Newsom’s push to alter spending on state mental health system faces pivotal test

Gov. Gavin Newsom’s plan to transform California’s mental health system faces its final hurdle in the state Legislature this week as lawmakers decide whether to place a pair of measures on the March 2024 ballot that would expand substance abuse treatment and generate $4.68 billion to build facilities to provide care for 10,000 patients.

The governor and his aides have spent months quelling concerns from counties and advocates for children and families about how his overhaul could shift funds away from existing services. The proposals are expected to pass, but the tensions along the way underscore the challenges Newsom confronts as he tries to address a homelessness crisis that has scarred the state and could define his political legacy.

The Democratic governor has received pushback from all sides, including from some of the most liberal advocacy groups in his own party, in his quest to create a new model.

“There’s no blueprint for how to solve homelessness and if there was this would have been done a long time ago,” said Anthony York, a spokesperson for Newsom. “There have been some who have been concerned about change, but the governor has been leading the effort to say we need change in order to serve the thousands of people living on our streets.”

The governor’s plan, unveiled in March, seeks to reform California’s 20-year-old Mental Health Services Act.

Approved by voters in 2004, the act enacted a 1% tax on personal income above $1 million per year to expand California’s behavioral health system to improve care and support for people with serious mental health issues. The money went directly to counties to spend on mental health programs.

Under Senate Bill 326, Newsom is asking lawmakers, and then voters, to reconfigure the mental health law and set aside 30% of the tax, or about $1 billion a year, for supportive housing for those with serious mental health illnesses or substance use disorders.

Assembly Bill 531, which would also go before voters if approved by lawmakers this week, creates a bond to generate at least $4.68 billion in one-time funding largely to build 10,000 new behavioral health beds under a streamlined environmental permitting process. Both measures would appear on the presidential primary election ballot next spring.

The governor contends the changes are necessary to modernize the MHSA to better meet the needs of today and to serve Californians with substance use disorders, which the state estimates at 1 in 10 adults, as well as those with serious mental health issues, a population of about 1 in 20. The legislation cites research by UC San Francisco that found 82% of homeless Californians reported having experienced a serious mental health condition and 65% reported regularly using illicit drugs at some point.

The proposal builds on Newsom’s ongoing effort to increase access to behavioral health services and build more supportive housing for people experiencing homelessness, which remains an entrenched problem for California and the Democratic governor despite billions spent by the state to address the issue.

Conservative media outlets and his GOP rivals repeatedly blast the image of encampments lining California sidewalks as an example of the deterioration of public safety and civic order under his watch in the Golden State. Florida Gov. Ron DeSantis, a Republican presidential candidate, in June released a campaign video from San Francisco, where Newsom once served as mayor, bashing the “leftist policies” he says have led to rampant drug use and people defecating on the streets.

Newsom has acknowledged the pressure he feels to deliver results on homelessness in his second term to counter the narrative from the right.

Last year Newsom championed the Community Assistance, Recovery and Empowerment (CARE) Court to require counties to create courts with the authority to order treatment plans for people suffering from schizophrenia or other psychotic disorders. Counties had expressed concerns about lacking the funding to increase housing and beds to treat CARE Court participants. Civil liberties groups and disability advocates lobbied against the plan, which they argued would criminalize homelessness.

Concerns over his mental health plan this year focused on Newsom’s call to redirect money from existing services and programs funded by the act to housing. Advocates were worried that the new focus on housing, coupled with an end to mandatory mental health funding allocations for children and families, could leave one of the state’s most vulnerable populations short-changed in the squeeze for public dollars.

“Counties are under intense pressure to address what we see in encampments and those are adults,” said Adrienne Shilton, director of public policy and strategy for the California Alliance of Child and Family Services. “Homeless youth that our organizations are working with, youth that are at risk, or families with children, they are not in encampments. They are a less visible homelessness population.”

Shilton said the governor’s office ultimately agreed to set aside about half of a county’s early intervention funds specifically for adults and youth under age 25, which was amended to the proposal. But there’s no such guaranteed allocation for housing support, she said.

Shilton pointed out that many children and families experiencing homelessness are not suffering from drug addiction or mental health issues and instead find themselves unhoused because of issues of affordability in a state with an increasingly high cost of living. Without an across-the-board mandate for money for those populations now, the problem the governor is trying to address could only get worse in the future.

“We will be creating the next generation of homelessness,” Shilton said. “That’s what we don’t want.”

Assemblyman Joaquin Arambula (D-Fresno) also raised questions in a recent committee hearing about the lack of allocations of funding for children and youth. He said setting aside 10% of funding for children through other programs, such as for housing assistance and Project Homekey, resulted in a 21% decrease in childhood homelessness, for example.

“I believe we’re in a crisis as a state for our children and adolescents and transitional age youth and believe that we need set asides within many of the funding pools for us to be prioritizing effectively and addressing issues like children’s homelessness and mental health needs,” Arambula said in an interview.

Newsom’s office acknowledged the pushback from some advocates, but said there’s also undeniable frustration with the status quo from millions of Californians.

Steven Maviglio, a Democratic strategist, said it’s often hard for advocates to be open to change, even when something isn’t working.

“This is a universe that no one has touched for a long time,” Maviglio said. “He’s got to be given some credit for not shrugging his shoulders, or not acknowledging the problem. The downside is this isn’t a quick fix. I mean, this is going to take a decade-plus to see any measurable results because just the whole system needs to be turned upside down.”