Though the OC Board of Supervisors has tentatively approved a $10.5 billion budget for the upcoming fiscal year, county officials warn of looming budget issues and department-wide cuts.
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With spending continuing to outpace revenue growth, the county had to draw $75 million from one-time reserves to balance the general fund for the upcoming 2026-27 fiscal year that starts in July, county CEO Michelle Aguirre said. Those resources will not be available the following year, meaning that additional reductions will be needed to close the budget deficit with action to close the gap.
“Simply put, we’ve exhausted all resources available to us, but we are resilient,” Aguirre said. “You will see that we have no general fund requests for additional resources because there are none to be given. Any cost increase must be offset with a corresponding reduction in the budget.”
The county has been able to avoid layoffs, Aguirre said, by eliminating more than 400 vacant positions and because of a hiring and expenditure freeze instituted last year.
The proposed spending plan for 2026-27 — nearly $300 million less than the current budget — also includes a 5% cut in every department. That’s to address rising operating costs that are primarily associated with ongoing payouts from the 2024 Airport fire, Aguirre said. As of May 26, the county had settled more than 1,200 claims, paying out $133 million. The supervisors last week approved a $23 million settlement to 35 families.
On top of that, the Garden Grove chemical incident last month has cost the county at least $3 million, CFO Kim Engelby said. Though the county is seeking reimbursement from FEMA, she said the costs have already been incurred.
“As we approach end of the fiscal year, we’re concerned we’ll have to draw from reserves in order to close the books,” Engelby said.
The county expects to receive $1.3 billion in general-purpose revenue that covers day-to-day operation costs — roughly $64 million more than this fiscal year. The boost is driven by a $58 million bump in property tax revenues, which account for 92% of the general purpose fund.
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Meanwhile, the county is also projecting to receive $54 million less in “realignment revenues,” which fund juvenile criminal justice, mental health and social services.
Some supervisors had cost-cutting suggestions for various departments.
Supervisor Doug Chaffee recommended that the Office of Independent Review be eliminated and reintroduced with stronger investigative and subpoena powers.
“I’ve looked at that a long time now,” he said. “It has never really been very productive in anything that I thought was meaningful.”
Supervisors Vicente Sarmiento and Don Wagner initially backed Chaffee’s idea, but withdrew their support when county staff informed the board that a supermajority vote in favor would be needed to reintroduce the office.
Spending for public protection departments, which include the Sheriff’s Department and the District Attorney’s Office, accounts for 19% of the proposed budget. That’s a $35 million increase from the current year due to “rising costs and lower anticipated revenue,” officials said.
Sarmiento requested that District Attorney Todd Spitzer and Sheriff Don Barnes look into eliminating a DNA program and deferring more than $9 million in equipment purchases until next year in order to preserve critical services he considered important, notably the Gang Reduction Intervention Partnership program in schools. The Sheriff’s Department receives the largest share of general fund money of all county departments.
“I want us to work through this year — or work through this part of the budget — because this year that we’re facing is especially difficult because of the draconian federal funding reductions that are going to be impacting some residents and potentially some employees here at county,” Sarmiento said.
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The board will take a final vote on the proposed budget on June 23.