Fiscal Woes Threaten Future of California's MH Funds

Local mental health programs in California would lose an average of $230 million over each of the next two years from a psychiatric care reserve fund if voters approve a new initiative this month aimed at closing the state's budget gap.

Proposition 1E would shift a total of nearly $460 million over two years from mental health care programs funded through a 2004 voter-approved measure, Proposition 63. The idea for the transfer of funds was placed on a May 19 special election ballot by legislators as one of six propositions that aim to help close a remaining hole in California's budget deficit that could exceed $15 billion.

The ballot measures are part of the budget Gov. Arnold Schwarzenegger (R) signed in February that uses tax increases, spending cuts, and borrowing to cover California's projected budget deficit through Fiscal 2009-2010.

The effort to redirect funds from the mental health account, which was established in 2005 under the Mental Health Services Act (MHSA), is opposed by the California Psychiatric Association (CPA) and other mental health advocates because it temporarily would reduce or eliminate psychiatric programs for some of the most vulnerable segments of the state's population.

Randall Hagar, the CPA's director of government affairs, said that the mental health funding is a small part of the overall effort to close the state's budget gap, but those funds are very significant for the counties that administer public mental health care throughout California.

The MHSA funds “are huge in counties, and the ultimate impact of their loss is unknown,” Hagar told Psychiatric News.

Psychiatrists who see the need for the mental health funds every day in their treatment of people with serious and persistent mental illness agreed.

“It's ironic that the [Proposition 63] initiative that did what many consider the right thing by providing a dedicated source of funding now faces reduction,” said Marcia Goin, M.D., Ph.D., a Los Angeles psychiatrist and former APA president.

The MHSA funds are generated by a special 1 percent state income tax on individual income over $1 million. The funds pay for innovative mental health programs and expanded county-provided mental health care. Among the goals of the MHSA are increasing participation of patients and families in all aspects of the public mental health system, expanding outreach to untreated populations, and multiplying the treatment options available to people with serious mental illness and their families.

Roderick Shaner, M.D., medical director of the Los Angeles County Department of Mental Health, said the loss of funds could reduce or eliminate many of the county's newer and innovative mental health programs. Such programs include so-called bridge services that coordinate patient care between needed general health care, psychiatric care, and substance abuse treatment. Other MHSA-funded programs provide housing and employment support services to people with mental illness.

“Many of these programs are designed to help reintegrate mentally ill people back into the community in ways that could not be done prior to passage of the MHSA,” Shaner said.

Unspent Funds Targeted

The state was charged with distributing the MHSA tax revenues to county governments, but due to a backlog in its disbursement effort nearly $2.5 billion remained in the fund during the winter 2008 to 2009 budget process. That large amount of unspent funds proved irresistible to state legislators, some of whom wanted diversion of the entire fund placed before voters. The legislators eventually agreed to offer voters the option to redirect about 20 percent of the MHSA funds.

“This ballot measure was seen as a compromise by some,” Hagar said.

But it is a compromise strongly opposed by CPA, which had a March council vote to join “No on Prop 1E,” a coalition of mental health advocates, consumers, and unions that has been working to educate voters about the unforeseen negative impact of redirecting MHSA monies. The coalition maintains that the pending voter proposition began as an effort to permanently move all MHSA funding and that its approval will open the door to the eventual loss of all such monies.

Supporters of the temporary shift in MHSA funds, including California Senate President Pro Tem Darrell Steinberg (D)—previously a leader of the initiative that created the MHSA fund—counter that the loss of psychiatric treatment funds is part of the sacrifice demanded of all state residents to close a historic budget gap. Another ballot proposition that voters will consider would temporarily shift $608 million from early childhood health care and education programs to fund services for foster children and children with developmental disabilities.

Vote Will Not Close Budget Gap

Voters appear divided on the mental health proposition. A mid-March poll by the Public Policy Institute of California found that almost half, 47 percent, of likely voters support Proposition 1E, while 37 percent said they would vote“ no.” Three in 10 likely voters said the outcome on 1E is very important. The survey interviewed 2,004 California residents, including 1,525 registered voters, 987 of whom were considered likely voters.

Even if voters approve all of the measures, the state's nonpartisan Legislative Analyst's Office projects that an $8 billion budget deficit in Fiscal 2009-2010 will continue to loom because state revenues so far are well below expectations.

The proposed funding cuts also come as rising unemployment in California is driving up state expenses for safety-net services, including Medi-Cal, California's Medicaid program.

Defeat of the ballot initiatives could result in another battle in the legislature over tax increases and program cuts. Goin said some mental health advocates worry that the defeat of Proposition 1E will lead legislators simply to cut other mental health services funded through the general budget.

Information on the “No on Prop 1E” coalition is posted at<www.noprop1e.com>.▪