California’s complex plan to save mental health funding by slashing it

To balance the state’s budget, Governor Jerry Brown has proposed raiding a state fund set aside to transform public mental health care. In return, he’s promising long-term fixes to the structural underfunding of public mental health. Is it a fair trade?


Side View Sacramento CapitolCalifornia Governor Jerry Brown has inhereted a budget deficit estimated at $25 billion, which everyone agrees will require significant changes in state services. One fix the Governor has proposed is raiding Mental Health Services Act (MHSA, originally known as Proposition 63) funds, an idea voters rejected as a budget fix in 2009.

This time around, Brown is proposing a novel compromise: let the state raid the MHSA fund on a one-time basis, and in return mental health services will get a longer-term, structural fix to chronic underfunding. It’s an intriguing proposal.


Thanks to a the MHSA, a voter-approved tax on millionaires*, California currently has about $2 billion set aside specifically for the improvement of its public mental health system. This money is meant to be used to provide new and expanded services, train public mental health workers in current research-supported approaches, and generally transform the system to one that is modern, client-centered, and accountable. (By law, the money specifically cannot be used to pay for existing services, which are chronically underfunded.) Many marriage and family therapists are employed in public mental health in California, often in clinics funded by Medi-Cal.

Of course, in a budget crisis, it is easy to see how elected officials could view $2 billion sitting in the bank as a budget-solution-in-waiting. Governor Schwarzenegger proposed raiding this fund in 2009, asking voters to shift $460 million from MHSA funds into the state’s General Fund. The proposal was defeated by a landslide.

In contrast to the failed 2009 proposal, Governor Brown proposes a scheme that — at least in theory — could help the state budget in the short term and preserve mental health funding in the long term. It includes several moving parts:

  • Shifting $861 million from the MHSA reserve account to the General Fund. The shift would pay for current mental health services for the 2011-2012 fiscal year. Net impact: Bad. But could be worse. Obviously, this is a setback for planned MHSA-funded new and expanded programs, but the money would still be used to pay for mental health services, and would be a one-time shift.
  • Shifting responsibility for three mental health programs from the state to counties. The programs include Early and Periodic Screening, Diagnosis and Treatment (EPSDT); Medi-Cal mental health managed care; and special education mental health services (known to professionals as AB3632). Net impact: Unclear. “Local control” is sometimes better in concept than in reality; state administration ensures careful auditing to ensure money is being spent wisely, and consistency in program standards. County control of these services may lead to some cost savings, but those are often overstated.
  • Changing how the state funds mental health. Starting in the 2012-13 fiscal year, mental health services would be given an additional dedicated portion of state sales tax and vehicle license revenues. These are projected to grow at approximately a 6% annual rate. Net impact: Good. Currently, mental health programs are funded through a mechanism that grows at about 2% a year, according to the California Council of Community Mental Health Agencies — lower than normal inflation, and certainly not enough to account for any growth in patient population. This is a prime example of structural underfunding, which leads to ever-increasing caseloads and access-to-care problems.

All of this adds up to a proposal that has public mental health leaders more cautious than optimistic. The California Mental Health Directors Association asks a long list of good questions about the proposal, most of which are presently unanswered.

But the fact that a proposed $861 million raiding of public mental health funds is not being met with noisy protests from the agencies that rely on those funds is telling. It suggests that the proposal may have merit.

In the state’s current budget environment, we know lots of cuts will need to be made. Some of those cuts are likely to impact public mental health workers, including marriage and family therapists. Weathering the storm with a minimal amount of damage to public mental health, and even a potential long-term improvement to how it is funded, could be a very good outcome. Maybe.


* Background on MHSA: As Governor Brown notes in his budget proposal,

To provide additional resources for county mental health services, voters passed the Mental Health Services Act (Proposition 63) in 2004. The intent of Proposition 63 was to reduce the long‑term adverse impact of untreated mental illness by developing services or expanding existing services at the local level. To fund these resources, Proposition 63 imposed a one‑percent surcharge on personal income over $1 million.

That tax brought in $2 billion more than expected in its first four years. (The budget proposal fails to mention that since then, the MHSA has brought in less than expected due to the worsening economy.) Counties have engaged in a long-term planning process for how they would use MHSA money to transform their mental health systems; by law, MHSA money was not to be used as simply a replacement funding stream for existing services. So while the MHSA currently has about $2 billion in reserves, counties have been planning for — indeed, counting on — that money to be available.