The Monterey County Board of Supervisors authorized the county auditor‑controller to remit funds to the State Employment Development Department to correct an under‑withholding in State Disability Insurance (SDI) taxes and directed staff to return with options for where the payment should come from.

Auditor‑Controller Rupa Shah told the board her office located a configuration error in the county payroll system that omitted deferred compensation and CalPERS retirement contributions from SDI tax calculations. Shah said the county must amend quarterly returns for the period October 2022 through June 2025 and remit the state liability, including penalties and interest. "We are here seeking authorization for the auditor controller to remit up to $1,700,000 to the state for under‑withheld SDI tax," Shah said.

Shah presented the estimated breakdown used by staff: an estimated tax liability of about $1,200,000, roughly $180,000 in penalties and about $98,000 in interest, plus Social Security and Medicare employer tax of roughly $80,000 — for an estimated total near $1.5 million. The auditor‑controller requested an authorization cap of $1.7 million to allow a buffer while the state independently calculates final penalties and interest.

Board members pressed staff on the source of funds. Raquel Esparza of the county administrative office (budget office) said the CAO recommended using the general fund "compensated absences" assignment, which currently holds about $10.4 million against a larger, longer‑term liability for vacation accruals of roughly $50 million noted in the county's audited statements. Supervisor John Church voiced concern about using that assignment and asked whether drawing down the account could create pressure in future budgets; Esparza and budget staff said the account has been relatively stable in recent years but acknowledged the long‑term liability remains.

Supervisor Luis López moved to authorize the remittance and to require the auditor‑controller and CAO to return at the board's next meeting with explicit funding‑source options; the motion included direction that the payment not be recouped from county employees. The motion passed unanimously.

What happens next: the auditor‑controller's office plans to amend the affected quarterly returns and remit payment to the state, but will return to the board at the next meeting with a choice of funding sources for the actual payment. Shah told the board the payment is intended to be made this month and that active employees will see a one‑time adjustment reflected on upcoming pay stubs; separated employees will see the county‑paid SDI amounts on their year‑end W‑2 forms.

Why it matters: The county acknowledged a multi‑year payroll configuration error that created an obligation to the state. The board chose to use county funds to satisfy the liability rather than implementing salary recoupment from employees, and asked for options to minimize budget risk before finalizing the appropriation.

Votes at the meeting: the motion directing staff to remit the SDI amounts to the state and to return with funding options carried on a unanimous vote of the Board of Supervisors.