All 20 cities in San Mateo County have joined a lawsuit originally filed in August 2025 by San Mateo County accusing the state of California of withholding nearly $38 million in funds legally owed to local governmental agencies, according to county officials.
The lawsuit details that this year San Mateo County local governments received only $76.5 million of the $114.3 million owed under a state funding formula — a nearly $38 million gap. The state’s initial 2025 budget proposal excluded San Mateo County’s funding entirely, but successful lobbying by the county and its Assembly and Senate members restored two-thirds of the total owed to support critical local services for this year only, and officials said it’s likely the state will exclude the county’s funding again next year.
All 20 cities have joined the lawsuit, underscoring the magnitude of what is at risk to local government budgets if the current $38 million is not restored and a permanent solution negotiated. Additionally, Mono County and Alpine County are dealing with similar challenges with the state of California and have joined the lawsuit, according to the county.
The lawsuit alleges that the state of California violated its own law and a 2004 budget compromise known as the “VLF Swap,” in which counties and cities gave up vehicle license fee revenue to help the state close its budget deficit, according to the county.
The case is currently pending at the Superior Court of California, County of San Francisco. The state of California is expected to respond to the suit in January.
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