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By Kristen Brown, Executive Director, Santa Cruz Area Chamber of Commerce Last month, Governor Newsom released his proposed 2026–27 state budget and we’re taking a look at what it could mean locally for businesses, workers, and our broader regional economy. While the budget is still in its early stages and subject to change, a deeper dive reveals several themes that are especially relevant to Santa Cruz County, from economic development and workforce trends to housing, climate resilience, and small business support. Viewing the proposal through a local lens helps clarify where opportunities may emerge and where challenges are likely to persist as the state budget process unfolds. While the administration points to stronger revenues driven in part by growth in artificial intelligence and innovation sectors, statewide economic indicators suggest a slowdown. Job growth is tapering off, higher-wage positions are declining, and population growth across California remains essentially flat. These trends matter locally, as Santa Cruz County continues to navigate workforce shortages, housing constraints, and rising costs that affect employers across industries. The good news for our region is that state economic development programs remain funded at expected levels. Investments in regional economic strategies, small business technical assistance, capital access, and infrastructure financing continue. These are all resources that local businesses, entrepreneurs, and economic development partners in Santa Cruz County can tap into. The extension of the California Competes Tax Credit and continued support for film production, innovation hubs, and small business assistance programs may be especially relevant for companies looking to grow or expand locally. Climate and infrastructure funding is another area of opportunity. The proposed allocation of climate bond funds includes investments in water infrastructure, wildfire resilience, coastal protection, extreme heat mitigation, and nature-based solutions. For Santa Cruz County, where water reliability, wildfire risk, and coastal resilience are ongoing priorities, these funds could support projects that protect our communities while also creating jobs and strengthening the local economy. Housing remains a major challenge locally, and the proposed budget does not include new funding for affordable housing. However, there is a notable shift in tone from the state, with greater recognition that high construction and financing costs are limiting housing production. Legislative housing bond proposals are still in play for the 2026 ballot, and their outcomes could have significant implications for housing supply and workforce stability in our region. On homelessness, the state continues previously approved funding rounds rather than introducing new dollars, while placing a stronger emphasis on accountability and outcomes. Mental health funding is expected to be more closely tied to housing and treatment efforts, changes that will directly impact counties and service providers, including here in Santa Cruz County. Other items of note include continued funding to modernize the Employment Development Department, which could improve access to unemployment and workforce services, and sustained cannabis tax revenues that support education, environmental cleanup, and public safety efforts statewide. Review the full budget proposal here. Overall, this budget sets the stage for a potentially volatile legislative year, with significant changes possible in the May Revise. The Santa Cruz Area Chamber will continue monitoring developments, advocating for policies that support local businesses and a resilient regional economy, and sharing updates as the budget process moves forward.
By Kristen Brown, Executive Director, Santa Cruz Area Chamber of Commerce
Last month, Governor Newsom released his proposed 2026–27 state budget and we’re taking a look at what it could mean locally for businesses, workers, and our broader regional economy. While the budget is still in its early stages and subject to change, a deeper dive reveals several themes that are especially relevant to Santa Cruz County, from economic development and workforce trends to housing, climate resilience, and small business support. Viewing the proposal through a local lens helps clarify where opportunities may emerge and where challenges are likely to persist as the state budget process unfolds.
While the administration points to stronger revenues driven in part by growth in artificial intelligence and innovation sectors, statewide economic indicators suggest a slowdown. Job growth is tapering off, higher-wage positions are declining, and population growth across California remains essentially flat. These trends matter locally, as Santa Cruz County continues to navigate workforce shortages, housing constraints, and rising costs that affect employers across industries.
The good news for our region is that state economic development programs remain funded at expected levels. Investments in regional economic strategies, small business technical assistance, capital access, and infrastructure financing continue. These are all resources that local businesses, entrepreneurs, and economic development partners in Santa Cruz County can tap into. The extension of the California Competes Tax Credit and continued support for film production, innovation hubs, and small business assistance programs may be especially relevant for companies looking to grow or expand locally.
Climate and infrastructure funding is another area of opportunity. The proposed allocation of climate bond funds includes investments in water infrastructure, wildfire resilience, coastal protection, extreme heat mitigation, and nature-based solutions. For Santa Cruz County, where water reliability, wildfire risk, and coastal resilience are ongoing priorities, these funds could support projects that protect our communities while also creating jobs and strengthening the local economy.
Housing remains a major challenge locally, and the proposed budget does not include new funding for affordable housing. However, there is a notable shift in tone from the state, with greater recognition that high construction and financing costs are limiting housing production. Legislative housing bond proposals are still in play for the 2026 ballot, and their outcomes could have significant implications for housing supply and workforce stability in our region.
On homelessness, the state continues previously approved funding rounds rather than introducing new dollars, while placing a stronger emphasis on accountability and outcomes. Mental health funding is expected to be more closely tied to housing and treatment efforts, changes that will directly impact counties and service providers, including here in Santa Cruz County.
Other items of note include continued funding to modernize the Employment Development Department, which could improve access to unemployment and workforce services, and sustained cannabis tax revenues that support education, environmental cleanup, and public safety efforts statewide. Review the full budget proposal here.
Overall, this budget sets the stage for a potentially volatile legislative year, with significant changes possible in the May Revise. The Santa Cruz Area Chamber will continue monitoring developments, advocating for policies that support local businesses and a resilient regional economy, and sharing updates as the budget process moves forward.