Special Notice / Hearing: None__
Vote Required: Majority
To: Honorable Board of Supervisors
From: Michael P. Callagy, County Executive
Connie Juarez-Diroll, Chief Legislative Officer
Subject: August Informational Report on the 2026 State and Federal Legislative Sessions and Third Quarter Legislative Presentation
RECOMMENDATION:
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Accept the August 2026 informational report on the 2026 state and federal legislative sessions and the third quarter legislative presentation.
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BACKGROUND:
On June 29, 2026, Governor Gavin Newsom approved the 2026-27 state budget. This followed the June 26 announcement of a three-party agreement among the Governor, Assembly Speaker Robert Rivas, and Senate President pro Tempore Monique Limon. The Budget Act of 2026 allocates a total of $351.7 billion, with $251.5 billion coming from the General Fund. This is roughly $2 billion less than the Legislature’s Budget Plan but about $4 billion more than the Administration’s May Revision proposal. The act sets a record with total reserves of $35.2 billion. It balances the General Fund for 2026-27 and 2027-28 and reduces the projected 2029-30 structural deficit from $23 billion to $8.4 billion, compared to the Governor’s January budget. The plan also proposes changes to the fiscal reserve calculation and schedule to boost deposits. While the budget avoids or delays many safety net cuts proposed last year and in the May Revision, it still does not fully fund all of San Mateo County’s and the County’s related priorities, which are detailed further below.
After passing the state budget, the Legislature adjourned for summer recess on July 2 and reconvened on August 3 to start the final phase of the 2026 legislative session. The Senate and Assembly Appropriations Committees have until August 14, 2026, to meet and report bills to their respective Floors. This includes conducting 'Suspense File” hearings, which will decide the fate of numerous bills with major fiscal impacts on the state. Both houses need to pass bills by August 31, 2026, and the Governor has until September 30, 2026, to sign or veto measures sent to him.
At the federal level, the House of Representatives is progressing with its FY27 appropriations process, having passed all twelve spending bills through the full Appropriations Committee. Meanwhile, in the Senate, progress on the FY27 appropriations bills has slowed, as Chair Susan Collins (R-ME) and Ranking Member Patty Murray (D-WA) have yet to agree on overall spending levels.
On June 10, 2026, President Trump signed the Secure America Act (S.2) into law, allocating $69.5 billion in multiyear mandatory funding for immigration enforcement via the budget reconciliation process. This law designates $38.5 billion for Immigration and Customs Enforcement (ICE) and $26 billion for Customs and Border Protection (CBP), with all funds available through FY2029. It also includes at least $350 million for ICE operations in jurisdictions that do not cooperate with federal immigration enforcement, with restrictions on the use of these funds to release or parole individuals in those areas. Additional federal legislative activity is detailed in the federal legislative section at the end of this memo.
DISCUSSION:
2026-27 State Budget Update
The following sections outline key features of the 2026-27 State Budget and highlight significant budgetary actions affecting San Mateo County. For more detailed information on specific department impacts and differences between the budget versions, refer to the attached detailed budget table (Attachment A).
Vehicle License Fee (VLF) Shortfall
The Budget Act includes $80 million in one-time General Fund to compensate San Mateo, Mono, and Alpine Counties for their VLF in lieu payment shortfalls. Of this amount, $77 million is designated for San Mateo County and its 20 cities. The County initially requested $157 million, covering $119 million owed for FY 24-25 and $38 million from FY 2023-24.
Additionally, the final budget removed a provision from the Legislative Budget Plan that would have allowed the Department of Finance (DOF) to allocate an additional $80 million to San Mateo County for this purpose. Consequently, all three counties will not be made whole for another fiscal year. At the direction of the Board’s VLF subcommittee, the County Executive’s Office will work with delegation members, labor, and other stakeholders to seek the inclusion of a permanent solution to this issue in a trailer bill during the final month of the state legislative session.
County Health and Human Services H.R. 1 Impacts
• Indigent Care/Emergency Only Medi-Cal Program. No funding for counties to provide indigent medical care to those who will lose their health care as a result of H.R. 1, nor funding for an alternative proposal to establish an emergency services-only program for people who lose full-scope Medi-Cal eligibility due to H.R. 1 work requirements.
Ø County Health originally anticipated that 36,200 to 53,700 (21-31% of San Mateo County residents currently on Medi-Cal) could lose their coverage and estimated ongoing financial losses of $24.9M for FY 26-27 and an additional $19.7M the following year, for a total of $44.6M in FY 27-28. Now that the state budget is finalized, County Health will work with the County’s Human Services Agency (HSA) to update these numbers. County-affiliated associations are currently developing a new alternative indigent care proposal, with details to follow.
