South San Francisco is warning parents that its subsidized childcare and after-school programs could shrink or get more expensive if Sacramento does not settle a long-running dispute over money owed to San Mateo County and its 20 cities. City Manager Laura Snideman told CBS San Francisco this week that more than 800 children are enrolled in the city's subsidized childcare programs, and that cuts would "likely" raise the cost of childcare for families.
"The state has broken a promise made many years ago to keep us whole," Snideman said. She said the possible cuts go well beyond childcare, listing "our police services, our fire services, childcare, after-school programs," and said the educators who supervise children after school could lose their jobs.
What the VLF shortfall is
The fight is over what is known as in-lieu vehicle license fee, or VLF, money. According to the City of San Carlos, local governments gave up their share of vehicle license fees in a 2004 state budget deal and were promised a replacement payment tied to the property tax system and school funding. That system depends on school districts that are funded by the state. In San Mateo County, so many districts have become "community-funded" (paid mainly by local property taxes) that only 2 of 23 remain state-funded, down from 12 a decade ago, which leaves too little money in the pot to cover what cities and the county are owed.
San Carlos says the shortfall began in fiscal year 2021-22, that the state's 2025-26 budget was the first time it failed to fully pay it back, and that by June 2026 the county's unpaid amount had grown to $226 million. CBS reports the county now puts this year's gap at nearly $230 million. Only two other counties, Mono and Alpine, face a similar problem, and on a much smaller scale.
How big the cuts could be
At a rare joint meeting of the Board of Supervisors and city leaders on Aug. 13, South San Francisco reported the largest cumulative city shortfall in the county, $13.2 million, according to a Coastside News report on the meeting. Snideman said then that the city could have to "eliminate potentially all subsidized childcare," including preschool, early learning and after-school care for up to 815 children, along with a possible fire station closure and the loss of 13 firefighter positions.
Other cities described their own hits at that meeting, including Daly City ($12.15 million), San Mateo ($12.9 million), Menlo Park ($5.4 million) and San Carlos ($4.4 million). County Executive Mike Callagy said the county's own $134.2 million share could put 603 county positions at risk.
What happens next
State lawmakers have agreed to negotiate. A budget trailer bill, which San Carlos identifies as AB 184, states the Legislature's intent to work with San Mateo, Mono and Alpine counties and their cities on a fix beginning in fiscal year 2027-28. The details have not been made public, and San Carlos notes it is still unclear whether a deal would require local governments to accept a permanent loss in exchange for guaranteed repayment.
"We're still very worried this funding is absolutely at risk," Snideman told CBS, though she said she is cautiously optimistic about the talks. For working parents, the stakes are immediate: one South San Francisco mother told the station the program is what lets her keep her 9-to-5 job while her children's school day ends around 2:30 p.m.
The money fight also hangs over local ballot decisions this fall. See our guides to San Mateo County Measure L and the San Mateo-Foster City Measure W school bond, and more Peninsula races on our 2026 election hub.