San Mateo County officials fight for VLF in Sacramento: Fight over $157 million in funding for county, cities continues 

But because the setup of San Mateo County’s existing educational revenue structures doesn’t qualify the county for the full in-lieu VLF amount, representatives are left to haggle for the money each year. That system has kept a fragile fiscal peace in prior years but, with only two-thirds of VLF paid to the county and its cities for last year and none allocated for the upcoming budget cycle, the situation has become dire, leaders warned. 

“This is catastrophic for San Mateo County and its cities, and it’s through no fault of our own,” San Mateo County Supervisor Jackie Speier told the state Senate Budget and Fiscal Review Subcommittee. 

Speier emphasized that the $119 million in VLF the county is not set to receive for the upcoming budget, as well as the $38 million owed from the prior fiscal year, is no small number. It is 18% of the county budget and up to 10% of budgets in certain cities — money that’s needed to fund police and fire departments, homeless shelters and mental health services that residents need to live. 

“We would have to close eight of our homeless shelters — that’s nearly 3,000 homeless people — or eliminate assistance for nearly 5,500 low-income families and seniors. Eliminate the psychiatric services for 600 homeless people. Eliminate benefits for 3,000 veterans,” Speier said. “I mean, you get the message.” 

The county’s ask to alleviate the looming crisis is twofold: first, that the state includes the $119 million allocation in the upcoming budget, and second, that a long-term solution be devised so leadership doesn’t have to beg for the money each year. Ultimately, whether that comes to fruition rests on the shoulders of a few key state players, including California Gov. Gavin Newsom. 

The point Speier returned to after the subcommittee hearing adjourned was that the system of in-lieu VLF disbursement the state devised decades ago was never intended to allow them to withhold the funds. 

“[Newsom] has the ability to fix this, and it’s not as if we’re asking for something that isn’t supposed to come to us,” she said. “We’re not asking for a bailout because we screwed up. We’re asking for money that is rightfully owed.” 

A representative from the California Department of Finance disagreed, testifying during the subcommittee hearing that the VLF funding was classified as a “discretionary expenditure” that wasn’t appropriate “in the context of the current fiscal situation.” 

But not everyone in Sacramento shares that opinion. State Sen. Christopher Cabaldon, D-Napa, who sits on the budget subcommittee, said during the hearing that it was clear the state had an obligation to repay counties, including San Mateo, its full VLF amount. 

“We have to solve it. San Mateo could have done nothing different. There’s nothing it could have done in order to avert this,” Cabaldon said. “San Mateo doesn’t earn this because San Mateo generates so much of our income tax revenue. San Mateo has earned this because it is our commitment to them.”

The county and its cities are also making that argument in the courts, recently suing the state for the $38 million it was owed from last year. As that case winds its way through the legal system, legislators and advocates will continue to fight at the state level, state Sen. Josh Becker, D-Menlo Park, said. 

Becker, who testified during the hearing alongside a robust group of county elected officials, nonprofit leaders and department heads, said while the county presented a strong, impassioned case, there was still work to be done. While discussions with the Department of Finance around a more long-term solution had ensued in weeks prior, the county was still waiting to receive a proposal, he said. 

“The state needs to acknowledge this money is owed and come up with a different funding mechanism and come up with a different pathway,” he said. “This money is owed.”