The MHSA & "Modernization"

The MHSA & Proposed Changes


        In 2004, California voters approved Proposition 63, which imposed a 1% tax on personal income in excess of $1 million per year.  The result was establishment of the Mental Health Services Act (MHSA) which was designated to expand and transform California’s behavioral health system to better serve people with – or at risk for – serious mental illness, and their families.  The funds may only be used to pay for MHSA programs.

        The MHSA addresses a broad range of prevention, early intervention, service needs, infrastructure, technology and training issues and programs. Originally, the law was intended to supplement the already existing behavioral health funding sources so as to expand the services available for the seriously mentally ill (SMI), including preventing relapse in persons who have been treated before. However, as counties began to use the MHSA funds to maintain current levels of the services, the MHSA gradually supplanted the other funding available and it became the only stable source of funding for existing SMI services rather than expanding the services. [fn1]

        The MHSA Oversight & Accountability Commission (MHSOAC) was established to monitor use of the funds.  Each County is required to prepare and submit a 3-Year Program/Expenditure Plan & Annual Updates to the oversight committee.  However, the commission has been ineffective and has consistently approved programs that do not meet the priority criteria of the MHSA.

        There has been constant pressure to include persons with substance use disorders among those served by the MHSA.  In an amendment Act (signed into law on 10/6/21), the legislature expanded the law.  Under the amended law, MHSA funds may now be used “to broaden the provision of community-based mental health services by adding prevention and early intervention services or activities to these services, including prevention and early intervention strategies that address mental health needs, substance misuse or substance use disorders, or needs relating to co-occurring mental health and substance use services.” [fn2]


        Governor Newsom has a very broad vision to change California law and spending to “serve mental health needs, substance use disorders and homeless[ness].” In 2023, he is continuing to propose changes that reflect his conflated view of these three foundational issues.  [fn3] Unfortunately, some proposals could hurt rather than help the SMI.

        In 2023, the Governor’s focus is on what he calls “modernizing California’s behavioral health system.” 

       The key components of his package are to:

       (1)   Authorize a $3-5 million general obligation bond to be put on the 2024 ballot to fund “unlocked” behavioral health residential settings and provide housing for homeless veterans.

      (2) “Modernize” the MHSA:

            (a) Revise MHSA funding allocations to

                    (i)30% for housing & enhanced care in residential settings for individuals with SMI/serious emotional disturbance and/or substance use disorder (SUD)

                    (ii) 35% for FSPs and

                   (iii)35% for other services including non-FSP Community Services & Supports (CSS), Prevention & Early Intervention (PEI), Capital Facilities & Technical Needs, Workforce Education & Training, and prudent reserve.

             (b) Authorize MHSA funding to provide treatment/services to persons with SUD  without a co-occurring mental health disorder.

             (c) Require counties to bill Medi-Cal for all reimbursable services.

             (d) Reduce prudent reserve amounts from 33% to 20-25% depending on  size of the county, to be reassessed more frequently. 

             (e) Authorize up to 2% of local revenue to fund administrative needs.

             (f) Pare back the counties’ requirements for three-year program/expense plans.

            (g) Move the oversight commission to be under state agencies, as advisory only, with director to be a gubernatorial appointee.

     (3)  Improve statewide accountability and access to behavioral health services:

            (a) Require county reports to have more detailed fiscal information including  allocations and unspent funds

            (b) Develop outcome measures, not just process measures.

            (c) Require state departments to develop a plan to achieve parity between private and Medi-Cal benefits for mental health and SUD.

The Administration says it is working “in close partnership” with the State Legislature, as well as with the State Assn of Counties, other critical local government stakeholders, community-based service organizations, advocates, & people with lived experience as bill language is developed.  We need to continue advocating for a “modernization” that truly benefits our SMI family member


[1] Even in the first decade of its implementation, the Act appeared to have been a “bait-and-switch” such that its funding was diverted and the SMI continued to go unprovided-for. See D.J. Jaffe, “California tax was bait-and-switch,” 8/14/2013, 

[2] MHSA Act (text) as of Jan. 2020:  

[3] California Department of Health Care Services and California Health and Human Services Agency, March 2023, “Modernizing California’s Behavioral Health Care System” 


Any modernization of the MHSA law must remain true to the mission of the original law approved by the voters of California in 2004.  It must focus on the unmet treatment needs of those with serious mental illness. Over the years, revenue from the tax has been diverted to programs that serve broader social service goals that do not help the vulnerable and underserved population for whom it was intended.  We are concerned that some of the current proposals will open the door to further mission creep.  General homelessness and substance abuse are problems that deserve resources and attention but – except for SUD with co-occurring SMI – these resources should not come from MHSA tax revenue.  The SMI population needs a dedicated and stable funding source to allow counties to develop all aspects of a quality continuum of care.

                                                                                                                                        GOOD THINGS ABOUT THE PACKAGE:  

It includes funding for thousands of beds’ worth of housing, at least some of which is of the licensed, very supportive caliber we need for our family members

–It gives the counties more flexibility in determining which programs have or have not been meeting the needs of those with serious mental illness

–It demotes the Oversight Commission, which has not provided effective oversight and has not focused on serious mental illness

–It introduces regional rather than county planning

–It gives us a chance, through its emphasis on outcomes, to hold government accountable for keeping our family members alive and well.

