though he commended the county for presenting “a pretty accountable, transparent budget.”
Supervisor John Peschong said he hoped that the county executive office would continue talks with the District Attorney’s Office.
“Let’s see if we can get something done,” Peschong said.
Supervisors adopted a resolution to introduce the recommended budget for public review. The county and the Board of Supervisors will continue to carry out its budgeting process over the next few weeks.
Budget hearings are scheduled to take place June 8 through 10, and the recommended budget will be adopted on June 16.
The final budget will be legally adopted in September.