• Funding for Public Hospitals. $250 million in General Fund to support grants to public hospitals for health care expenditures, as proposed in the Legislative Budget Plan.
Ø Funding will be distributed through a grant system; however, the distribution methodology is not yet known. Therefore, the total amount San Mateo Medical Center (SMMC) will receive is to be determined.
• Medi-Cal and CalFresh County Eligibility. A total of $420 million one-time General Fund for county eligibility related to H.R. 1 implementation, including:
Ø $223 million for CalFresh county eligibility, available for expenditure until June 30, 2029. The actual net increase for 2026-27 is closer to $180 million due to underlying base decreases.
§ HSA anticipates approximately $2.5 million in additional one-time CalFresh administrative funding tied to ABAWD H.R. 1 work-requirement implementation. The county match waiver provides partial fiscal relief by capping the required county contribution at the FY 2024-25 level. Still, it does not eliminate all county share exposure if the allocation is depleted.
Ø $197 million for Medi-Cal County eligibility.
§ HSA estimates a total of $14.5 million in one-time administrative funding to address the additional county workload associated with implementing H.R. 1. As of June 2026, approximately 52,000 San Mateo County Medi-Cal beneficiaries may be affected by six-month redeterminations and work requirements. These changes are expected to increase eligibility workload, call volume, office visits, and case management activity as clients navigate more frequent renewals and documentation requirements.
Human Services
• In-Home Supportive Services (IHSS). Rejects the Administration’s proposal to shift the costs of growth in IHSS assessed hours to counties, which would have increased county costs by an estimated $360.6 million starting in 2027-28 and rising each year.
Ø No impact to San Mateo County as this proposal was rejected.
• Homeless Housing, Assistance, and Prevention (HHAP) Program. Provides a total of $900 million for a Round 7 of the HHAP program, which is $400 million more than was committed to for this round in the 2025 Budget. Counties, big cities, and continuums of care (CoCs) will receive more grant funding in this round than in prior rounds, as 97 percent of the funding will be distributed as grants to counties, cities, and CoCs. In contrast, only 80 percent of the $1 billion in prior rounds was for grants.
Ø Despite an increase from the January proposal, the enacted budget is lower than the previous year’s funding level, resulting in approximately $500,000 less in SMC’s HHAP 7 allocation. The statewide 10% reduction will likely result in less funding for the County in HHAP 7. These funds primarily support non-congregate shelter and homeless outreach. Administrative streamlining will simplify the Center on Homelessness administrative work. HSA will strategize to ensure the HHAP 6 obligation deadline is met.
Health
• Delaying the Elimination of the Prospective Payment System (PPS) Rate for Medi-Cal Beneficiaries with Unsatisfactory Immigration Status (UIS). The budget postpones the removal of the Prospective Payment System reimbursement method for Federally Qualified Health Centers providing state-funded services to the UIS population by 12 months, from July 1, 2026, to July 1, 2027. It allocates about $1 billion for 2026-27 to support this delay.
Ø The Health System states that a $14 million impact is delayed by one year. Delaying the implementation of this provision was County Health's highest state budget priority.
• Medi-Cal Mobile Crisis Benefit. Provides $42 million in General Fund support for the continuation of community-based mobile crisis response services that benefit the Medi-Cal program until June 30, 2027.
Ø This becomes a county opt-in benefit after June 2027. Restored funding of $500,200 is anticipated.
• Funding for Distressed Hospitals. $90 million from the General Fund to provide grants to hospitals in significant distress and authorizes the DOF to augment this amount by up to $50 million, for a potential total of up to $140 million.
Ø The impact on San Mateo County is currently unknown.
• Transition of Medi-Cal Enrollees with UIS from Managed Care to Fee-for-Service (FFS). To comply with federal guidance issued in September 2025, the Department of Health Care Services (DHCS) proposed transitioning approximately two million UIS enrollees from the managed care delivery system to the fee-for-service delivery system, effective January 1, 2027. An alternative to this proposal was not included in the final state budget.