                                                                                                                                       PROBLEMS WITH THE PACKAGE:

It fails to make clear that MHSA money can be used for treatment in secure inpatient facilities, whether voluntary or involuntary. 

–The original intent of MHSA was to assure funding for medically necessary treatment of people with SMI according to what they needed. By forgetting that, we are missing a chance to restore what might make MHSA actually work for our family members. 

–It is a myth that a voluntary-only system will help all the seriously mentally ill.  We agree that voluntary treatment is preferred, but we also know that for those who lack insight into their illness, intervention is often necessary to assure treatment. In time, involuntary treatment leads many to develop the insight they need to engage in voluntary treatment.

–The worst option is no treatment at all.  Untreated SMI leads to increasing brain deterioration, despair, death, and sometimes violence.

The proposal fails to address serious dearth of beds in secure acute and subacute facilities.

–The wording of the proposal only allows for funding of unlocked residential housing. We were very disappointed to be told in listening sessions that NONE of the $3-5 billion from the bond measure would go to secure beds. MHSA funds may rightly be used to build secure, locked facilities and involuntary treatment services as long as the needs of the people to be served cannot be met in a less restrictive or more integrated setting. 

–The 2021 Rand report says the state needs 4,767 acute and subacute secure beds, using an analysis similar to what other organizations have been using for years.  (This is separate and apart from the additional 2,963 community (unlocked) residential beds that the report says we need.)

–For years, our SMI family members have been waiting months for beds in subacute facilities, if they can get onto the waiting list at all.  One of us had a family member wait FIVE YEARS in jail for a locked bed in a state hospital. 

–The shortfall in secure beds can’t be made up by other programs.  The BHCIP program is almost over.  The Medi-Cal SMI Waiver Demonstration Pilot program seems weak and half-hearted at best, has been delayed for years, and leaves counties to opt-in. 

It does not guarantee that the residential beds would be sufficiently supportive for our family members. We know from harsh experience that people with SMI who need help the most need intensive supportive services, best provided by licensed facilities that have services onsite and manage medications for clients.  Funding “housing” via thousands of motel rooms, single-room occupancy hotels, or tiny houses may help some highly-functioning individuals but are not a solution for everyone.

Expansion of the target population to include people with substance use disorders, even if they have no diagnosis of mental illness, will likely dilute the resources needed for the originally-intended beneficiaries of the MHSA.  

–The Act was intended to be a reliable and dedicated source of funds to provide for the unmet needs of the SMI.  The reality is that prioritization of SMI hasn’t been honored.  In fact, the MHSOA’s oversight has consistently put less severe/urgent “mental health needs” ahead of SMI in terms of investment.  The oversight failure does need to be corrected, but NOT by basically codifying what the oversight has already been doing! We are concerned that the choices and priorities will continue to FAIL to prioritize the most vulnerable

–We insist that MHSA funds be dedicated to the most serious cases – whether of mental illness or substance abuse – and NOT spread out to cover the less severe ones.

Further, the term “prevention” in the original Act was intended to mean prevention of RELAPSE on the part of someone who has experienced a serious condition, NOT merely a general attempt to “prevent” serious mental illness (as by way of generic promotion of mental health). 


The proposal does not address the real need for more and improved public psychiatric hospitals in California.

— As expert sociologist Alex Barnard put it, the psychiatric beds that California has “are disproportionately controlled by private and for-profit providers” which are “reluctant to provide costly, long-term care to people with the most chronic illnesses.”  Public, state hospital beds are disproportionately given to forensic patients. So, we need more and better public psychiatric hospitals. 

–Also, California’s psychiatric beds are used ineffectively; research shows that slightly longer hospitalizations actually reduce readmissions, but because of inadequate space, patients are discharged too soon and the patients end up cycling in and out via involuntary holds.

–We are not done with the job of providing quality, medically necessary, secure facilities. The proposal talks of “state-of-the-art” facilities; it is essential that we build  “state of the art” public hospitals that are soothing and supportive environments, built using state-of-the-art design principles that improve patient health & well-being. Instead of dreary, dark and ominous rooms, they should “set patients at ease,” incorporate “strategies to ‘humanize the space’ [like those] that are employed in other healthcare environments.

 We must have the necessary funding and political commitment to make those a reality. That would be a genuine “modernization” of the mental health system in our  state.

More Resources for information

“What We Are Asking and Why.”  
California for All and Calif. Dept. of Health Care Services, “Policy Brief:  Understanding California’s Recent Behavioral Health Reform Efforts.”  
Governor of the State of California, “Fact Sheet:”  Modernizing Our Behavioral Health System & Building More Mental Health Housing.”   
McBain, Ryan, and others, 2022, “Adult Psychiatric Bed Capacity, Need, and Shortage Estimates in California—2021.”  Copyright RAND Corporation.