The Santa Clara Board of Supervisors on Friday approved a $4.6 billion budget, including $2.4 billion in general funds that covers all discretionary and many mandated services for the new fiscal year beginning July 1.

"We are cautiously optimistic,'' said County Executive Jeff Smith of the year ahead. "The economy is improving; however, we'll have to wait to see if it is sustainable."

The budget solves a $67 million general fund deficit, as well as $3 million more in additional expenses, for a total of $70.4 million. The deficit will be paid down by a mixture of departmental cuts, on-going labor concessions, and Measure A sales tax revenues or one-time reserves.

The budget also addresses the county's $1.8 billion unfunded liability in its retiree health program by paying $101 million of the $190 million bill due this year.

In August, the board is expected to adopt an ordinance that would require the county to increase contribution amounts annually to retiree health care on an accelerated basis to reach the full annual contribution of $233.3 million by fiscal year 2018.

-- Tracy Seipel, Mercury News