Ø The Health Plan of San Mateo estimates that approximately 40,000 UIS live in San Mateo County, with about half seeking care at SMMC. This is a significant concern, as it would likely mean reduced access to care for UIS Medi-Cal beneficiaries and lower reimbursement for SMMC. The budget agreement includes $31 million for care coordination services, including navigation services, language access capabilities, integrated planning, member outreach, and other enhancements to care planning and navigation. $8 million is also included for contracts with clinics and community-based organizations to provide culturally and linguistically appropriate care navigation services. At a minimum, the shift from HPSM payment rates to fee-for-service only is expected to reduce SMMC's revenue by $3.6 million in FY 26-27.
Public Safety
• Proposition 36 (2024). The Budget Act includes $50 million in one-time General Fund to support continued implementation of Proposition 36.
Ø $10 million in one-time General Fund support for trial courts to address the increased workload and to expand or establish collaborative courts, with allocations determined by the Judicial Council.
Ø $20 million one-time General Fund allocation to county behavioral health departments to support planning and capacity-building activities to expand and accelerate services, with allocations provided through non-competitive grants according to an allocation methodology determined by the Department of Health Care Services in consultation with the Judicial Council.
§ The Health System predicts one-time funding will be available for training and support for first responders and homeless outreach workers. However, the amount is currently unknown.
§ The Sheriff’s Office may benefit indirectly from the additional county behavioral health funding and expanded justice system capacity supported by the Proposition 36 allocation; however, no direct funding is provided to address Sheriff-specific workload increases. The operational impacts of Proposition 36, including enforcement, custody, transportation, and coordination with courts and treatment providers, remain ongoing and are not easily quantified at this time.
§ While the Probation Department may indirectly benefit from our system partners receiving these funds, none of this funding is directly allocated for probation.
Ø $20 million one-time General Fund to the Judicial Council to reverse a previously planned reduction to pretrial services.
• Victims of Crime Act (VOCA). $50 million one-time General Fund for VOCA, an increase of the $25 million proposed in the May Revision, to support counties and other service providers in maintaining critical victim services for thousands of survivors statewide.
Ø According to the District Attorney’s Office, the impact on San Mateo County is unknown. The County currently receives pass-through federal funds from the California Governor’s Office of Emergency Services (Cal OES) in the amount of $461,984.
Elections
• Election Administration. A total of $34 million in one-time General Fund for counties to expedite the vote counting process and for voter outreach and education. This includes:
Ø $29 million to increase the number of available staff to tabulate votes, make equipment purchases or technology upgrades, or acquire space to accommodate additional staff or equipment purchases to expedite the vote counting process.
Ø $5 million to provide voter outreach and education before the November 3, 2026 statewide general election.
§ CSAC will work with the Department of Finance on how this funding will be distributed to counties.
Planning and Building
• Development Impact Fees. Adopts trailer bill language (AB 179 <https://url.us.m.mimecastprotect.com/s/OEGICQWK6JskN1GElfmtocGuQyX>/SB 179 <https://url.us.m.mimecastprotect.com/s/t-WBCR6KPYcvgD9k0Swunc1e4BO>) that limits counties’ ability to impose Development Impact Fees on affordable housing grants from state programs. Specifically, effective July 1, 2027, lead-applicant counties must waive specific non-utility impact fees as a condition of receiving state affordable housing grants, or the state may reduce the grant award by that amount. Further, the language does not apply to impact fees assessed by a variety of other local governments, including schools and special districts.
Ø The Department of Planning and Building collects impact fees on behalf of other departments that use these fees to implement housing, parks, school, and other capital improvement and maintenance projects. These include Roadway Mitigation Fees that are transferred to the Department of Public Works for roadway maintenance and improvements; housing impacts that are routed to the Department of Housing for housing projects; park impact fees that are provided to County Parks for park improvements; and school impact fees that are collected by the various school districts within the unincorporated areas and are based on the scope of the development projects approved by planning and building. While the planning and building department processing fees are waived for affordable projects, some but not all of these impact fees are waived. Waiving all impact fees for affordable housing projects could impact the ability of other departments and agencies to implement projects that offset the impacts of such development.
Technology Services
• Sales and Use Tax Expansion to Digital Downloads. Adopts the Administration’s proposal to expand the sales and use tax base to include digital prewritten software sales, one of the only expansions to the state’s narrow pool of tax-eligible sales in recent memory.
Ø At a high level, the Technology Services Department estimates an impact of at least $5 million per year. Further countywide analysis should be conducted to assess the full fiscal impact.
November 2026 Ballot Propositions
June 25, 2026, was the deadline for initiative and legislative measures to qualify for the November ballot. The ballot will include the following 14 propositions:
In July, the California State Association of Counties (CSAC) held meetings of two policy committees to review ballot measures directly affecting county government. These committees offered a platform for discussion and possible decisions, such as support, opposition, or no position, on key issues affecting California counties.
