To: Board of Supervisors
From: Monica Nino, County Administrator
Report Title: Major Impacts from H.R. 1 and the State Budget
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
RECEIVE report on major impacts resulting from H.R. 1 and the State Budget on the County, and PROVIDE direction on next steps for analysis and implementation.
FISCAL IMPACT:
This is an informational item without any direct fiscal impacts.
However, H.R. 1 and the State Budget Agreement have major fiscal implications for the County. As a California general law county, Contra Costa County locally delivers a variety of federal and state services, including Medicaid (Medi-Cal), and SNAP (CalFresh).
BACKGROUND:
As a California general law county, Contra Costa County locally delivers a variety of federal and state services, including Medicaid (Medi-Cal), and SNAP (CalFresh). The County’s operations and finances are dependent on federal and state policies because of these relationships. The 2025 federal budget reconciliation bill (H.R. 1) represents a significant shift in the relationship between the federal government and state/local governments. It introduces major fiscal and policy changes over a ten-year time frame, including reductions in access to and funding for hospitals, healthcare, food, and a variety of social safety net services.
The federal reconciliation bill includes a $911 billion cut to Medicaid (called Medi-Cal in California) and a $193 billion cut to SNAP (called CalFresh in California). These federal policies modify eligibility and benefits for low- and middle-income individuals and families, as well as immigrants. The shift in costs to state and local governments reduces overall resources and funding flexibility. Estimating these impacts, in terms of enrollment as well as costs, is challenging for a variety of reasons ranging from administrative uncertainty due to pending guidance, to general economic factors.
Timeline of Major Changes
The timeline of major impacts includes numerous statutory and administrative rule changes that have major, ongoing impacts to the County. In the current fiscal year, a number of new eligibility and recertification requirements take effect. Administrative and eligibility requirements increase costs to the County, while adding additional barriers to enrollment for the community. In terms of current year fiscal impacts, the largest County impact in FY25-26 is due to a reduction in Disproportionate Share Hospital payments.
The largest harms occur in out-years, when the new enrollment challenges-or changes in eligibility criteria-will reduce the population of eligible enrollees by reducing the number of people eligible for services through both SNAP (CalFresh) and Medicaid (Medi-Cal). These reductions in enrollment are particularly harmful for Medicaid/Medi-Cal, where the County retains certain responsibilities to provide care, regardless of coverage status. This increases the amount of unreimbursed care being provided, while also reducing the pool of resources to provide medical care.
CalFresh/SNAP Statutory Eligibility Changes
All Able-Bodied Adults Without Dependents (ABAWD) are subject to work, education, or community engagement requirements of 80 hours or more each month. Previously, the federal government allowed waivers for specific populations, and exempted certain populations, including adults ages 54 to 64, families with children ages 14 to 18, homeless individuals, veterans, and former foster youth ages 18-24. All of these groups, in addition to every other ABAWD individual, are now subject to the 80-hour per month community engagement requirements. These changes lead to increasing costs for eligibility and administration for the County, while increasing barriers for enrollees in these programs.
In addition to the community engagement requirements, ineligible non-citizens, including refugees, humanitarian parolees, asylees, and survivors of human trafficking and domestic violence, will no longer be able to receive CalFresh. In aggregate, these changes mean that fewer people in need will receive essential food and nutrition benefits, while increasing costs to the County.
CalFresh/SNAP Impacts
Food insecurity is expected to increase in our community over the next decade as a result of H.R. 1. CalFresh serves nearly 110,000 people in Contra Costa County each month, and based on statewide data, about 30% may risk losing benefits. On top of the new eligibility requirements, benefits amounts are also changing. Benefit amounts will stay flat for participants over time due to cost neutrality changes in the Thrifty Food Plan, reducing purchasing power. Together, the losses in eligibility and the declining purchasing power of SNAP benefits will harm participants and increase demand for other safety net services.
CalFresh/SNAP Cost Sharing
New costs will be shifted to the State and Counties through several mechanisms. California counties locally administer CalFresh eligibility and are responsible for complying with new eligibility and recertification requirements. The administrative cost sharing split will increase for Counties, compounding the impacts to Contra Costa and others. On top of that, a share of SNAP benefits cost is being shifted to States based on payment error rates. Historically, SNAP benefits have been 100% federally funded.
