Budget plan may aid San Mateo County

Gov. Gavin Newsom’s May budget revision did not include plans to reimburse the county, likely triggered by the state’s severe projected deficit — estimated to be about $28 billion. The state planned to withhold what it owes to San Mateo County, and it’s one of only three counties being denied such funds in the revision. That’s because, with only a few nonbasic aid districts in the county, the state has less of a legally binding obligation to pay it back. While the other two counties, Alpine and Mono, are in a similar predicament, their overall VLF shortfalls are much lower, county officials said.

Both the governor and Legislature propose their version of the state budget before it is finalized by June 30. Though still not approved, the inclusion in the legislative budget proposal should spell some relief for local officials as there were drastic concerns of substantial financial challenges without the funds. Coupled with already declining revenue due to economic contraction, local cities and the county could experience deeper revenue challenges.

VLF revenue accounts for 18% — or approximately $41 million — of San Mateo County’s operating funds. It funds a variety of services from shelter operations and housing subsidies to school-based health clinics and gun violence prevention programs. The exclusion of these funds from previous budget proposals had placed these vital programs at risk, according to Papan’s office.

Members of the state legislative delegation representing San Mateo County have worked to ensure VLF funding made its way into the state budget proposal by working with budget leaders such as Assemblymember Jesse Gabriel, D-Ventura, and state Sen. Scott Wiener, D-San Francisco, the budget committee chairs in their respective houses.

“The inclusion of the VLF funding in the Joint Legislative Budget Agreement underscores our commitment to keep the state’s promise to local governments on critical investments that improve the environment, health, and safety of our communities,” state Sen. Josh Becker, D-Menlo Park, chair of the Senate Budget Subcommittee on Resources, Environmental Protection and Energy, said in the release. “I’m proud of the Legislature’s leadership, and look forward to seeing this funding included in the final budget.”

County Executive Mike Callagy thanked Papan and others in the legislative delegation for working on the county’s behalf.

“This is one of the most significant threats to our county budget that we’ve experienced and losing it will result in severe reduction to the critical public safety, health and homelessness programs our community relies on,” Callagy said in the release.

The complicated reimbursement formula is related to vehicle license fees paid by residents, which are directed to the state and then subsequently reimbursed to cities, typically by the following fiscal year.

But the payback process is not straightforward. Instead of simply giving cities and counties back the amount of fee revenue collected in their respective jurisdictions, the state uses a reimbursement formula based on jurisdictions’ nonbasic aid school districts, or those that don’t generate enough property taxes to meet their state-mandated minimum school funding needs.

That works out for most counties, which mostly have nonbasic aid schools. And even though San Mateo County has only a few nonbasic aid schools — meaning most of the districts are fully funded via the area’s property taxes — the money from the property-tax-in-lieu-of-VLF is still critical for cities’ general funds.