San Mateo County Supervisors Jackie Speier and Ray Mueller are demanding the state close a $226 million funding gap that has shortchanged the county and all 20 of its cities.

The two published a CalMatters commentary on Thursday, Aug. 27, escalating their push for a legislative fix to the Vehicle License Fee shortfall. The city of San Mateo is among the 20 municipalities affected.

"We are not asking for special treatment. We are asking for equal treatment," the supervisors wrote.

The county government itself is owed $134.2 million, and the 20 cities and towns are collectively owed $91.6 million for fiscal year 2025-26, according to the county's advocacy site. Every other Bay Area county receives its full VLF replacement funding.

How it got here

In 2004, California permanently reduced vehicle license fees and promised to replace that revenue annually for every county and city. The payment mechanism worked for years but has become obsolete in San Mateo County, blocking full payments without state action.

The gap kept growing. In FY 2011-12, the shortfall was $294,000. It ballooned to $70 million by FY 2022-23, then $119.2 million in FY 2024-25. As of July 2026, the figure stands at $226 million.

The county's mid-year budget update, presented to the Board of Supervisors on Feb. 10, called the unreimbursed shortfall "the single largest threat to the financial stability of the County." The governor's proposed budget for FY 2026-27, released Jan. 9, did not include funding to cover the prior year's $119.2 million gap.

What's at stake

Without a fix, services at risk include shelter access for nearly 3,000 people, rental assistance for more than 5,500 households, early literacy programs for 7,400 children, mental health care, crisis response, wildfire prevention, first responders, libraries, parks and road repairs, according to the county.

The county has been covering shortfalls by spending reserves typically set aside for capital projects. Budget officials warned that practice could undermine building maintenance, new facilities and other capital improvements.

San Mateo County, its 20 cities and towns, and Alpine and Mono counties previously filed legal action over the VLF funding issue. The litigation has since been withdrawn as the jurisdictions pursue a permanent solution through the Legislature, according to the county's fair-funding campaign.

Escalating pressure

The CalMatters commentary follows an Aug. 13 emergency study session where representatives from more than a dozen cities joined the Board of Supervisors in Redwood City. County Executive Mike Callagy said at that session, "It will change the face of delivery of services to our residents," according to Local News Matters.

Without a legislative fix, the county estimates more than $1 billion in VLF replacement funds will be at stake by 2030. No specific Sacramento hearing or vote on the issue has been scheduled.