County rally targets Sacramento over $226 million funding gap

San Mateo County officials took their fight over missing state funding to the steps of County Center on Thursday, Aug. 13, warning that $226 million in Vehicle License Fee money owed to the county and its 20 cities remains unpaid — including $4.6 million owed to Burlingame alone.

Supervisor Ray Mueller spoke at the rally in downtown Redwood City, organized with the San Mateo County Economic Development Association. The county's official social media accounts tagged Gov. Gavin Newsom directly, calling on Sacramento to restore the funding.

The stakes have grown sharply since this outlet reported on the county's $73 million VLF gap in July. The county frames the total shortfall at $226 million for fiscal year 2025-26, with more than $1 billion at stake by 2030 if no permanent fix passes. The $226 million figure is larger than the $73 million gap this outlet reported in July and the $119 million Assemblymember Diane Papan's office cited in June; the county has not publicly explained the difference.

The County of San Mateo said on its official X account that without action from Sacramento, $226 million in VLF funding for the county and its cities remains at risk "this year and beyond."

What's at risk locally

According to the county's advocacy website, the $226 million breaks down to $134.2 million owed to county government and $91.6 million owed to all 20 cities and towns. VLF replacement funding accounts for 18% of San Mateo County's general fund.

The county warns that without full restoration, nearly 3,000 people could lose shelter access, more than 5,500 households could lose rental assistance and 7,400 children could lose early literacy programs. Cuts to mental health care, crisis response, wildfire prevention, libraries and road repairs are also on the table.

How it got here

In 2004, California replaced local Vehicle License Fee revenue with guaranteed annual payments to all 58 counties. San Mateo County says it is one of the only counties not receiving its full share because the payment mechanism became obsolete and the state has refused to update it.

The Legislature included about $77 million in relief in the 2026 state budget. "It's an important step forward, it's a substantial achievement for us. It doesn't fully resolve the issue," Assemblymember Diane Papan said in a June 13 statement when the partial fix was announced.

County Executive Mike Callagy warned at the county's June 8 budget hearing that the shortfall was enormous. The county and several other affected jurisdictions filed suit against the state in fall 2025 to compel payment.