Newsom makes concessions on the way to mental health reform

SACRAMENTO, Calif. — Gov. Gavin Newsom has spent four years trying to overhaul how counties pay for mental health care, betting his reputation on making a dent on homelessness, substance abuse and mental health problems.

Now, he is making concessions amid concerns he’s going too far, POLITICO has learned.

By channeling more funds into housing and treatment for the state’s most seriously ill and homeless residents, his proposed changes threw into doubt the fate of mental health programs for youth and other preventive services.

Faced with those concerns — and the politically toxic optics of cutting programs for kids to pay for his plan — Newsom is tweaking the proposal to ensure a smoother passage in the Legislature with the hope of landing it on the March primary ballot.

The resulting policy could direct the next 20 years of mental health care spending in California, driving a shift in priorities to chronic homelessness, substance abuse and severe mental health issues, and away from prevention services and early interventions. Newsom hinted at the changes to his proposal when speaking with reporters Friday.

“I’m not going to defend the status quo, I’m not interested anymore,” he said. “I'm not interested in tinkering around the edges. I’ve got a sell-by date, I’ve got three and a half years left.”

The new amendments to the plan signal the beginning of an end-of-session sprint to get Newsom’s signature legislative push over the finish line as critics have raised concerns with increasing intensity in recent weeks. The final proposal will give more wiggle room for counties, set aside money for children’s services, and keep the commission that oversees these funds independent instead of folding it into the executive branch.

But the updated proposal still includes such sweeping changes to mental health spending that it’s unlikely the amendments will inoculate it from criticism.

“We’re feeling better about it, but we’re not fully there yet,” Christine Stoner-Mertz, CEO of California Alliance of Child & Family Services, said before she had seen the amendment language yet. “We certainly feel like we’ve been heard as a constituency.”

The proposal, introduced in the Legislature by state Sen. Susan Eggman (D-Stockton), is a suite of changes to 2004’s voter-approved Mental Health Services Act. In addition to those reforms, Newsom wants to ask voters in March to approve a bond that would provide $4.68 billion for 10,000 mental health treatment beds.

The money comes from a 20-year-old tax levied on millionaires, one of the most volatile funding streams in the state. Today it nets around $4 billion per year, most of which goes to counties.

Newsom’s idea, which he’s been floating since his State of the State Address in 2019, is to restrict how counties spend this money. He wants a third of it to go to housing assistance, a third of it to a “whatever it takes” approach for people who need intensive services, and the last third for all other programs.

Those categories — and subcategories with more funding requirements — have been a source of consternation for local government agencies, which note the vastly different makeup and needs of California’s 58 counties.

Not every county can spend a third of their MHSA budgets on housing, they say, as some don’t have a large enough homeless population to serve. They argue that the spending constraints will leave less to go around for crisis centers, capital improvements, outpatient services and dozens of other programs.

The administration wants counties to find funding for those services elsewhere — through Medi-Cal or private insurance. They contend that if the programs are transparent and show results, they’ll still get funded.

Newsom’s newest proposal sets aside 51 percent of the funding in two areas to be used for people 25 and younger. That amounts to about 2 percent earmarked for kids’ prevention services and 8.25 percent for kids’ early interventions. Prevention will now be the responsibility of the state, not the counties.

The changes are a great start, said Lishaun Francis, senior director of behavioral health at the group Children Now. Francis also hadn’t seen the finalized amendments as of Tuesday, but she said they’re a sign that the administration is listening when it comes to prevention and early intervention.

“On the other buckets, we really have questions,” Francis said. “Young people don’t experience homelessness in the same way as adults, how do we make sure kids are being served, at a minimum, at the same level that they are today?”

To offer more flexibility — one of several changes that counties have requested — the bill has been rewritten to let counties use a portion of the money designated for one category for other purposes.

The 16-member oversight commission, which will stay independent, will get six more members to represent people with substance use disorders, youth, and family members of people with mental health issues. It will also start sharing more data with the state and take a more comprehensive view of county mental health budgets, looking at other sources of money besides just the MHSA.

Darrell Steinberg, mayor of Sacramento and architect of the first iteration of the MHSA, said he understands people’s concerns, but that the change is needed, even if it’s hard. He argued that counties have time to figure out how to fund their programs.

“We've got two and a half years, we've got more funding than ever before,” he said. “This is an opportunity.”