LEGISLATION COMMITTEE
Meeting Date: July 28, 2025
Subject: Major Impacts from Federal Reconciliation and the State Budget
Submitted For: Legislation Committee
Department: County Administrator’s Office
Presenter: E. Struthers
Contact: (925) 655-2045
Referral History:
The Legislation Committee monitors and provides direction on federal and state budgetary, legislative, and regulatory matters of interest to the County. With the recent adoption of the State Budget and the enactment of the federal budget reconciliation bill, County staff are working to analyze fiscal and operational impacts to the County and those we serve.
Referral Update:
On July 4, 2025 President Trump signed the 2025 federal reconciliation bill, also known as H.R. 1 or the "One Big Beautiful Bill Act.” H.R. 1 makes significant changes to federal expenditures (i.e. services and programs) and revenues (i.e. taxes) over the next ten years. The bill will have major ramifications for state and county budgets, particularly in California. Many provisions phase in, or out, over several years.
Many of the potential benefits to the American people are front-loaded within the ten-year window, meaning that they take effect immediately (during the 2025 tax year) and will expire before the ten-year window elapses. For example, the annual state and local tax (SALT) tax deduction cap will temporarily increase from $10,000 to $40,000, which is anticipated to have benefits for middle and high income homeowners. However, this increase is will revert to $10,000 after just four years. At the same time, many of the bill’s harms phase in over time.
Some of the most potentially harmful federal policies that will take effect between 2026 to 2028 include:
• Limits on Medicaid State-Directed Payments
• Medicaid (Community Engagement) Work Requirements
• SNAP benefit cost sharing begins: 15% match expected for California
• Medicaid cost sharing begins for expansion population
• SNAP Administrative Cost Shift
• Provider Tax Restrictions (i.e. Prop 35 Managed Care Organization Tax)
Just days before H.R. 1 was signed into law, Governor Newsom approved the Legislature’s Fiscal Year 25-26 State Budget. Independent of H.R. 1’s passage, the State has taken actions to balance its annual budget. Several cost-saving polices were enacted that will impact many of the same health and social safety net programs that serve low income people in Contra Costa County. Major State budget impacts of note include:
• Medi-Cal Asset Test Limits
• IHSS Asset Test Limits
• Enrollment Freeze for Full-Scope Medi-Cal Expansion to Undocumented Californians, Adults Ages 19 and Older
• Community First Choice Option Late Penalties for IHSS
• Elimination of Dental Benefits for Adults with Unsatisfactory Immigration Status, Ages 19 and Older
• Medi-Cal Premiums for Adults with Unsatisfactory Immigration Status, Ages 19-59
The State plans to hold an initial informational hearing on August 20 in Assembly Budget Subcommittee 7 to discuss further impacts from H.R. 1 on California’s budget. The Legislature is expected to direct further legislative and budgetary actions related to the implementation of H.R. 1 over the next several years.
As part of this item, the Committee members are encouraged to share any information or perspectives from recent events and meetings on this topic, including the recent Annual Conference of the National Association of Counties (NACo). The Committee is also welcomed to provide direction to staff on upcoming public meetings related these topics, such as the August 8, 2025 Legislation Committee in-person meeting at 1025 Escobar Street.
Recommendation(s)/Next Step(s):
DISCUSS initial analysis of major impacts resulting from federal reconciliation (H.R. 1) and the state budget, and potential next steps for analysis and implementation.
Fiscal Impact (if any):
This item has no direct fiscal impact, however, the impacts of the state budget and federal budget reconciliation are very significant to County operations and services.