The entire San Mateo County is dragging the State of California to trial, cities seek millions of unpaid money
San Mateo County, California – Every city in San Mateo County has agreed to support the county’s lawsuit against the State of California to get back about $38 million that was not paid. The County filed the complaint in August 2025, saying that the State had not paid the entire amount owed under a long-standing financing system that helps important local initiatives. Now that all 20 cities are supporting the legal case, the effort to get back the missing money is at its strongest point yet.
County authorities said that local governments should have received about $114.3 million in state-shared revenue this year. They only got $76.5 million, which was roughly $38 million less than they needed and expected. Communities usually utilize this money to pay for basic services like health care, public safety, and programs that help people find affordable homes. Last year, during budget talks, state lawmakers returned some of the cash. However, the relief only covered about two-thirds of the overall sum and was only for the current year. County authorities say that the upcoming state budget may leave out San Mateo County again.
Supervisor Lisa Gauthier said that the money that wasn’t sent to them comes at a time when local governments are already having trouble with their budgets.
“At a time when the County and our cities are working hard to sustain critical services while confronting ongoing fiscal challenges, it’s essential that the state maintain the local funding that nearly every other jurisdiction in California continues to receive,” said Supervisor Lisa Gauthier.
Mono and Alpine counties are also involved in the lawsuit because they have similar losses through the same state financing system. The complaint says that the State broke the rules of the 2004 “VLF Swap,” which was a budget agreement that swapped money from vehicle license fees with monthly payments based on property taxes called the Vehicle License Fee Adjustment Amount. Local leaders say that technological problems with the system have let the State avoid paying what it owes, even while 55 other counties are getting full funds without any problems.
City leaders from throughout San Mateo County are worried about what may happen because of the gap. Rob Newsom, the mayor of San Mateo, said that his city is missing $2.2 million, which is hurting community programs and other public services. Martha Barragan, the mayor of East Palo Alto, said that every dollar counts for smaller municipalities, especially when it comes to youth and safety programs. Sue Beckmeyer, the mayor of Pacifica, talked on how important the funding is for emergency response activities. She said that losing this money puts both local people and visitors who pass through Pacifica every day at danger.
The Superior Court of California, County of San Francisco is now waiting for a response to the complaint, which names the State of California and Governor Gavin Newsom’s financial director, Joe Stephenshaw, as defendants. The lawsuit asks for full reimbursement going ahead in order to stop budget disputes from happening again and to bring financial stability back to the towns and counties affected.
San Mateo County officials warn that what happens next will decide if communities keep the resources they need to keep providing services that people need every day. Now that all the cities are on board with the lawsuit, local governments are getting ready for a long battle to get the money they think they are legally owed.