The federal portion of administrative cost sharing is reduced from 50% to 25%, while the state portion increases to 75%, up from 50%. The County's share of administrative costs, typically split 30% County and 70% State, will increase to 22.5% (from 15%) starting October 1, 2026.
H.R. 1 also shifts a share of SNAP benefit costs to states based on payment error rates. Benefit costs are anticipated to be 15% for California. Statewide, California administers approximately $12.8 billion in SNAP benefits annually, with an expected increase in State cost exceeding $1.8 billion each year. In today’s dollars, this would amount to new costs of approximately $40 million annually in Contra Costa.
Medi-Cal/Medicaid Statutory Changes
Eligibility and cost-sharing changes include the reinstatement of asset test limits, retroactive coverage reductions, and a number of changes for Medicaid Expansion Adults. Medicaid Expansion Adults earn between 100-138% of the Federal Poverty Level (FPL).
H.R. 1 adds work requirements, a 6-month redetermination, and new cost sharing (co-pays) for Medicaid Expansion Adults. State Medicaid coverage changes for immigrants and non-citizens include an enrollment freeze for adults aged 19+ with unsatisfactory immigration status (UIS) starting January 1, 2026. While not required for any other population in the program, monthly premiums for UIS adults aged 19-59 will start January 1, 2027. Refugees, humanitarian parolees, asylees, and survivors of human trafficking and domestic violence will no longer qualify for Medicaid starting October 1, 2026.
Medi-Cal/Medicaid Impacts
New eligibility requirements could apply to approximately half of enrollees and may result in a loss of coverage for an estimated 52,000 to 116,000 people in our County. Contra Costa County experiences greater impacts due to our vertically integrated system, in which the County is involved with healthcare at many levels. The County locally administers Medi-Cal eligibility, resulting in increasing eligibility and administration costs. In addition, the County administers the single health plan serving approximately 265,000 people, as well as a hospital and nine clinics. These cascading and interrelated impacts lead to uncertainty in modeling and forecasting.
Forecasting Challenges
Significant administrative uncertainty and ambiguity remains, as federal guidance, rules, and related state laws and regulations are still pending. Without clear guidelines, it is difficult to clearly understand the impacts on enrollment. In addition to administrative uncertainties, forecasting is challenged by demographic and economic factors, such as inflation, population changes, and general economic conditions. Economic conditions impact demands on the social safety net. County revenue streams like property tax and sales tax vary based on the economy. Additionally, the increasing cost of doing business, including labor negotiations and healthcare costs, further complicates forecasting.
Estimated Current Year Fiscal Impacts
The County has already lost an estimated $24.2 million in the current fiscal year due to a combination of funding reductions and new, unfunded responsibilities. These include Disproportionate Share Hospital (DSH) cuts, the loss of SNAP Education Funding, and Community First Choice Option Penalties for IHSS. Changes to Medi-Cal eligibility will significantly impact enrollment in outyears. Losses in revenue and increases in unfunded responsibilities will increase significantly in outyears. Anticipated annual impacts are likely to exceed $250 million, primarily due to escalating impacts of Medi-Cal changes on health plans, hospitals, and clinics.
Considerations and Next Steps
To address these challenges, the County will work to implement new requirements, monitor and engage on related state rulemakings or legislation to minimize the harm of these policies to the County and community, and continue to proactively monitor and forecast economic conditions. The County will also continue to refine estimates of impacts on participants and the County as additional information and guidance becomes available.
A schedule of regular updates to the Board has been proposed to allow the County to plan ahead and make operational adjustments, as needed. Key upcoming dates include department implementation detail updates on December 16, 2025, the Annual Board Retreat on February 3, 2026, and the Annual Budget Hearing on April 27-28, 2026.
CONSEQUENCE OF NEGATIVE ACTION:
This item provides information to County leadership and the community about the impacts of federal and state policies on the County’s finances, operations, and people we serve. Without this item, the Board will not be able to provide direction to County staff on next steps for implementation and analysis of these impacts.