July 13, 2023

Mental Health Services Act

Proposed Change in Mental Health Services Oversight and Accountability Commission’s Role

Summary. This post is one of a series of Legislative Analyst’s Office posts on the various components of the Governor’s Behavioral Health Modernization proposal, reflected in SB 326 (Eggman), as amended on June 19, 2023. The Mental Health Services Oversight and Accountability Commission (MHSOAC) was established as an independent commission, apart from the administration, to help ensure that Mental Health Services Act (MHSA) funding is used appropriately and effectively by counties to address mental health challenges across the state. As part of a package of proposed changes to the MHSA, the Governor proposes to remove most oversight, regulatory, and programmatic authority that the commission would have over MHSA funding. While the commission still would serve in an advisory role to the administration and the Legislature, removing most of its other authorities would significantly limit its ability to do so independently or more generally serve as an independent oversight entity. Furthermore, the Governor’s proposal conditions the commission’s access to data from other state entities on these entities allowing such access at their discretion, thereby limiting the commission’s capacity to serve as a data-driven advisor. We recommend that the Legislature consider maintaining MHSOAC’s current authority absent compelling justification for the Governor’s proposal.


Current Responsibilities of the Commission Focus on Independent Oversight

The MHSA Provides Funding Mostly to Counties. Approved by voters in 2004, the MHSA places a 1 percent tax on personal income over $1 million and dedicates the associated revenues to mental health services. The vast majority­ of MHSA revenues—at least 95 percent—goes directly to counties, which use it to support a variety of services for individuals with or at risk of mental illness. Currently, the MHSA establishes broad categories for how counties can spend the funding: Community Services and Supports (CSS), which funds direct service provision; Prevention and Early Intervention (PEI), which funds services that prevent mental illness before it becomes severe; and Innovation, which encourages counties to experiment with new approaches to addressing mental illness.

The MHSOAC Oversees MHSA Expenditures and Has a Unique Role in the State’s Mental Health System. The MHSA established a framework for state oversight of counties’ MHSA activities, granting oversight authority to two state agencies: the Department of Health Care Services (DHCS) and the MHSOAC. The commission’s role includes providing general oversight over all county MHSA spending as well as programmatic authority over two specific components of the MHSA—PEI and Innovation. As a part of its general oversight role, the commission advises both the Legislature and the administration on how to improve mental health services and outcomes, provides technical assistance to counties, and evaluates counties’ spending and performance under the MHSA. In order to evaluate county spending and performance, the commission is authorized to obtain data from state agencies and counties to perform independent analyses on the programs supported by MHSA funding. The commission’s programmatic authority includes setting funding priorities and establishing regulations for PEI and Innovation program activities, reviewing and approving Innovation program activities proposed by counties, and administering grants.

DHCS Oversees Components of MHSA Not Covered by MHSOAC. DHCS, by contrast, oversees the CSS funding category (a role similar to that of the commission in respect to other funding categories) and generally acts as the state entity to which counties report MHSA-related data. The department collects MHSA revenue and expenditure data, reviews prudent reserve levels, and monitors whether county expenditures match county planning documents. DHCS also oversees the Mental Health Service Fund (the special fund into which MHSA revenues are deposited) and calculates whether any county MHSA fund balances are subject to reversion.

Governor’s Proposal

Governor’s Proposal Would Dramatically Alter Commission’s Role

Governor’s Package of Proposed MHSA Changes Includes Restructuring of MHSA Funding Categories. The Governor’s overall proposal would make major changes to how counties allocate MHSA revenues, shifting the focus of county spending to two specific categories: Full-Service Partnerships (FSPs) and Housing Interventions. Both PEI and Innovation program activities largely would be shifted into a new third category—Behavioral Health Services and Supports (BHSS)—a broadly defined funding category that includes early intervention programs (a majority of the funding); services and supports for adults, older adults, and children that are not provided under FSPs; innovative behavioral health pilots and projects; capital facilities; technological needs; workforce; education and training; and deposits for counties’ prudent reserves. (We provide our analysis of this component of the Governor’s overall proposal in a separate post.)

Change in Funding Categories Mostly Removes MHSOAC Programmatic Implementation Authority. The Governor’s overall proposal would remove the PEI and Innovation program funding categories along with the related programmatic role of the commission in setting funding priorities; adopting regulations; and, in the case of Innovation programs, approving funding for projects. While funding for early intervention services and innovative projects would be available under the newly proposed BHSS category, the Governor’s proposal gives DHCS the authority to set funding priorities for these programs. Under the Governor’s proposal, with its restructured MHSA funding categories, the commission would not receive programmatic implementation authority that is equivalent to its current authority. Rather, the commission’s authority in this regard would be limited mainly to administering grants authorized by the MHSA, such as grants to fund partnerships between educational and county mental health entities as prescribed under the Mental Health Student Services Act.

