Palo Alto shoppers are already paying a five-eighths-cent sales tax increase under Measure A, but the estimated $330 million it generates annually remains frozen after a court ruling cleared one legal challenge and a second lawsuit is scheduled for a hearing Oct. 16.

California's Sixth District Court of Appeal ruled Sept. 23 that the Santa Clara County Board of Supervisors reasonably declared an emergency due to federal budget cuts. That declaration allowed supervisors to place the tax hike on a special election ballot on Nov. 4, 2025, rather than waiting for a general election. Voters approved it with 57% support.

The ruling, reported by journalist Joyce Chu of San José Spotlight, rejected a challenge brought by Brian Holtz, secretary of the Libertarian Party of Santa Clara County. Holtz argued that federal spending cuts don't qualify as an emergency under state law. A Santa Clara County Superior Court judge had previously rejected the challenge.

The appellate judges found that Holtz and his co-plaintiffs failed to provide substantial evidence that the county was not facing an emergency from federal cuts.

The money stays locked up. A second lawsuit, filed by the Silicon Valley Taxpayers Association, is set for a hearing on Oct. 16 in Santa Clara County Superior Court. San José Spotlight reported that the lawsuit argues Measure A is invalid because it was placed on a special election ballot last November instead of a general election this November. Revenue cannot be spent until both cases are resolved.

Holtz told San José Spotlight he plans to consult with his lawyer about a further appeal but would "lay low" for now.

"I wouldn't want to be someone who develops that kind of track record of clogging up the courts with stuff that you know is not going to get through," Holtz told the outlet.

County Counsel Tony LoPresti called the ruling a major victory for residents who rely on county health care and safety-net services.

Palo Alto residents are among Santa Clara County's nearly 2 million residents, and Santa Clara Valley Healthcare says it serves about one in four county residents. County officials have projected more than $1 billion in annual funding losses tied to federal changes, including reductions affecting Medi-Cal. Half of patients in the county's public hospital system pay through Medi-Cal, and one in four county residents are enrolled.

Santa Clara Valley Healthcare CEO Paul Lorenz told the Board of Supervisors on Jan. 27 that the cuts represent an "extraordinary fiscal emergency," projecting shortfalls of $200 million this fiscal year, $160 million in fiscal year 2026–27 and $260 million in fiscal year 2027–28, according to Palo Alto Online.

Measure A is structured as a general tax, meaning spending is not legally restricted to hospitals. County Executive James Williams has proposed directing all of the revenue to the public hospital system, California's second largest, according to San José Spotlight's budget reporting.

The Oct. 16 hearing is the next scheduled proceeding in the remaining challenge to Measure A.