September 07, 2006

California Adds $890 Million to Mental Health Services

Mental health services in California are poised to receive an unexpected amount of funding -- on the order of hundreds of millions of dollars -- as a new fund dedicated to serving the mentally ill is flush with cash, raising $890 million above estimates in the last two years. Already we've talked with schizophrenia researchers and clinicians and it sounds like significant new programs to target early identification and prevention of schizophrenia (as is already being done extensively in Canada, Western Europe, and Australia) will be initiated in the next year. This is truly good news for the mentally ill and their families - and it will help all of society with lower costs in terms of lost productivity (due to untreated mental illness), and lower costs for courts and jails. A large body of research (as well as common sense) has shown that investment up front for prevention and early treatment of disorders and diseases results in substantial savings down-the-road. This mental health services investment is putting this knowledge into practice.

The new money, which is 57 percent above original projections, comes from Proposition 63, approved by voters in 2004. The measure levied a 1 percent tax hike for those people making more than $1 million a year in income, in order to expand services for mentally ill seniors, children and homeless.

"I am thrilled," says former Assemblyman Darrell Steinberg, who authored the legislation to place Proposition 63 on the ballot. "When you consider 40 years where mental health and the mentally ill have often been left behind, I am glad the number is higher rather than lower."

Projected by the nonpartisan Legislative Analyst's Office (LAO) in 2004 to raise $750 million in the 2005-06 fiscal year and $800 million this year, the mental-health fund is now expected to take in $1.18 billion last year and another $1.25 billion this year, according to the latest numbers produced by the Department of Finance.

The same high-income earners that have fueled California's overall surge in revenues -- the state pulled in $7.5 billion more than expected in the current budget -- are the driving force behind the unanticipated boost for the mental health fund.

"Income at the top end of the distribution has soared over the last two years and given that the Proposition 63 tax is a tax on the top tier that fund has particularly benefited," says Brad Williams, the director of fiscal forecasting at the LAO.

Carol Hood, deputy director of the Department of Mental Health, says the administration believes the revenues are a one-time boon and notes that even the revised numbers are still estimates.

"We won't know the final amount until 15 months after the end of a calendar year," says Hood. "This amount can go up and down."

The influx of money has left the mental health services world with two unique challenges. The first is that although money is pouring in, there is not yet an existing infrastructure to properly spend the funds on helpful services.

"We have had so many years of cuts that we lost much of our management infrastructure. So when you expand quickly, it is difficult," says Hood. "This is quite a challenge."

The second problem is that Proposition 63 specifies that the new funds must be used exclusively for creating and expanding new programs. That has left current core mental services programs at the county level facing cuts, while those same counties rush to create innovative programs.

"We cannot use Mental Health Services Act to backfill programs previously funded by the county," says Hood. "Many counties are facing reductions at the same time they are trying to expand quickly."

Between the lack of infrastructure and the inability to fund existing programs, much of the money raised is simply sitting in the bank.

"It goes into the Mental Health Services Fund and sits there collecting interest," says Hood of much of the estimated $2.7 billion already collected.

Because Proposition 63 only draws money from the wealthiest of the wealthy--those earning more than $1 million a year -- the windfall effect has been even more pronounced than for the state overall.

For example, in 2004 the LAO estimated that the general-fund revenues in 2006-07 would be $86 billion, while in reality tax receipts have climbed closer to $94.4 billion, a 9.7 percent increase.

But Proposition 63 revenues in 2006-07 are projected at $1.25 billion, compared to an estimated $800 million in 2004, a 57 percent increase.

"We've had a couple of very good years and for taxpayers at the top end, extraordinarily good years," says Williams.

The tax revenues from top-earners are notoriously volatile, as much of their revenue is not derived from steady salaries but from stock options and capital gains that vary from year to year. Steinberg, who chairs the 16-member Mental Health Services Oversight and Accountability Commission that approves project funding, says the commission will keep a "prudent reserve" to compensate for down-turns in the economy.

"We recognize, and recognized from the beginning, the volatility of the tax on million-dollar earners," says Steinberg. "There will be a time when the revenue is less and we need to prepare for that time to make sure we are never suspending services."

Steinberg says the commission will keep a reserve equal to 50 percent of the previous year's appropriations to compensate for any downturns. But for now the commission is basking in the good revenues.

"We will take advantage of every dollar that allows us to build a new a system that helps people," he said.

Source: Capitol Weekly

More Information: Proposition 63 - Mental Health Services Expansion, Funding. Tax on Personal Incomes above $1 Million
State of California


Thanks for providing the informative articles here. I can't wait for some new ones.

Posted by: Heather at September 7, 2006 02:43 PM

This is wonderful news. Thank you for posting it. I hope the rest of the states will follow California's lead.


Posted by: yaya at September 8, 2006 07:34 AM

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