San Mateo County budget balanced for now

The county’s $3.4 billion budget, after covering staffing and operational costs, has been largely focused on continuing its COVID-19 recovery, supporting housing initiatives and advancing equity.

Beyond concerns around growing inflation which Callagy warned could lead to a recession as has happened in the past, additional concerns have been fueled by uncertainty around how the state will handle vehicle licensing fee repayments to the county.

Within 18 months, the state has agreed to repay the county in full for what VLF funds it owes this year but Callagy said projections indicate a shortfall of about $64 million and a permanent solution is still not on the books. Without that funding, Callagy said key county programming could be jeopardized.

“That is definitely a threat and something we’re going to have to keep an eye on it,” Callagy said, noting the state was considering having the county repay itself using excess Educational Revenue Augmentation Fund dollars, money collected from property taxes that first goes toward supporting schools and what dollars remain are distributed to jurisdictions to support vital services.

More than a decade of strong financial growth could also soon be stunted as expenditures potentially surpass revenue in the near future, Callagy warned. He shared strong concern for a dip in property tax revenue that has begun to fall after peaking at 8% and is expected to come in at about 5% this year. Sales tax revenue has also not yet returned to pre-pandemic rates and Callagy expressed concerns about how recent inflation could affect it.

Projections indicate the county will see a General Fund shortfall of about $22 million in the coming year, though final numbers won’t be known until September when year-end funds come in, Callagy said. One-time funds will be used to balance those losses and an ongoing $5.5 million contribution will go toward addressing a $20 million County Health budget deficit but Callagy said long-term spending will need to be “looked at with a closer eye.”

The most challenging ongoing cost is staffing, Callagy said. Recent salary increases have added about $25.5 million to the county’s budget and the market is only getting more competitive.

Budget reserves have fallen but overall remain well above the 2% minimum with departmental reserves sitting comfortably around 6.5%, Callagy said, commending the departments for budgeting conservatively.

But ultimately, Callagy said the county is prepared to continue serving the public without layoffs. Instead, he noted the departments will be expanding services and hiring additional staff after a nearly two-year hiring freeze prompted by the pandemic.

“It really is in our hands to make a better world for all who are living in it and I think this board has done an outstanding job at accomplishing that,” Callagy said. “We may be in for some tighter times, more difficult times in the future but we’re well-positioned to handle those times.”

sierra@smdailyjournal.com

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