Budget and Policy Post
August 21, 2023LAO Update: The Governor’s Revised Behavioral Health Modernization Proposal
Summary. We released a series of analyses on various components of the Governor’s Behavioral Health Modernization proposal. A number of these posts analyzed the Governor’s initial proposal as reflected in SB 326 (Eggman), as amended on July 13, 2023, which would make far-reaching changes to the Mental Health Services Act (MHSA). On August 15, 2023, a number of amendments were made to SB 326, some of which, at least in part, respond to issues raised in our initial posts. This post highlights three key issue areas from our prior analyses that are significantly impacted by the August 15th amendments: (1) county spending flexibility, (2) funding for children and youth services, and (3) the role of the Mental Health Services Oversight and Accountability Commission (MHSOAC). As discussed below, we find that the Governor’s revised proposal would provide significantly greater spending flexibility for counties than the initial proposal. In contrast to the initial proposal, the revised proposal would include a statutory funding requirement for children and youth mental health services, making spending for this purpose less uncertain. Finally, while the revised proposal would provide the MHSOAC with more authority relative to the initial proposal, we find that it still would reduce the commission’s current authority and role as an independent oversight agency for MHSA implementation. We find that the amendments related to county flexibility and children and youth funding begin to address issues raised in our prior posts, whereas we continue to find that reducing the commission’s role lacks justification.
County Spending Flexibility
Issue Raised in LAO Post on Initial Governor’s Proposal
Proposed Funding Categories Would Have Reduced County Spending Flexibility With Uncertain Trade-Offs. We found that the administration’s initial proposed funding categories—which focused funding on Full-Service Partnerships (FSPs) and housing interventions—were overall more prescriptive than under current law and reduced the amount of overall flexibility afforded counties. County spending flexibility was reduced in two ways: (1) by creating only one category, Behavioral Health Services and Supports (BHSS), with just 30 percent of MHSA funding that could accommodate flexible program expenditures and (2) by including a wide variety of programs that counties would need to spend funds on in the BHSS category (early intervention, capital facilities, deposits into prudent reserves, among others) that would have reduced available funding for other county initiatives. In effect, the initial proposal would have shifted the discretion in setting MHSA funding priorities away from counties to the state. We found that this shift could reduce the benefits of county-level expertise in program implementation and understanding the needs of their residents. Consequently, the Legislature faced a tradeoff between ensuring certain types of programs were provided and utilizing local expertise.
How August 15th Amendments to SB 326 Respond to Issue
Increased County Flexibility to Shift Funding Between Categories… Our analysis of the Governor’s initial proposal found that the proposed new funding categories likely would result in the need for counties to reduce or redirect spending on some current county programs and services. Under the Governor’s revised proposal, there is a process allowing for some flexibility in county spending, potentially mitigating what could otherwise be a negative impact on funding for current services. Specifically, under the revised proposal, following review and approval from the Department of Health Care Services (DHCS), counties would be able to move between 5 percentage points and 7 percentage points of MHSA county funding from each category to another (up to a maximum of 10 to14 percentage points total). For example, during the initial three-year planning period a county could shift 7 percentage points from the FSP category and 7 percentage points from the Housing Interventions category, which would result in an increase of 14 percentage points of funding in the BHSS category. Additionally, the revised proposal provides greater flexibility for small counties (population under 200,000) to adjust how much funding must be used for housing interventions.
…Which Might Mitigate Potential Negative Impacts to Current Services. The amendments allowing counties to shift funding between categories may help to mitigate potential reductions in funding for current services. In particular, counties may choose to shift a portion of their funding from FSPs and housing interventions to the BHSS category, which is the category we estimate likely would see substantial reductions in spending. The net impact on current spending, however, is unclear. That said, the increased spending flexibility afforded counties in general would give counties more opportunities to tailor services to the needs of their residents.
Funding for Children and Youth Mental Health Services
Issue Raised in LAO Post on Governor’s Initial Proposal
Lack of Statutory Funding Requirement for Children and Youth Mental Health Services Made Impact on Spending Uncertain. The Governor’s initial proposal shifted MHSA funding towards FSPs and housing interventions and away from other services, such as outpatient or crisis intervention services. While there could have been an increase in MHSA funding for children and youth services within FSPs, there likely would have been a reduction in MHSA funding available for other children and youth services. Current regulations require a certain level of MHSA funding for children and youth mental health services, but there was no such statutory requirement included in the Governor’s initial proposal. We found in our original analysis that is was unclear whether, on net, the current level of county MHSA spending on children and youth services would have been maintained.
How August 15th Amendments to SB 326 Respond to Issue
Revised Proposal Creates Minimum Level of Funding for Children and Youth Services. The Governor’s revised proposal includes a statutory requirement for counties to spend 51 percent of early intervention funding and for the California Department of Public Health to spend 51 percent of population-based prevention services on individuals 25 years of age and younger. The amendments not only set a statutory minimum level of funding for children and youth mental health services, but also include, unlike the initial proposal, transition-age youth (individuals 16 to 25 years of age) in those services. As counties currently use MHSA funding for children and youth services within FSPs (which has no children and youth spending requirement) and it is unclear how many current children and youth services would be classified as early intervention, it is still unknown how the revised proposal would impact current county spending on children and youth services. However, the revised proposal provides greater certainty that counties would spend at least a minimum amount on children and youth services overall.
The Role of the MHSOAC
Issue Raised in LAO Post on Governor’s Initial Proposal
Reduction of MHSOAC’s Role and Authority Lacked Justification. The Governor’s initial proposal would have removed most of the commission’s current oversight, regulatory, and programmatic authority over MHSA funding. We found that the proposed substantial reduction of the commission’s authority would have limited its independence. Given the lack of analysis provided by the administration on the potential benefits of its initial proposal, we recommended the Legislature consider maintaining the commission’s current roles in providing general oversight as well as implementing certain components of the MHSA.
How August 15th Amendments to SB 326 Respond to Issue
Increased Role for MHSOAC, but Still Overall Reduction in Current Authority Without Justification. The Governor’s revised proposal would provide for MHSOAC’s participation, in a consultation role with DHCS, in a number of components of the MHSA. Some of these responsibilities include helping to establish standards of care in FSPs and identifying evidence-based practices for early intervention services. Additionally, the amendments would allow the commission to more readily access MHSA spending data from DHCS. However, relative to its current role and authority, the proposal still shifts the majority of the commission’s current oversight, regulatory, and programmatic authority over MHSA funding to DHCS. A reduction in the commission’s independent authority may impede its ability to provide the Legislature a beneficial perspective into local programs, particularly if its analyses and recommendations differ from the administration’s policy focus. As the administration has not provided analysis on the potential benefits of this shift in authority, we maintain our prior recommendation that the Legislature consider maintaining the commission’s current roles.