State cuts, soaring insurance and a rejected levy leave County Council to face its most difficult budget yet

Published 1:30 am Wednesday, June 3, 2026

San Juan County is confronting one of the most serious budget crises in recent memory, and County officials made clear at Tuesday’s Council meeting that the time for deferring hard decisions has passed.

With a failed levy lid lift behind them, a structurally imbalanced budget ahead of them and a community that just voted emphatically against new property taxes, the Council spent hours Tuesday working through the grim mathematics of what it will take to keep the County solvent in 2027.

The numbers, presented by Budget Analyst Dr. Molly Foote, were stark. The 2027 budget is projected to leave just over $1 million in ending cash — far short of the $3.18 million the County is legally required to maintain as a minimum reserve. That alone creates a structural shortfall of $2.1 million before accounting for anything else.

In addition, insurance premiums for liability, property and cyber coverage are expected to surge 34% — an expense Chair Justin Paulsen noted the County has “functionally zero control over.” And the state delivered a blow equally outside the County’s hands: a roughly $350,000 to $400,000 cut to foundational public health funding that will directly affect services islanders rely on.

County Manager Jessica Hudson recommended the Council plan for a gap closer to $2.5 million as a minimum, but urged going further. “We are not making a cut right now and then having to go back in for even deeper cuts in 2029,” she said. “It makes sense that we look at buying down this gap now, making the cuts at one time, even though it will hurt.”

Council member Kari McVeigh put the target even higher. “Part of the reason we are where we are is because we didn’t do that work previously, and we ate up more cash,” she said. “We have to stop doing that so that this community really truly understands the problem of the structural imbalance of our budget.” The Council debated a final figure, and staff summarized the consensus target at approximately $4 million.

On the question of how to cut, Council was equally deliberate about not repeating last year’s blunt approach. In 2025, departments were directed to cut 9.5% across the board — a method widely criticized Tuesday as too crude. “We need to be far more sophisticated in what we ask them to look at,” Council member Jane Fuller said. She called on departments to analyze their full range of services — not just line items — and distinguish clearly between what is legally mandated and what is discretionary, then examine what reduced staffing would actually mean for each category of service.

McVeigh asked staff to first produce a complete list of non-mandatory programs and their costs before departments receive any specific direction. “Many of the people who voted against the levy lid said publicly, ‘live within your means,’” McVeigh said. “I want to know exactly what all those non-mandated programs and services cost — so that when we give departments direction, we’re giving them direction based on what those cuts might be.”

Paulsen cautioned that the line between mandatory and discretionary is not as clean as it sounds. “There’s not a lot of discussion in state law about what that means,” he said. “It doesn’t say whether you’re going to have two people do it or ten people do it. It just says you shall do X. And so it all comes down to level of service.”

Two potential new revenue tools were also on the table Tuesday — a law enforcement sales tax estimated to generate $800,000 annually, and a new state-authorized public health clinic property tax that could bring in roughly $1.1 million per year. Both were ultimately set aside, at least for now.

Paulsen was direct about his reasoning. “I personally believe that if we pass either of those revenue options, it is a deal killer on any future levy,” he said. “Our residents gave us a really clear head nod that they don’t appreciate taxes as a way of seeing our way through this.” The Council agreed to build the budget on cuts alone for now, with McVeigh open to revisiting the sales tax if needed and Fuller unwilling to rule out either option pending further analysis.

The Council approved three additional meeting dates in June — the 15th, 16th and 24th — to begin department-by-department reviews. A preliminary balanced budget is due from the Auditor’s Office by Aug. 25, a deadline set by state law. Between now and then, the County will be mapping what $4 million in reductions actually looks like — service by service and position by position.