San Mateo County faces major budget shortfall, sues CA for $100M owed

SAN MATEO, Calif. (KGO) — San Mateo County Supervisor David Canepa on Monday warned that the county faces severe financial trouble without additional state funding.

“If we don’t get those state dollars, we are in deep, deep trouble,” Canepa said.

He said two major issues are driving the shortfall.

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The first is a $20 million refund the county must pay to biotech company Genentech after years of accidental overcharges on some taxes.

The second is an ongoing dispute with the state over California’s Vehicle License Fee.

San Mateo County – along with several other California cities and counties – has been in a long-running dispute with the state over Vehicle License Fee (VLF) revenue. This stems from changes made in 2011, when the state shifted certain local tax revenues to help balance its budget.

Local governments argue that the state shortchanged them in the process, particularly in how property tax in lieu of VLF was calculated.

San Mateo County officials have publicly stated they believe the state owes them more than $100 million in back payments. In 2023, the county filed a lawsuit seeking to recover those funds. The state has disputed the claim and so far, the case had not been resolved in court.

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Without that money, officials predict some schools and agencies could lose hundreds of thousands of dollars.

“It’ll affect public safety, most important. It’s going to affect mental health. It’s going to affect just how we deliver services,” Canepa said.

The funding gap is also affecting nonprofit organizations that receive substantial support from the county.

Mike Stancil, executive director of Daly City Partnership, said his group – which operates in northern San Mateo County and provides food assistance, after-school programs and clothing – is struggling to meet demand.

“The biggest challenge that we have is that it’s one thing after another,” Stancil said. “It’s never really declined since the pandemic. So the cost of living right after the COVID pandemic affected us and now we’re dealing with another sharply-raised increase.”

Canepa said the county has sued the state to recover the Vehicle License Fee funds. Without them, he warned, the consequences could be long lasting.

“If they take away everything, and even if they take away 50 percent, we as a county have to rethink how we’re going to” operate, Canepa said.