San Mateo County adopts $4.2B budget

The updated budget reflects a $791 million increase from a $3.4 billion budget adopted by the board in June. Those additional dollars include rollover funds from incomplete capital improvement projects, federal money given to the county through the American Rescue Plan Act and higher than expected returns on property taxes.

Over the next fiscal year, the county will spend millions on its top three priorities — recovering from the pandemic, combating homelessness and promoting equity in operations and services.

The second tranche of ARPA funding, about $74 million, was included in the most recent budget with $40 million still left unallocated. Nearly $149 million was granted to the county in total, with most of the funds going toward supporting housing and renter initiatives, small business grants and the fiscal recovery of the county and County Health budgets.

“We deserve a shoutout to the health department staff because they rolled their sleeves up and solved that shortage and have created a budget that we all think is very workable and will still manage to take care of the people who need our services,” Supervisor Carole Groom said.

About $700,000 from the Equity Fund will roll over into the new fiscal year and will be used to support housing and other programs. Callagy said the county will also be hiring an equity management analyst who will be stationed in the Human Resources department and will assist with engaging staff on inclusive and equitable workforce priorities.

An Equity and Belonging Manager will also be added to the equity team and the county released a request for proposals for support with staff equity training. Additionally, the county is preparing a pilot staff affinity group to build a strong sense of belonging in county offices, preparing to onboard members of the county’s Farmworker Advisory Commission and launching an Equity Resource Hub where staff will have access to equity tools, resources and learning opportunities.

More than $185 million will go toward homelessness initiatives in the coming year with $61 million directed toward homelessness prevention programs, interim housing and support services. The remaining nearly $123 million has been earmarked for permanent housing initiatives including $97 million of Measure K and ARPA funds that will cover affordable housing development and $23.7 million for housing vouchers.

“With a 20% increase in homelessness since the pandemic started, this board has made historic investments to house and support our most vulnerable residents,” Supervisor David Canepa said in a press release following the meeting. “The goal to reach functional zero homelessness is becoming within reach and this budget reflects the board’s values to make sure that no one is left behind.”

Canepa went on to laud the increased funding incorporated into the budget to provide communities with food and rental assistance and other basic needs given the strain many are feeling during a period of high inflation.

Looking ahead, Callagy said county officials are preparing for the worst-case scenario given the national financial uncertainty. Federal, state and local funds have bolstered the county’s budget during the pandemic, enabling the county to provide desperately needed services over the past two years, but high inflation, stagnant interest rates and a projected recession could force many to again turn to county services for support, Callagy said.

Chief Financial Officer Roberto Manchia said he and his staff used conservative estimates when making future revenue projections. Though property tax returns came in higher than anticipated largely due to commercial properties, Callagy said it’s difficult to say whether that trend will continue in the future. With that in mind, Manchia said they went with a 7% increase in property tax revenue, which has been the average increase over the last five years.

“I do think we’re looking at some stiff headwinds here and I’m glad to see we’re being conservative,” board Vice President Dave Pine said.

The board will receive a more thorough update from department heads in the near future but, meanwhile, Callagy said they have been advised to take calculated risks when budgeting for new innovative ideas.

Callagy and Manchia also noted the county’s reserve fund is well prepared to whether an economic downtown, at 14.7% of the county’s budget value. Of that, 9.5% is the General Fund reserves while the remaining 5.2% is department reserves, more than the 8% General Fund requirement and 2% department requirement, Manchia said.

At these levels, Callagy and Manchia said, departments would have the wiggle room they may need to continue operations while the board will have its own breathing room to continue pursuing ambitious initiatives and weather a financial downturn.

Additional financial savings are also ahead for the county as it prepared to pass a threshold that would allow it to reduce its contribution to its unpaid pension liabilities. Manchia said pensions are currently about 86% covered.

“We’re starting to see slowdowns in various areas that are concerning. We’ve been here before but we’re prepared for that and that’s maybe the difference now,” Callagy said. “It really depends how long, how deep, if we do go into that it will take to pull out of that.”

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