California counties ask voters for sales taxes to backfill Medicaid cuts

County Supervisor Holly Mitchell's office

Facing an estimated $2.4 billion financial hole driven by the Trump administration's Medicaid cuts, the Los Angeles County Board of Supervisors agreed Tuesday to place a temporary half-cent sales tax measure before voters in June.

The sales tax vote followed a contentious debate over the need, structure, and potential economic impact of the proposed measure.

The tax, slated to expire in 2031, is intended to serve as a bridge to save the county's public health system from what officials described as "catastrophic" cuts stemming from House Resolution 1, the One Big Beautiful Bill Act, the Republican tax and spending bill President Trump signed in July.

The sales tax would backfill federal cuts to Medi-Cal, California's version of the Medicaid health insurance program for low-income residents.

The sales tax is estimated to generate $1 billion per year to replenish the shrinking budgets of local hospitals and clinics.

H.R. 1 brought the largest federal cuts to Medicaid in U.S. history, said Los Angeles County Supervisor Holly Mitchell, who introduced the measure along with Supervisor Hilda Solis.

"It pulled the rug out from underneath all of us," Mitchell said. "The federal government has walked away from its responsibility to fund Medicaid appropriately."

The cuts could result in the closure of some of Los Angeles County's 24 clinics and put its public hospitals and health programs at risk, the directors of those programs testified at the supervisors' meeting.

On the same day, Contra Costa County supervisors made a similar choice, asking voters in the San Francisco East Bay county to approve an additional 0.625% sales and use tax, which would generate an estimated $150 million to support the county's general operations for five years. 

The five Contra Costa supervisors voted unanimously to support the measure, which staff said would help to fill an expected $307 million gap in Medi-Cal needs caused by H.R. 1.

"What Santa Clara did, now Contra Costa and Los Angeles are trying, in an effort to be more aggressive than the state is," said Marc Joffe, a visiting fellow at the libertarian-leaning think tank California Policy Center.

Santa Clara County voters approved Measure A, a sales tax measure, in November, which is expected to raise $330 million annually to offset a more than $1 billion annual budget shortfall expected from federal funding cuts related to healthcare.

The board of supervisors in Santa Clara County, center of the Silicon Valley tech industry, approved placing a temporary sales tax measure on the ballot in August. The board had declared a fiscal emergency, citing more than $1 billion in annual funding losses due to unprecedented changes to federal safety-net programs.

Even with the approval of the sales tax, Board of Supervisors President Otto Lee said, Santa Clara County would still need to make cuts.

Joffe noted that the state had gone down the path of allowing more undocumented immigrants to access Medi-Cal, but had to reverse course when it turned out it would cost more than anticipated, or that the state could afford. It made that move in April – well before H.R. 1 passed in July, he said. 

"Right now, unless the state reverses it, undocumented immigrants will have to pay a premium to receive Medi-Cal," Joffe said.

"The state has had to roll it back, and now some of the more progressive counties want to reverse that," he said.

"As a libertarian, I am for open immigration, but I am also fiscally conservative," Joffe said. "If we have a national policy that everyone can come here, which I am for, that is fine. But if we say you can all get all the free healthcare you need if you come, we can't do it. We don't have the supply of medical resources to cover it. There has to be a limit."

The state has started to adjust to that reality, Joffe said. 

To place its measure on the ballot, Los Angeles County will have to get state lawmakers to approve an exception to a state law that places a 2% cap on the amount localities can levy for sales tax on top of the 7.25% already levied by the state, Joffe said.

Supervisor Kathryn Barger, the lone Republican and the only no vote on the measure cited the harm to cities that already have high sales tax. She noted that Palmdale and Lancaster already have sales taxes of 11.25%, among the highest in the country. Both raised their sales tax rates by 0.75% to reach that level following voter approval in 2024.

"Backfilling federal funding cuts on the backs of county taxpayers is not acceptable," she said. "Los Angeles County residents are already stretched thin."

Barger argued that if Los Angeles County boosts its sales tax higher than neighboring Orange County and Riverside County, residents of border cities will drive to other counties harming retail.

"Since this appeared on the agenda, my phone has been flooded with texts and letters like never before," Supervisor Janice Hahn said. 

Though Hahn said many of the calls were from people opposing the measure, she wanted to give voters the option of supporting the community's healthcare options.

"Almost three quarters of our budget already goes to healthcare. One of my frustrations is the state should have taken the lead on this," Barger said.

"This is a regressive tax — and we are backfilling a federal and state obligation. This is the tail wagging the dog. It's not how you go about public policy," she said.

Little was said during three hours of discussion about a ballot measure in the signature-gathering phase impose a one-time tax on net worth of billionaires. SEIU-United Healthcare Workers West is leading efforts to get the measure on the ballot. It would also backfill Medicaid cuts.

"It is clear the federal government created this problem," said Los Angeles County Supervisor Lindsey Horvath. "I am glad our people here are working toward solutions, while our federal government is doing the opposite."

She described a Catch-22, in which the federal government will continue to offload costs on the county, but failure to act will create more holes in the healthcare system.

This is a difficult conversation at a time when every resident in the county is thinking about affordability," she said.

Phased-in Medicaid funding cuts and policy changes adopted in H.R. 1 began last month. Other key changes, starting in 2027, include the sunsetting of enhanced federal match rates and work requirements for beneficiaries.

Los Angeles County is anticipating a $2.4 billion loss over the next three years, with a projected annual loss of $700 million to the Department of Health Services and over $40 million to the Department of Public Health. 

County Director of Health Services Dr. Christina Ghaly warned that the cuts have the potential to be "catastrophic," leading to hospital closures, emergency room closures, and delays—a situation the county has seen before with the closure of the Martin Luther King Jr./Drew Medical Center in 2007. Severe, well-documented failure in patient safety and mismanagement led to its loss of accreditation and eventual shut-down. 

Its closure left a hospital services hole in a large swath of south Los Angeles that was filled when the county dedicated $452 million to build a replacement hospital on the same campus. The 133-bed Martin Luther King Jr. Hospital, smaller than its predecessor, opened in 2015 as a non-profit, independent of the county. MLK Hospital has been struggling financially since 2023, because of the financial pressures COVID-19 wrought. It also has a high percentage of Medicare and Medicaid patients, officials said.