|Budget Issue:||Mental Health Realignment Risky, May Violate Proposition 63|
|Program:||Department of Mental Health|
|Finding or Recommendation:||Recommend the Legislature require the department to report at budget committee hearings on its interpretation of the MHSA maintenance of effort requirements, and the potential impact of the proposed reduction on existing state and local programs.|
The Governor proposes to reduce mental health realignment funds by $602 million, and redirect those monies to pay for social service costs that would be shifted from the state to the counties. Specifically, the proposal would increase the county shares of cost in food stamp administration and Child Welfare Services for total General Fund savings of $602 million in 2010-11. This would require amendments to state law. At the time this analysis was prepared, we had not received related trailer bill language.
Proposal May Violate Proposition 63. The administration’s proposal may conflict with the Mental Health Services Act (MHSA) of 2004 (Proposition 63). Proposition 63 established a personal income tax surcharge on high-income earners to expand mental health services. It also established a state maintenance of effort requirement to ensure that MHSA funds are not used to supplant existing resources. The act states:
“The state shall continue to provide financial support for mental health programs with not less than the same entitlements, amounts of allocations from the General Fund and formula distributions of dedicated funds as provided in the last fiscal year which ended prior to the effective date of this act……The state shall not make any change to the structure of financing mental health services, which increases the county share of costs or financial risks for mental health services unless the state includes adequate funding to fully compensate for such increased costs or financial risk.”
The above language regarding the state maintenance of effort references (1) General Fund spending, (2) formula distributions of dedicated funds, and (3) the structure of financing mental health services. If the courts held that this proposal altered the formula distributions and the structure of financing mental health, it could be prohibited under current law. In light of this, we would caution the Legislature that this proposal is legally risky, and ultimately may not result in General Fund savings.
Existing Mental Health Programs Would be Significantly Affected. Under the Governor’s proposal, counties would retain about $435 million in mental health realignment funds in 2010-11. The use of these funds would be limited to paying for federally required benefits, namely Early and Periodic Screening, Diagnosis and Treatment, inpatient services; and medication. To the extent that counties currently use realignment funds to support other mental health services, this potentially would limit the availability of certain services. In the Mental Health Managed Care program, for example, some counties may no longer offer targeted case management, and rehabilitative services. The Legislature should require the department to testify at budget hearings on its assessment as to how its realignment proposal would affect existing programs.
LAO Recommendation: Recommend the Legislature require the department to report at budget committee hearings on its interpretation of the MHSA maintenance of effort requirements, and the potential impact of the proposed reduction on existing state and local programs.
It should be noted that the expansion of health coverage and the individual mandate required by the Patient Protection and Affordable Care Act (the recently enacted federal health care reform bill) has the potential to significantly reduce—beginning in 2014— the number of uninsured indigent adults, thus potentially relieving counties of some of the caseload and fiscal demands on medical and mental health services. In light of this, it will be important for the Legislature to consider the state-local relationship as part of its deliberations on the implementation of PPACA.