A three-day public hearing on the San Mateo County budget is underway, a time when departments are giving presentations on plans to navigate an uncertain fiscal landscape for the next two years, while maintaining services for residents.
County Executive Mike Callagy has tasked each of its 22 departments to not only begin budgeting for 4% reserves as recently mandated, but to also plan an alternative budget in the case 5%-10% reductions must be made, “as an exercise.”
“I see the challenges ahead. I see the opportunities with these challenges,” Callagy said. “There’s great uncertainty in our future. I’m going to ask us to be cautious as we put this budget together.”
Looking toward fiscal years 2025-26 and 2026-27, the county is expecting to not spend much more than it anticipates earning, and is budgeting conservatively, but should state funding be cut — particularly funds to cover the vehicle licensing fee shortfall — the county will be in “an immediate deficit,” Callagy said.
Callagy shared that as recently as Friday, Gov. Gavin Newsom was considering striking the line item off the state’s budget for the shortfall layer of funding. These funds are owed to San Mateo County and its cities, Callagy argued, and the county is working with local legislators to secure the significant source of revenue. However, the threat to this funding source has remained an issue for the past few fiscal years and presents hardships when planning.
The VLF shortfall funds account for $114 million to San Mateo County in the upcoming fiscal year. Securing the revenue source long term may mean the difference between a $200 million deficit in the next 10 years, which would “fundamentally change the way we do business as a county,” Callagy said.
With a proposed $4.9 billion total budget for fiscal year 2025-26 — assuming the shortfall funds are in fact secured — the county is balancing its budget keeping in mind the high cost of living and child care in the county, the aging population, climate change and threats to programs that take care of the residents most at risk.
On top of the state’s budget impact, federal funding cuts to programs such as Medicaid and the Supplemental Nutrition Assistance Program, which provides nutritious food benefits to low income families, will likely strain what the county can or must provide. Should residents no longer be eligible for federal programs, much of the need then falls on what the county can provide, straining already finite and spread-thin resources.
The federal funding that is at risk is largely concentrated in three county departments — health, housing and human services — and equates to a loss of $673 million, overall.
“The county’s goal is to make sure we take care of those most vulnerable,” board President David Canepa said, noting the need for departments to see what they can sustainably offer.
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Although the county’s fiscal outlook will be able to weather immediate financial strains, long-term planning feels like “building an airplane as you’re flying it,” Callagy said.
As the cost of living continues to rise — particularly in San Mateo County, which is home to almost 34,000 families living in poverty — the county’s programs are key to providing the baseline resources to residents. Efficiency is at the top of mind, and will mean a constant evaluation of the county’s programs moving forward, Callagy said.
“Money is too tight and too precious to waste money on things that are not successful,” Callagy said.
Budget priorities remain focused on families, kids and seniors; housing and homelessness; emergency preparedness; and mental health.
Compared to the $4.9 billion total budget for the upcoming fiscal year, the overall budget is proposed to shrink to $4.5 billion for fiscal year 2026-27, mainly dropping due to the closing of various capital projects and the loss of stimulus packages from the pandemic.
The largest cost in the county is salaries and benefits, making up about 70% of all expenditures, Chief Financial Officer Roberto Manchia said. The county is proposed 22 new positions for the upcoming fiscal years, primarily in County Health.
In September 2024, the Board of Supervisors approved an increase in its reserve requirement from 10% to 15% overall, to establish a proper financial safety net. The new reserve number will begin to be implemented this upcoming budget cycle.
Despite navigating the uncertain financial landscape, Callagy maintained the county is “structurally sound” and maintains a balanced budget. County staff will return to the Board of Supervisors with any adjustments needed in September, after the state and federal governments finalize their own budgets.
“We have a tendency here to turn obstacles into opportunities,” Callagy said. “I’ve never seen anything like this come together — between the state, the Fed, VLF and the way the economy is — in recent history. The good news is, we’re positioned well right now.”
(1) comment
“The largest cost in the county is salaries and benefits, making up about 70% of all expenditures, Chief Financial Officer Roberto Manchia said.” OK, so now that we know who’s taking the biggest bite of the meal, let’s begin reducing salaries and benefits. Reducing anything else is just an appetizer.
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