The Government Finance and Administration Committee reviewed:
• Proposition 2: Save for California's Future Act (ACA 20).
Ø Recommended position: Oppose
• Proposition 3: Provides Permanent Funding for Schools and Healthcare by Extending Existing Tax on High Incomes.
Ø Recommended position: Oppose
• Proposition 43: Local Taxes: Limitation (ACA 22).
Ø Recommended position: Oppose
While the Housing, Land Use, and Transportation Committee reviewed:
• Proposition 1: Veterans and Affordable Housing Bond Act of 2026.
Ø Recommended position: Support
• Proposition 45: Modifies Environmental Review for Certain Projects.
Ø Informational item, no action was taken.
The policy committees' recommendations will be forwarded to the full Board of Directors for final approval on August 20, 2026. If the San Mateo County Board of Supervisors would like to adopt an official position on any of the propositions, the Intergovernmental and Public Affairs (IGPA) Unit can prepare a detailed analysis upon request.
State Legislation
The IGPA Unit also continues to track and monitor legislation of interest to the County. The list below includes new bills on which the County has acted on since June 3, 2026, consistent with the County’s legislative session program.
In July, the IGPA Unit issued a request to County departments to identify additional bills warranting County engagement. The IGPA Unit is currently reviewing the flagged bills internally and will submit position letters on the County’s behalf, where appropriate.
New Bills Acted On Since Last Board Meeting
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SUPPORT |
OPPOSE |
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SB 968 (Becker) |
SB 811 (Caballero) |
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AB 1838 (Berman) |
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AB 762 (Irwin) |
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AB 1448 (Hart) |
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AB 1607 (Gonzalez) |
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AB 2465 (Ortega) |
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Education
• SB 968 (Becker) Community Colleges: San Mateo Community College District - Support
Would remove a sunset date of July 1, 2028, for statute that authorizes the governing board of the San Mateo County Community College District (SMCCCD) to adopt a policy to use local unrestricted general funds to provide fee waivers and other assistance to help cover the total cost of attendance for students residing within the boundary of SMCCCD.
Labor
• AB 1838 (Berman) Public Contracts: Local Agencies: Responsive Bidders - Support
Would require a contractor, as a condition of submitting a bid to a local agency for a public works contract, to fully disclose any history of wage and hour violations and provide supporting documentation and would authorize a contractor that fails to provide the required disclosures and supporting materials to be disqualified from the bid.
Environment & Sustainability
• AB 762 (Irwin) Disposable, Battery-Embedded Vapor Inhalation Device: Prohibition and Penalties - Support
Would prohibit, beginning January 1, 2027, a person from importing or manufacturing for sale in this state a new or refurbished disposable, battery-embedded vapor inhalation device, and, beginning January 1, 2028, a person from selling, distributing, or offering for sale a new or refurbished disposable, battery-embedded vapor inhalation device in this state.
• AB 1448 (Hart) Coastal Resources: California Coastal Sanctuary: Tidelands and Submerged Lands: Oil and Gas Development - Support
Would prohibit leases and oil- and gas-related infrastructure located upon tidelands and submerged lands from being used to support Pacific Outer Continental Shelf leases issued after January 1, 2026, and would remove the exception authorizing new oil- and gas-leasing in state waters within the California Coastal Sanctuary if state oil deposits are being drained from wells on federal lands.
Health
• AB 1607 (Gonzalez) Emergency Medical Services - Support
Would extend the sunset date, until January 1, 2037, for the Maddy Emergency Medical Services (EMS) Fund, which authorizes each county to levy an additional $2 for every $10, or part of $10, upon criminal fines to support an EMS fund for reimbursement of costs related to patients who do not make payment for EMS.
• SB 811 (Caballero) Hazardous Materials: Metal Shredding Facilities - Oppose
Would establish a comprehensive scheme for the regulation of metal shredding facilities that would be administered by the Department of Toxic Substances Control (DTSC) pursuant to authority separate from laws governing the control of hazardous waste, and would prohibit an owner or operator from operating a metal shredding facility in the state unless they have a permit from the DTSC or are deemed to have a permit.
Immigration
• AB 2465 (Ortega) State Government Benefits - Support
Would prohibit a business entity that contracts with the federal government for immigration enforcement purposes from receiving any state-provided grant or loan, and would also prohibit a disqualified taxpayer (a taxpayer that is directly invested in, owns, or manages a private detention facility, or a taxpayer that contracts with a private detention facility or agency engaging in immigration enforcement) from receiving any tax credits.
