WATSONVILLE — California will update its system for funding social services across the state in less than six months and Santa Cruz County officials are warning that while it’s not all bad, the community and contracted local service providers should brace for impacts.
In March 2024, California voters passed Proposition 1, which is an overhaul of the Mental Health Services Act that has funded local services and operations across the state since 2004. The new iteration of the program is slated for implementation July 1 and will be known as the Behavioral Health Services Act, but the name isn’t the only thing changing.
The voter-approved transformation will shift the way the program both administers and funds mental health and prevention services using tax revenue from high-income residents across the state, also known as the “millionaires’ tax.”
The Behavioral Health Services Act, according to county staff, is meant to improve access to care, support community members in greatest need such as those who are unhoused or at risk of homelessness, restrict how funding is used and expand involvement of community voices without new funding streams.
But in addition to unpredictable program funding due to millionaires moving out of state to avoid the 1% income tax, county Behavioral Health Director Marni Sandoval stressed at Tuesday’s Board of Supervisors meeting that the new version of the act brings with it a series of challenging shifts, including an overall reduction in funding, more rigid spending categories defined by the state and a heavy burden on county staff to produce administrative and planning reports.
“Quite a lift with a lot less money,” said Sandoval.
Funding in the county will be reduced to $26.4 million this fiscal year, according to staff estimates, which are subject to change. That total represents a 5% reduction overall. In broad strokes, 30% of the funding will go to housing interventions, 35% must be used for behavioral health services and supports, and 35% will be dedicated to full-service partnerships.
The state has identified six behavioral health goals local jurisdictions must target with the tax money: access to care, untreated behavioral health conditions, institutionalization, homelessness, justice-involvement and removal of children from homes where severe behavioral health issues are present. Each jurisdiction is allowed to select one additional priority of its own choosing and county officials recommended it be suicide reduction efforts.
Sandoval explained that while the county agrees that it is important to address many of the issues prioritized by the California Department of Public Health — particularly the new program’s emphasis on housing interventions — it results in diminished flexibility to cater the limited funds to the unique needs of county residents. The impacts will trickle down to community-based organizations and nonprofits that have previously been contracted for existing work, she said.
As an example, Sandoval said she worries the strict spending requirements will put the squeeze on the county’s robust behavioral health prevention network.
“It makes it seem like there’s wonderful new money to fund all these things, but the flip side is if we choose to do that, we absolutely will cut a significant number of existing programs and services,” said Sandoval. “This is the dilemma that every county is faced with.”
Sandoval clarified that the new funding structure will not cause county leadership to propose staff cuts, but contracts with some local nonprofit providers may not be renewed because the county simply can’t dedicate resources to that work as money gets shuffled around.
Supervisors Monica Martinez and Kim De Serpa emphasized the need to communicate with these local organizations as the July 1 transition draws closer. That work is already underway, responded county staff.
From November through January, the county has held three community forums, five educational sessions and four informational meetings along with a number of focus groups, interviews and a community survey. The board ordered staff to continue these outreach efforts as local behavioral health program leaders work to put forward formal Behavioral Health Services Act plans for the next two fiscal years in June for board consideration.
“Anywhere that you can engage our community-based partners to keep them in the loop every step of the way so they can plan accordingly would be very helpful,” said Martinez.
While the funding system’s reorientation may be a painful adjustment for the county and its partners, Sandoval and Health Services Agency Director Connie Moreno-Peraza said there are some silver linings. Moreno-Peraza highlighted that the act will now include substance use disorder services as an allowable use of the tax revenue funds and it brings a measure of shared responsibility between the county and state when it comes to housing support for those experiencing severe mental illness.
“It’s is a lot of work, but it is really holding us accountable and transparent to the public and how we fund all these services,” she said.