San Mateo County sues state for $38M

“These funds are owed to San Mateo County and our 20 cities,” County Executive Mike Callagy said in the press release Aug. 27. “And instead of living up to its obligations, the state wants us to absorb the cost.”

Both the county and its incorporated cities have long struggled with the unique bureaucratic mechanisms that deploy VLF funding. A 2004 change in the distribution system of VLF, which comes from taxes on California vehicles, left local governments with far less revenue than previous years.

A majority of California cities receive substantial in-lieu VLF money from the state, as the reimbursement is determined by property tax revenue and the county’s school districts.

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. This leaves local cities uncertain of whether they will have VLF revenue, which is typically used to fund basic local services.

The lawsuit, filed in California Superior Court, argues that San Mateo County is still owed the remaining money and is unfairly burdened by the VLF distribution mechanism.

“The state’s failure to provide full payment of the VLFAA to San Mateo County and its cities will cause serious and lasting harm to the county and the cities whose budgets require these funds to deliver public services to residents,” the lawsuit said.

Legislators worked to deliver the majority of VLF funding amidst a tight budget environment and a looming deficit, they said previously.

“We secured the lion’s share of what the county was owed, and I think that’s a big win in these very austere times,” Assemblymember Diane Papan, D-San Mateo, said previously.

Papan, Assemblymember Marc Berman, D-Palo Alto, and state Sen. Josh Becker, D-Menlo Park, did not immediately respond to request for comment.