Questions loom as San Mateo County proposes two-year budget

“While we continue to navigate uncertain times, this Board does so with a commitment to fiscal responsibility, service to our community, and a clear focus on both immediate priorities and our long-term vision,” the report reads.

Amid economic uncertainty and the potential for significant policy shifts, the county is preparing “thoughtfully and ensuring we remain flexible,” Callagy said in a press release.

“While this budget reflects the realities of increased pressures both with respect to revenues and expenses, we are prepared to respond to circumstances as they change,” he said.

The total recommended budgets are $4.9 billion for fiscal year 2025-26 and $4.5 billion for fiscal year 2026-27, and for the discretionary general fund, $3.5 billion and $3.2 billion, respectively.

For fiscal year 2025-26, of the total budget, approximately 28% will go toward health, which includes County Health, Behavioral Health and Recovery Services and public health policy and planning. Around 19% will go toward community services, which includes planning and building, parks, public works and emergency management. About 12% will go toward criminal justice, which includes the Sheriff’s Office, the District Attorney’s Office, the Coroner’s Office and around 8% toward social services, which includes the Human Services Agency and Department of Child Support Services. The largest chunk, 33%, will go toward administration and fiscal services, which includes the county’s elected positions and their respective departments and staff.

With a planned smaller budget for fiscal year 2026-27, the proportion of funds toward health, criminal justice and social services will increase slightly, and those toward community services and administration and fiscal services will decrease slightly from the year prior.

Evolving budget landscape

In response to the changing political and fiscal landscape, critical components of the county’s budget and operations specifically associated with programs like public safety, social services and health are at significant risk, according to the report.

Changes to eligibility of programs that serve thousands of county residents including Medicaid, Supplemental Nutrition Assistance Program and Temporary Aid to Needy Families will also likely stress the county’s available support systems. Significant changes will include work and immigration status requirements.

Particularly, changes to the qualifications for Medi-Cal, the state’s health insurance program for low-income residents, will likely shift who is able to receive benefits, use adjacent health care programs, and result in an influx in residents who may need other safety-net support systems.

For the last year, low-income undocumented immigrants have been eligible for Medi-Cal and able to use services offered by County Health. However, Gov. Gavin Newsom’s budget draft proposed to freeze such eligibility. This comes as the Trump administration proposed major spending cuts to Medicaid, including penalizing states that provide insurance for undocumented immigrants by reducing federal funding.

As Medi-Cal eligibility may change, County Health will watch the county’s Access and Care for Everyone program — a low-cost health coverage option for low-income residents who are not eligible for Medicare or Medi-Cal or other insurance policies — as more people may seek the service, Chief Health Officer Colleen Chawla said previously.

In San Mateo County, 161,056 residents are enrolled in Medi-Cal, according to the county’s Human Services Agency. Making up the majority of Medi-Cal recipients, 48% are Hispanic and 15% are Asian.

Ongoing fiscal developments by the state and federal governments will likely require adjustments to the budget, the report reads, which will be presented to the Board of Supervisors for adoption as they arise.

To mitigate these changes and respond to long- and short-term fiscal changes, multiple long-term financial policy changes are proposed in the budget as well.

One aspect is Returned Educational Revenue Augmentation Funds that are used to address delays in Vehicle License Fee Adjustment Amount reimbursements that the state owes the county. In 2023 and 2024, these VLFAA payments were not included in the governor’s budget, making it so Returned ERAF must be used to maintain cash flow, however, it does not close the entire financial gap and is ultimately unsustainable.

“This use of Returned ERAF to cover VLFAA shortfalls adversely impact the county’s ability to fund capital outlays, ongoing maintenance costs and other capital improvements,” the report reads.

Returned ERAF was previously budgeted at 50% of estimated value to meet the ongoing expenditures stifled by limited cash flow from VLFAA, but will be budgeted at 60% in fiscal year 2025-26, 65% in fiscal year 2026-27, and up to 70% ongoing, according to the report.

The county will also work to increase its reserves from 10% to 15%, and departments must maintain a 4% reserve.

Revenue is budgeted to decrease rather significantly in fiscal year 2025-26 compared to fiscal year 2024-25, moving from approximately $1.01 billion to approximately $922 million. However, property taxes remain the largest discretionary revenue source for the county, which is expected to grow by an average 4.3% in fiscal year 2025-27.

The budget plans for the net addition of 13 county positions in fiscal year 2025-26, which is relatively low compared to previous budget recommendations, but the overall cost for salary and benefits continues to rise, according to the report.

The Board of Supervisors will hold a three-day public hearing to review the recommended fiscal year 2025-27 budget that will be open to public comment from June 23 to June 25, according to the report.

“We are prioritizing what the county is doing now, meeting the needs of today’s residents, while continuing to build toward the future,” the report reads. “This Recommended Budget strikes a careful balance: it addresses short-term issues head-on while keeping our eyes firmly on long-term impacts and opportunities.”