$226M Shortfall Could Force Deep Cuts To SMC Services

REDWOOD CITY, CA — San Mateo County and its cities are warning that a projected $226 million state funding shortfall could force sweeping cuts to public safety, health care and other local services, potentially putting around 1,000 government jobs at risk.

Hundreds of elected officials, public safety leaders, workers and community members gathered outside County Center on Thursday to call on California lawmakers and Gov. Gavin Newsom to permanently address the growing Vehicle License Fee replacement funding gap.

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The county government alone faces a roughly $134 million shortfall, while its 20 cities and towns collectively face another $91.6 million gap. The county's fair-funding website puts the respective figures at $134.2 million and $91.6 million for the 2025-26 fiscal year.

"Let me tell you exactly what $134 million dollars in county cuts looks like. It means more than 600 critical public servants working at the county are on the chopping block," said Supervisor Ray Mueller.

Officials said no decisions have been made about specific cuts, but warned that a shortfall of that magnitude cannot be sustained without reductions to staffing, programs and services.

The county says nearly 3,000 people could lose access to shelter, more than 5,500 households could lose rental assistance and 7,400 children could lose access to early literacy programs if the funding isn't restored. Officials also warned of fewer nurses, police officers, firefighters and emergency responders, along with reductions to libraries, parks and youth and senior programs.

Some cities are already making cuts.

San Bruno City Manager Alex McIntyre said the city eliminated eight positions, including three firefighter jobs and one police officer position, and expects it will need to cut further.

San Mateo City Manager Alex Khojikian said his city's projected shortfall jumped from $7.1 million to $12.9 million.

The dispute dates to 2004, when California reduced the Vehicle License Fee paid by vehicle owners and established replacement funding for local governments. County officials said the mechanism used to distribute that money has since become obsolete in San Mateo County, leaving the county and its cities unable to receive their full allocation without additional action by the state.

For six consecutive years, state lawmakers have approved one-time funding that covered all or a substantial portion of the gap, but those appropriations did not permanently fix the underlying funding formula.

San Mateo County has also used about $80 million from its reserves over the past two years to make up for money it did not receive from the state.

"This is the seminal fiscal issue this County has faced in its modern history," said County Chief Executive Mike Callagy. "The loss of these dollars will mean staggering, systemic changes for San Mateo County and will change the face of our county."

County officials say more than $1 billion could be at stake by 2030 if the funding problem is not permanently resolved. The county and all 20 cities are pursuing both legislative and legal efforts to secure the money, including court proceedings launched with Alpine and Mono counties and their cities.