By Moryt Milo
For close to 20 years, California’s Mental Health Services Act (MHSA) has been a lifeline for a number of behavioral health care programs not covered by Medi-Cal. Come March 2024, some of that funding could shift dramatically if voters approve the referendum on the ballot.
Proposition 1, as it will be known, combines Senate Bill 326, authored by State Sen. Susan Eggman, a bill to amend the allocation of MHSA dollars, and Assembly Bill 531, authored by Jacqui Irwin, a $6.4 billion general obligation bond that would aim to significantly increase the state’s psychiatric and addiction services infrastructure. The Mental Health Services Act will be renamed the Behavioral Health Services Act.
The new legislation would amend MHSA—which passed in 2004 as a 1% tax on individuals who make more than $1 million annually—by carving out 30% from the annual tax for housing the chronically homeless, new housing construction, and assertive treatment for those with severe mental illness and substance use disorders. This year, the tax generated about $3 billion in revenue. That equates to a $1 billion carve out.
The mandated realignment of funding would significantly alter the counties broad discretion over how these monies are spent. The shift would reduce available funds for non-mandated programs such as adult outpatient services for the mentally ill, county crisis response services, and resources and services for people of color and in the LGBTQ+ community.
“We are increasing the number of people for involuntary commitment and reducing the funding to treat them,” Paul Simmons, executive director of the Depression and Bipolar Support Alliance, said. “The problem is it will guarantee services to some funds and not to others.”
Program Funding Realigned
There are some winners in the reshuffling. The California Alliance of Child and Family Services lobbied nonstop to make sure that early intervention and prevention programs were not cut.
“MHSA has been instrumental over the past 20 years in filling the gaps that Medi-Cal can’t cover,” Adrienne Shilton, director of Public Policy and Strategy for the California Alliance of Child and Family Services, said.
She feared child and youth programs would be dismantled. But the organization’s advocacy paid off. Within the 35% of funds allocated to the Behavioral Health Flexible Account bucket, 50% of those dollars will go toward early intervention services, and of that amount 50% is to be designated for children and young adults ages 0-25.
The bill will also require that 4% of MHSA dollars be set aside for prevention and 51% of those dollars is to be spent on children and youth 0-25, as well. These funds will be administered directly through the State Department of Public Health not through counties.
“This was like our North Star to get both of these two requests,” Shilton said.
Effect on Services
Proponents and opponents alike acknowledge that cuts to programs and services will be unavoidable within the new framework, and where those cuts come from is an ongoing question and concern.
This has not escaped the eyes of the Legislative Analyst’s Office, a nonpartisan government agency that provides fiscal and policy advice to the state legislature. The LAO stated that the governor’s proposal would change the funding categories and “would reduce overall county discretion which would likely result in counties spending less on a number of programs.”
Santa Clara County’s flexibility in how it divvies up the dollars will most likely require a major recalculation for fiscal year 2025-26 if the law takes effect.
One area that will become more equitable is the way innovation grants are doled out. Funding will no longer be county centric. Instead, over 10 years, $20 million annually will be available in grants for counties and community-based nonprofit organizations with innovation programs for underserved populations.
“That’s a positive change,” Shilton said. “Honestly, we never thought that would be possible.”
Momentum for Health, which contracts with Santa Clara County, relies on MHSA funds for a number of the nonprofit’s programs, including adult outpatient care and mental health services for youth ages 10-25.
Momentum For Health CEO Dave Mineta said the nonprofit is waiting to hear from the Santa Clara County Behavioral Health Services Department on potential funding cuts, in anticipation of voters approving Prop. 1.
“We have heard from other providers around the state that they are taking giant cuts in prevention and early intervention all the way through outpatient programs,” Mineta said.
The issue of adding two new programs like housing and substance use to existing mental health services without increasing MHSA funding doesn’t seem feasible, providers said. There won’t be enough to spread around equitably.
The LAO is taking a hard look at this very issue. The agency is questioning the administration’s justification as to whether these changes are warranted.
The analysts wrote: “Can the administration provide evidence that the proposal is likely to result in better behavioral health outcomes for the population as a whole? What are the trade-offs in reducing county spending flexibility?”
For Ret. State Sen. Jim Beall, the answer is obvious.
“By carving out 30% we are taking away the ability to get out in front of the problem,” Beall said. “Instead of addressing the problem early on, we are at the tail end of the problem trying to fix it. That doesn’t make any sense.”
This is why providers are questioning the timing and whether the approach, as pointed out by the analyst, has been carefully thought through to avoid problematic outcomes down the road.
“Of course, everyone wants additional resources for substance use disorders and behavioral health housing, and yet there are serious concerns about this package of legislation and what these [changes] are going to do to the existing systems when they take the brunt of the shortfall dollars,” Mineta said.