The 2026 Legislative Activity Report (Attachment B) outlines the bills tracked so far, sorted by department. During the session, the IGPA Unit continuously reviews newly flagged and amended legislation, determines which bills require further monitoring, and updates the report by adding these bills to the existing list.
Federal Legislative Update
On July 11, 2026, Washington, D.C., was surprised to learn that Senator Lindsey Graham (R-SC) had died unexpectedly from a medical condition. Serving 23 years in the Senate and leading as Chair of the Senate Budget Committee, his sudden death leaves a vacancy that is likely to influence the Senate's agenda considerably in the upcoming weeks.
Senator Mitch McConnell (R-KY), who has been absent from the Senate for several weeks due to health issues, issued his first statement since June 14. While recovering in the hospital, he has not provided an expected return date.
Congressional Activity
On July 10, 2026, at midnight, the deadline for President Trump to act on the bipartisan, comprehensive housing package, the 21st Century ROAD to Housing Act (H.R. 6644), expired. On June 24, 2026, Trump canceled a scheduled signing ceremony, saying he would delay signing the bill until Congress passed the SAVE America Act (H.R. 7296), which would mandate proof of U.S. citizenship to register to vote and require photo ID for federal elections. Since the 10-day period passed without Trump signing or vetoing it, the bill automatically became law. The act features several key provisions:
Ø NEPA reforms to streamline environmental reviews for small and infill housing projects;
Ø Grants to help communities develop pre-approved home designs; updates to the HOME Investment Partnerships Program;
Ø Three-year reauthorization of the CDBG-DR program;
Ø Increase of 100,000 units to the Rental Assistance Demonstration program cap;
Ø Reforms to manufactured housing financing standards;
Ø Nine community banking provisions to expand local lending capacity; and
Ø Prohibition on large institutional investors purchasing certain single-family homes.
In June, the House passed several laws addressing issues that affect children. These included the Stop Child Care Scams Act (H.R. 7726), which aims to improve federal oversight of the Child Care and Development Block Grant program, which assists low-income families with child care. The House also approved the Kids Internet and Digital Safety (KIDS) Act (H.R. 7757), which combines over a dozen proposals related to youth online safety and privacy. This law would require social media platforms to set default privacy and safety controls for minors, including features for managing direct messages, limiting addictive elements such as infinite scrolling and algorithmic feeds, and regulating targeted ads.
Members of Congress also introduced two bipartisan bills to improve child care and online safety for children. The first, the Child Care Modernization Act (H.R. 9224/S. 2828), marks the first major reauthorization of the Child Care and Development Block Grant program since 2014. The second, the Safeguarding AI Features to Ensure Kids’ Informed Digital Safety (SAFE KIDS) Act (S. 4855), would require chatbot providers to conduct risk assessments and implement safety measures before launching systems for children. It would also mandate the use of age-estimation technology to distinguish between child and adult accounts and provide parental controls to manage chatbot memory, data, and usage limits.
County Federal Action
Finally, IGPA has collaborated closely with the County Attorney’s Office to address numerous federal policy proposals aligned with the County’s established legislative policies, as outlined in the 2026 County Legislative Session Program. Attachment C details all federal actions taken by the County to date, including submitted public comments, litigation the County has joined, and amicus briefs signed in partnership with other entities. These issues span a broad array of topics, such as public student loan forgiveness, federal housing funding and policies, immigration, birthright citizenship, and more.
A recent notable action is the Office of Management and Budget’s (OMB) proposal to revise the Uniform Guidance, which sets regulations for federal grants and cooperative agreements. San Mateo County contributed to a public comment letter (Attachment D) opposing these regulatory changes, which aim to overhaul the federal grant system. The proposed overhaul would replace the traditional merit-based, competitive process with one that grants significant political discretion over funding decisions. These changes threaten to decrease transparency and accountability, introduce uncertainty for grant recipients, and jeopardize vital funding for community programs and services.
CSAC and the Urban Counties of California (UCC), the County’s primary state advocacy associations, also joined a coalition of county groups representing various county departments, programs, and projects that could be adversely affected by the proposed rule. The coalition urged OMB to reconsider and withdraw the proposed changes (Attachment E).
Since the public comment period has ended, the next step is for OMB to review and address all substantive comments before finalizing the rule. The IGPA Unit, in collaboration with the County Attorney’s Office, will continue to monitor this process as it moves forward.