Removes MHSOAC’s General Oversight Role Over MHSA Spending. The Governor’s proposal would remove MHSOAC’s general oversight role to evaluate county spending and performance of various components of the MHSA, including adult, older adult, and youth behavioral health services; PEI; and Innovation programs. Additionally, the commission only would be able to collect data at the discretion of DHCS, the Department of Health Care Access and Information, and other state or local entities that receive MHSA funding to evaluate projects and programs funded by the MHSA. Generally speaking, roles and responsibilities being given up by the commission under the Governor’s proposal largely would be assumed by DHCS.


Rationale for Governor’s Proposal Unclear, Potential Benefits Not Demonstrated

Administration Cited Improved Coordination of the State’s Multiple Behavioral Health Initiatives… As a part of the Governor’s original proposal related to the commission, the administration had placed the MHSOAC under the direct oversight of the California Health and Human Services Agency (CalHHS) and reorganized the commission’s leadership to be direct Governor appointees. At a recent budget hearing, when asked if there was a problem that the Governor’s proposal was intended to address with the reorganization, the administration responded that there is not a problem per se, but an opportunity to better coordinate the state’s multiple behavioral health initiatives.

…But Has Not Clearly Articulated the Rationale for, or Demonstrated the Benefits of, Its Revised Proposal. The Governor’s proposal has since changed to keep the commission’s governance structure mostly the same as well as maintain its separation from CalHHS. The administration did not include, as a part of their updated proposal, whether improved coordination can be achieved by, or is even still the primary rationale for, shifting the majority of general oversight and program implementation authority to DHCS. Further, the administration has not detailed what, if any, behavioral health outcomes would be improved under the proposal. Without an analysis and justification by the administration on the proposal’s potential to improve program coordination or behavioral health outcomes, weighing any potential benefits against the proposal’s trade-offs will be difficult.

Proposal Significantly Limits Independent Oversight

The Proposed Substantial Reduction of MHSOAC’s Authority Would Limit Its Independence. The Governor’s proposal largely keeps the current governance structure and grant-making authority of the commission intact. From our review of other commissions in the state, we find that the level of resources and authority provided to a commission by the Legislature can be more determinative of a commission’s independence than where it sits in the state’s administrative structure. Regulatory authority, direct programmatic implementation oversight, and approval over local projects, for example, help foster a culture of independence among commissioners and commission staff. For example, while the California Transportation Commission is located under the Transportation Agency, it allocates funding for highway, rail, and transit improvement projects which requires the commission to make independent decisions based on its own evaluation and expertise. By removing many of the MHSOAC’s current roles and responsibilities, the proposal may inhibit the ability for the commission to act independently despite maintaining a similar governance structure as currently.

Constraining MHSOAC’s Independence Reduces Legislative Insight Into Local Programs. The MHSA provides fairly flexible funding to counties—both currently and, to a somewhat lesser degree, under the Governor’s overall proposal—to address mental health challenges that may be unique to their residents. An independent oversight commission, like the MHSOAC, can oversee county spending to ensure counties are meeting the requirements of the law without imposing the administration’s priorities on county-based programs. Additionally, an independent commission could provide analyses and recommendations to the Legislature that may differ from the administration’s policy focus. These insights can be of value to the Legislature as it deliberates its preferred policy approach on mental health issues.

Issues for Legislative Consideration

Maintain MHSOAC’s Authority Absent Compelling Justification for Governor’s Proposal. Given the lack of analysis provided by the administration on the potential benefits of its proposal, the Legislature should consider maintaining the commission’s current roles in providing general oversight as well as implementing certain components of the MHSA. While the PEI and Innovation program funding categories would be removed under the Governor’s overall proposal, there are still components that could be directly overseen by the commission. Given the commission’s experience with the MHSA, directing the commission to oversee and promulgate regulations, in consultation with DHCS, for FSPs and early intervention programs would be reasonable. This could include setting funding priorities beyond what is listed in statute, based on its consultation with the administration, counties, and members of the community. Additionally, we recommend maintaining the commission’s authority to receive all information requested of state departments and all state and local entities that receive MHSA funding at its independent discretion.