Every City In SMC To Join In Funding Lawsuit Against The State

SAN MATEO — All cities in San Mateo County have joined the county in a lawsuit against the state, arguing that the state is nearly $38 million short in funding owed to the county and its cities.

"The county brings this lawsuit to compel the State of California to make good on its financial obligations to local government," reads the complaint. "The Legislature has shorted the county and the cities within it $37,750,993 in funding promised and due under law."

The lawsuit accuses the state of violating a 2004 budget agreement known as the Vehicle License Fee Swap, or VLF Swap, in which local governments and counties gave up their vehicle license fee revenues to help the state close its budget deficit.

In exchange, cities and counties agreed to receive annual property tax allocations known as the Vehicle License Fee Adjustment Amount, or VLFAA.

To meet its VLF Swap obligations, the state created a system that ties the promised VLFAA funding to "non-basic-aid" school district funding. Non-basic-aid school districts are those whose property taxes alone do not cover minimum funding requirements.

However, many school districts in San Mateo County are considered "basic aid," meaning that they receive minimal state funding because property tax revenues do cover the minimum funding requirements.

This difference in funding mechanisms, the county argues, has shorted the county and its cities millions of dollars in obligated funding from VLFAA.

Meanwhile, the state pays the full amount to local jurisdictions in 55 other counties.

"We have collectively been singled out by the state and treated differently than every other county," said County Executive Officer Mike Callagy in a statement. "It is extremely important for every resident to be informed about the real impacts of this state taking, this year and beyond, and to join us in the fight to keep our tax dollars in San Mateo County."

The funding is supposed to be shared between the county and its cities to go toward services like health care, affordable housing and public safety.

"For communities like East Palo Alto, every dollar of state-promised funding matters," said East Palo Alto Mayor Martha Barragan in a statement. "We rely on these resources to support youth programs, neighborhood safety, and essential services our residents depend on every day."

For the city of San Mateo, $2.2 million of the obligated $38 million was supposed to be allocated to the city.

"The magnitude of funding cuts to local government services and programs in every city as a result of the state's actions is deeply concerning," said San Mateo Mayor Rob Newsom in a statement. "Absorbing that shortfall has impacted essential city services and core neighborhood programs."

The county originally filed the suit in August along with Mono and Alpine counties, which have also been dealing with similar challenges in receiving the full funding.

The lawsuit names the state of California, Department of Finance Director Joe Stephenshaw, and Controller Malia Cohen as defendants.

"Standing united with all 20 cities sends a clear message: San Mateo County deserves fair and consistent funding," Barragan said.

The case is currently pending in San Francisco Superior Court. The state of California is expected to respond to the suit in January, according to San Mateo County.

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