San Mateo and Napa officials ask Legislature to restore Vehicle License Fee backfill as counties face multi‑year shortfalls

Local elected officials from San Mateo County, Napa County, the city of Napa and the city of Calistoga told the Senate Budget Subcommittee No. 4 that a statutory and budgetary backfill is needed for vehicle license fee (VLF) shortfalls that emerge when school districts become basic‑aid and cannot absorb redirected property tax revenue.

County and city representatives said the VLF in‑lieu funding is a predictable and critical portion of local general funds, used for public safety, roads, social services and other county and city obligations. For some smaller jurisdictions the VLF backfill represents a double‑digit share of discretionary revenue: Napa County estimated the VLF amount at about $29.3 million (roughly 15% of the county’s discretionary general fund); the city of Napa said the VLF amount is roughly $10–12 million (about 9% of its general fund); Calistoga’s share is roughly 15% of its general fund, city officials said.

Why it matters: The state’s 2004 vehicle‑fee/property tax revenue shift (the ERAF/VLF swap) created a statutory structure that ensured cities and counties received the revenue available under the new formula. When school districts in some counties become basic‑aid because local property tax per pupil exceeds the threshold, the excess ERAF cannot be absorbed and the local VLF shift cannot fully materialize — creating a shortfall. Historically the Legislature has provided a general fund backfill in affected years. Counties now ask that the Legislature either fund the outstanding shortfall for FY 2023‑24 or enact a permanent fix so the funding is not left to annual discretionary action.

What speakers told the committee - Supervisor Billy Ramos (Napa County Board of Supervisors) described the local stakes: Napa faces a roughly $46.9 million VLF allocation across county and cities, with $29.3 million affecting county discretionary funding. He urged a long‑term fix to avoid annual “pilgrimages” to Sacramento seeking discretionary backfills. - Councilmember Beth Painter (City of Napa) said the city’s budget relies on $10–12 million in VLF funds (about 9% of the general fund) and urged a permanent solution rather than year‑to‑year requests. - Vice Mayor Iris Lopez Ortega (City of Calistoga) and other local leaders noted their jurisdictions serve low‑income and tourism‑dependent populations and that losing the funds would force cuts to core services. - Legislative Analyst’s Office and Department of Finance staff explained the statutory mechanics: the state’s historical VLF/ERAF arrangement provides no automatic statewide backfill when specific counties lack eligible basic‑aid school districts to absorb ERAF; previously the Legislature has provided discretionary backfills.

Numbers and scope - San Mateo County reported a $114 million shortfall request for FY 2023‑24; the LAO and DOF noted most of the statewide shortfall dollars currently stem from San Mateo’s situation. - Napa County estimated the local VLF amount (county + cities) at about $46.9 million for the fiscal year in question; the county’s requested backfill figure and the local distribution of ERAF have been provided to the committee by county staff.

Committee response and next steps Members of the subcommittee noted the historical origin of the VLF shift (the 2004 compromise when the state reduced VLF rates) and expressed interest in coordinating with Finance and the LAO on a statutory solution that avoids annual ad‑hoc budget add‑ons. Chair Cabaldon said he expected ongoing negotiations between the administration, LAO, and affected counties to pursue a more predictable and equitable approach. Several local leaders asked that FY 2023‑24 shortfalls be addressed in this budget cycle while the longer‑term statutory fix is developed.

Ending No vote was taken. The committee held the discussion open and asked the administration and LAO to examine options to repair the shortfall and to consider a durable statutory fix that treats counties consistently across the state.