San Diego County finances teetering toward structural deficit, watchdog study finds

Days before the San Diego County Board of Supervisors is scheduled to adopt its multibillion-dollar budget for the year that begins July 1, a government watchdog group is ringing alarm bells over the fiscal health of the nation’s fifth-largest county.

Most concerning, according to an analysis by the San Diego County Taxpayers Association, is a 2026-27 spending plan that is balanced on paper but drifting steadily toward a structural deficit like the one that haunts the city of San Diego.

The driving force behind the worsening budget scenario is a 28% increase in the number of employees over the past decade and a half.

The 23-page analysis also pointed to escalating public health and social services costs, declining investments in capital improvements and an outsized reliance on state and federal tax dollars as drivers of the county’s diminishing financial health.

“The county spends more every year to grow its workforce while the infrastructure that supports operations is allowed to crumble,” said Mark Kersey, president and chief executive officer of the San Diego County Taxpayers Association.

“More than half of the general fund comes from Sacramento and Washington – dollars the county cannot control – yet it has not prepared for cuts already scheduled,” he said.

A spokesperson for San Diego County said the proposed budget reflects thorough, year-round planning and careful consideration of community priorities and input.

“This ensures long-term fiscal stability while managing a consistently changing environment and meeting the needs of the community,” spokesperson Tammy Glenn said by email. “The analysis of San Diego County’s Taxpayers Association is lacking additional context and details that would provide an accurate representation of the county’s fiscal health and stability.”

Glenn also noted that San Diego County enjoys Triple A credit ratings from all three major rating agencies.

The county Board of Supervisors on Thursday is scheduled to consider adoption of the proposed $9.2 billion budget for the 2026-27 fiscal year that starts July 1. Two Republican supervisors worry that the spending plan relies on reserves; the Democratic majority said the budget is fundamentally sound.

Now more than 80 years old, the San Diego County Taxpayers Association is a nonprofit, non-partisan government watchdog organization. It regularly produces research and policy analysis in order to promote efficiency and effectiveness among elected officials.

The taxpayers’ review of county financial practices follows a similar – and more scathing – analysis of San Diego city spending the organization released in April.

Like the evaluation of city finances, the latest study noted that the public payroll increased at a rate that was notably higher than the population within its jurisdiction. For San Diego County, the growth in its workforce was nearly four times the rate of residential growth.

San Diego County now employs 6.15 people per 1,000 residents, up from 5.07 full-time workers per 1,000 residents in 2011, the study said. In inflation-adjusted dollars, personnel costs have climbed by 53%, to $3.5 billion, it added.

Labor now accounts for almost 41% of county spending – up from the 32.5% it accounted for in 2011, the report said.

The growth in payroll was due in part to rising costs for food stamps, health care and other state and federal programs – all efforts that are vulnerable to legislation such as the “One Big Beautiful Bill Act” passed by Republicans in 2025 that slashed Medicaid and Medi-Cal payments, the study said.

“The county is obligated to deliver service levels that follow caseload and eligibility rules set in Sacramento and Washington,” it said. “But the county retains meaningful discretion over how it administers those programs, and also controls fiscal levers that are entirely local.”

The consequences of the county’s fiscal practices are most visible in the region’s declining investments in infrastructure, the taxpayers’ association report said.

“The county’s capital-improvement program has collapsed to $45.8 million in Fiscal Year 2026 – the lowest in the 16-year data set and only 0.5% of the budget,” the report said.

“The county has published no facilities condition assessment for its 7.6 million square feet of buildings, even as the deferred Vista Detention Facility replacement alone nears a projected $1 billion.”

In 2011, San Diego County dedicated some $289 million to capital projects, the taxpayers’ study noted, 4.1% of overall spending. The sharp decline in spending on long-term projects shows that elected officials are willing to put off difficult spending decisions, the authors said.

“The volatility itself is a finding,” researchers said. “It indicates that the county treats capital investment as discretionary rather than a planned, lifecycle-based obligation.”

While county officials have yet to create a structural budget deficit – where annual obligations regularly exceed revenues and services fluctuate widely from year to year – expected changes in demographics may worsen current conditions, the study said.

The taxpayers’ group said the number of people aged 65 and older is expected to grow by 244,000 over the next two decades-plus, driving up demand for the most expensive services while the working-age tax base shrinks.

“Every one of these pressures – the federal cost-shifts, the aging population, the maintenance backlog – is knowable and already on the calendar,” said Mike McLaughlin, the San Diego County Taxpayers Association chairman.

“The county’s job is to build a budget that can absorb them,” McLaughlin said. “Instead, the data shows it drawing down reserves and leaning on one-time money in the very year it was warned about the cliff.”

The study also criticized San Diego County for providing limited insight into the specific outcomes of many local programs.

For example, researchers said, a 2024 assessment by the accounting giant Deloitte singled out the county’s escalating spending on efforts to prevent homelessness.

In all, that review found that the county operates 46 homelessness programs funded by 28 different sources. It also identified critical gaps in case-management tools and inconsistencies in its data collection across various programs.

Even though “rent-voucher programs showed better-than-national-average success rates at keeping people housed, the fragmentation of funding and programming makes it difficult for the county – or taxpayers – to evaluate cost-effectiveness or track year over year progress against measurable goals,” the study said.