San Mateo is bracing for a $16 million general fund deficit next fiscal year — more than double this year’s projected shortfall — as the city battles a stagnant economy, increased operating costs and tenuous state-level funding sources.
The widening deficit is partly driven by the city’s decision not to include a major revenue generator in the budget for this upcoming fiscal year 2026-27, which begins in July. The removed funding source is technically a reimbursement the state gives the county and is based on a complicated formula that takes into account vehicle license fee revenue and school districts in each county. The funds are at the center of a lawsuit against the state, as it hasn’t been reimbursing San Mateo County jurisdictions.
"At this point in time, I cannot recommend that we budget for VLF," City Manager Alex Khojikian said during a council meeting April 20. "We've already been stripped of $2.2 million so far for this current year. It’s really concerning overall.”
The city projects $174 million in general fund revenue, with $190 million in expenditures in 2026-27. Another key source of revenue is sales tax, which is expected to stay flat amid a sluggish economy, and property transfer tax, also susceptible to ebbs and flows in the housing market.
“We are keeping an eye on what the Federal Reserve is doing. They are in a wait-and-see mode, and that's partly because the labor market is not looking as strong as the way they'd like it to look, but inflation is still high,” Finance Director Abby Veeser said during the council meeting.
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“We’re not hearing that there is going to be more than one rate cut in 2026, which is definitely going to affect interest rates and potentially impact our housing market depending on how things go.”
The transfer tax may also face an existential threat, as a possible ballot measure could prohibit jurisdictions from imposing such taxes throughout the state.
“The new statewide proposed ballot measure — it’s not on the ballot yet — is looking to eliminate real property transfer tax, which is our third largest revenue source,” Veeser said.
Expenses have also surged, she added, especially insurance premiums. The city is limiting hiring for vacant positions, and the City Council has been weighing a sales tax measure that could go before voters in November that could help narrow the operating deficit if passed.
Folks, the biggest takeaways are that San Mateo continues to do next to nothing to reduce expenses and instead, would rather propose more taxes to pay for ever-increasing union salaries, pensions, and benefits. Notice San Mateo says they’re only “limiting” hiring for vacant positions. Why not stop hiring for all positions? And when folks retire, leave those positions vacant? Regardless, San Mateo isn’t doing their fair share so vote NO on the upcoming sales tax measure. San Mateo says they’re weighing the measure but I’m predicting it will be a sure thing and they’re only weighing when to “officially” publicize the measure.
Mr. Y - I agree and they should cut overhead by freezing salaries and or providing pay cuts. A city business should treat tax payers money like it's a rare commodity, not water that flows from a spigot. Divide the $16 million deficit by revenues (about $180 million) which is about 9% and then cut all salaries by 9%. It is really quite simple, it's what responsible families do when income has changed.
The picture is much worse and cuts need to be more severe, This does not take into account the capital needs of over $300M which will be financed with debt which effectively triples the costs. The transfer tax as I understood it would limit transfer tax to 1%. City and article make it sound like there will be no transfer tax if passed.
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Folks, the biggest takeaways are that San Mateo continues to do next to nothing to reduce expenses and instead, would rather propose more taxes to pay for ever-increasing union salaries, pensions, and benefits. Notice San Mateo says they’re only “limiting” hiring for vacant positions. Why not stop hiring for all positions? And when folks retire, leave those positions vacant? Regardless, San Mateo isn’t doing their fair share so vote NO on the upcoming sales tax measure. San Mateo says they’re weighing the measure but I’m predicting it will be a sure thing and they’re only weighing when to “officially” publicize the measure.
Mr. Y - I agree and they should cut overhead by freezing salaries and or providing pay cuts. A city business should treat tax payers money like it's a rare commodity, not water that flows from a spigot. Divide the $16 million deficit by revenues (about $180 million) which is about 9% and then cut all salaries by 9%. It is really quite simple, it's what responsible families do when income has changed.
The picture is much worse and cuts need to be more severe, This does not take into account the capital needs of over $300M which will be financed with debt which effectively triples the costs. The transfer tax as I understood it would limit transfer tax to 1%. City and article make it sound like there will be no transfer tax if passed.
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Keep the discussion civilized. Absolutely NO personal attacks or insults directed toward writers, nor others who make comments.
Keep it clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't threaten. Threats of harming another person will not be tolerated.
Be truthful. Don't knowingly lie about anyone or anything.
Be proactive. Use the 'Report' link on each comment to let us know of abusive posts.
PLEASE TURN OFF YOUR CAPS LOCK.
Anyone violating these rules will be issued a warning. After the warning, comment privileges can be revoked.