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Grand jury questions San Mateo County’s budget deficit
July 23, 2013, 05:00 AM By Michelle Durand Daily Journal Staff
San Mateo County has not had a structural deficit for the last 10 years, despite using the alleged gap and the use of reserves to balance the budget as reason for voters to favor four tax measures, according to the civil grand jury.

The jury report released yesterday claims the Board of Supervisors “systematically” excludes some or all of its extra property tax revenue when penciling out its budget to create the impression of a deficit despite having a multi-million dollar surplus.

But board President Don Horsley and County Manager John Maltbie counter that the jury is the one that is wrong and that the county’s habit of not including excess Educational Revenue Augmentation Funds is fiscally prudent.

“Had we thrown all caution to the wind and spent every cent then we’d have real financial trouble,” Maltbie said.

Horsley said he “resents” the jury’s statement that the county didn’t paint an accurate picture of its finances for voters faced with measures T, U and X in the June 5, 2012 election and Measure A in the Nov. 6, 2012 election.

“It is casting aspersions that are unfair and unfounded,” Horsley said.

The crux of the jury’s report entitled “An inconvenient truth about the county’s so-called ‘structural deficit’” is ERAF, the money left after schools meet their funding requirements. San Mateo County is one of only three counties statewide that have extra funds and, while the money has come every fiscal year since 2004, Maltbie said it cannot be considered anything beyond one-time amounts.

For instance, Maltbie said, the governor’s new school funding formula may mean the county loses $20 million to $30 million in ERAF.

The jury, though, said ERAF should be included because it is about 5 percent of the total budget, was used to balance the budget for five fiscal years between 2009 and 2013 and paid for routine items like adding positions and maintaining the property tax system.

If the county actually counted ERAF in its budget calculations, there would be no actual deficit because the extra amount is actually more than the structural deficit, the jury reported. The decrease in unrestricted funds from year to year is not because of the structural deficit but “extraordinary” expenditures like $57 million to buy the Circle Star office buildings and new jail land, the jury report states.

The jury recommends the Board of Supervisors report all anticipated revenue, including ERAF, and inform the public the most current assessment of it deficit or surplus when giving voters revenue measures.

Had those procedures been in place previously, voters would have learned of the county’s $26 million surplus in fiscal 2012 prior to passing measures T and A, according to the report.

Measure T placed a 2.5 percent rental car tax in the unincorporated areas. Measure A increased the county’s sales tax by a half-cent for the next 10 years. The Board of Supervisors is currently in the midst of tentatively allocating the $64 million annually and on Tuesday will consider multi-million dollar requests by private Seton Medical Center in Daly City and SamTrans.

The report released yesterday is the latest aimed at the county and its finances; the last questioned the county’s unfunded pension liability and concluded the debt is much greater than presented. Horsley thinks the focus on government spending is a sign of the distrustful times and that, while the criticism keeps the county on its toes, it must also be taken with a grain of salt.

Maltbie, who said he is not bashful about questioning the grand jury’s methods, takes the skepticism future in calling its report “completely untrue.” Maltbie said the county and public cannot know what information the jury uses because its proceedings are done in secret and their members unvetted publicly.

Regardless, the grand jury reports carry no legal weight but recipients are required to respond in writing within 90 days.


(650) 344-5200 ext. 102

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