Santa Barbara County may need to tighten its belt in a few years, as expenses are expected to outpace incoming revenue.

A five-year forecast conducted by the county shows that it may face a cumulative deficit of $23 million over the next five years.  

The forecast was shared on Tuesday during a presentation to the Santa Barbara County Board of Supervisors.

According to County Executive Officer Mona Miyasato, the issues are not unique to Santa Barbara County. Many counties across the state are dealing with similar revenue issues.

“Next fiscal year, starting in July (…), we’re looking forward to a status quo budget, and we should be fine. We don’t see any budget deficit. The following year, we see a slight deficit, and then third year, we see a larger one. So, that’s the bad news. The good news is that we have time to plan,” Miyasato said.

Officials expect to see the largest deficit in the 2027-28 budget, which is anticipated to be a little more than $14 million.

Departments have not been told to anticipate cuts at this time but have been informed they may have to consider cost-cutting measures in the coming years.

Despite the numbers, Miyasato says Santa Barbara County is in a better position than other counties in the region because of how it has prepared during the past few years.

Two examples Miyasato gave were San Luis Obispo County and Monterey County. SLO County was able to balance its budget but is in the budget deficit plan for the next two years. Monterey County initiated a hiring freeze in October.

One of the reasons Miyamoto says Santa Barbara County has been able to avoid such issues is its saving efforts. In the wake of the 2020 COVID-19 pandemic, the county saw additional revenue from the housing market, tourism and sales.

The county set that additional revenue aside and plans to use it during the next few years to address the deficit.

The decline in revenue has been linked to a few different causes. One is a slowdown in property transfers, from which the county receives revenue from taxes.

During the COVID-19 pandemic, there was a surge in people buying new homes. The trend seems to have settled in recent years because of a slowing economy and rising interest rates.

According to Budget Director Paul Clementi, the current level of property transfers seems more in line with its normal rate.

Miyasato says the county anticipated that the market would slow down, and officials prepared by saving the additional income from the increase in sales.

Other declines in revenue are linked to the transient occupancy tax, which is charged to people staying in hotels, motels and vacation rentals. The tax saw a jump after 2020 because of an increase in tourism and the opening of several new hotels that attracted guests.

The amount of growth has dropped over time, the county said. However, in November, residents voted to increase the tax rate from 12% to 14%. Revenues are expected to grow in the short term, because of the rate increase, before slowing.

The county also is anticipating a drop in sales tax revenue growth because of “economic uncertainty.” The forecast predicts annual growth in revenue of 2.4% over the next five years.

The county says the driving force of its rising costs is the Northern Branch Jail — primarily, health care costs and the facility’s expansion. The Sheriff’s Office operates two jail facilities, and yearly costs have surpassed $95 million per year.

During questions from the Board of Supervisors, Miyamoto added that the cost of health care at the jail is growing at about $2 million a year. That’s a trend that also is occurring at jails in other counties.

Another issue for the Northern Branch Jail has been mandatory overtime for custody deputies and other staff. The overtime is expensive ($11 million last year) and hurts morale, leading to recruitment and retention issues. In response, the county has approved raises for employees and signing bonuses for new hires.

Miyasato said the goal is to attract new deputies, which officials hope will reduce the need for so much overtime.

Also adding to the county’s costs are increases to employee salaries and employee benefits.

During his comments, Supervisor Steve Lavagnino said he remembered when he first joined the board and it was facing a $60 million to $90 million budget deficit.

Lavagnino said the county was able to overcome it with cautious spending and the hard work of county staff. He said he didn’t want to downplay the forecast but sees it as a yellow light and does not want to worry county employees.

“I don’t want to be overly optimistic. I am glad we budget very conservatively, but if you look at who’s hand is on the wheel guiding this — we got a great budget team, we got a great leadership in our CEO’s team, and I trust the five of us to make the right decisions that’s going to get us through this,” Lavagnino said.

The Santa Barbara County Board of Supervisors plans to hold budget workshops in the spring for the 2025-26 fiscal year, which starts July 1.

“We feel very fortunate that the board has been so prudent financially that we have this time,” county spokeswoman Kelsey Gerckens Buttitta said.

Scroll down to read part of the presentation from Tuesday’s five-year budget forecast presentation.