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Newsom’s homeless housing-and-treatment ballot measure cuts county budgets

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(The Center Square) – California Gov. Gavin Newsom is promoting his $9.3 billion Proposition 1 as new funding for mental health and substance abuse, but a state analyst says it would cost $140 million annually while counties are doing much of the same for less.

If approved by voters in March 2024, the proposition aims for the construction of 11,150 new behavioral health beds, 26,700 outpatient treatment slots, and $1 billion worth of veterans’ housing.

Since the passage of the 2005 Mental Health Services Act, the state has raised $2 to 3.5 billion per year in taxes on high-income Californians to directly fund mental health services, with approximately 95% of that funding going directly to counties, including flexibility with how they provide these mental health services. The remaining 5% goes to the state to spend on its own mental health programs.

According to the LAO, Proposition 1 would remove $140 million per year from county mental health funding and direct it to state mental health priorities. This would be in addition to the $310 million cost of servicing the $9.3 billion lifetime cost of the $6.4 billion bond Newsom is seeking to take out to pay for his requested expansion of mental health and drug treatment facilities and of conversion and construction of government-subsidized housing.

If passed, Proposition 1 would not just take $140 million from counties — against the $2 to 3.5 billion they receive — but would require 30% of that spending to go towards housing interventions supporting individuals with behavioral health conditions. This spending could take the form of rent subsidies or even building new housing. However, for smaller and/or rural counties that have not received boosts in funding from other state or federal sources, this required shift in resources could mean having to cut existing mental health services.

“Counties have a significant and growing obligation to fund [behavioral health] services under the Medi-Cal entitlement and use MHSA funds to support that obligation. This proposal leaves counties with fewer resources to do so, including less funding available to use as Medi-Cal match to draw down additional federal dollars,” a formal analysis from the California Senate staff said. “New prescriptive state requirements direct how counties must spend BHSA funds and restrict a county’s ability to design programs best suited to serving local communities.”

Some experts say that, beyond these concerns, California is hardly in a fiscal position to take on $310 million more per year in spending to pay down the bond.

“At a time when the state is facing a yawning budget deficit, Proposition 1 adds another $310 million of annual spending, and given what we have seen with prior housing initiatives, we don’t have much reason to think that housing money will be spent efficiently,” said Marc Joffe, a California-based state policy analyst for the Cato Institute.

Joffe is concerned that public developments in California, such as those built by Los Angeles’ Measure HHH, have failed to live up to expectations. In 2016, LA voters approved a $1.2 billion bond to support the construction of 10,000 apartments for homeless individuals. As of a March 2023 analysis from the Los Angeles Daily News, the bond is likely to fund approximately 8,600 apartments at a median cost of $550,000, or nearly double the price of the median single-family home in Texas. In one building, construction costs rose to over $800,000 per unit — or almost as much as the median home even in California.

Beyond concerns of costs to counties and taxpayers, Joffe also said it’s important to remember why the United States got rid of most of its mental health treatment facilities in the 1960s and 1970s in the first place.

“Mental health facilities got a bad reputation in the mid-20th century due to mistreatment of patients,” said Joffe. “If the state is going to consider bringing back more involuntary confinement, then the state has a responsibility to put in safeguards that are going to reduce the risk of mistreatment.”

Voters will have the opportunity to support or reject the measure on the March 2024 primary ballot.

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