California is spending billions on mental health housing. Will it reach those most in need?

The Newsom administration is moving swiftly to distribute by May billions of dollars from the 2024 mental health bond narrowly approved by voters, but concerns are emerging about whether areas of the state that have the greatest need will be left behind, according to testimony at legislative oversight hearing this week.

Proposition 1, championed by Gov. Gavin Newsom, pledged to inject $6.4 billion into the state’s overburdened mental health and addiction treatment system. Newsom promised voters the move would help the state address its homelessness crisis, which is often publicly associated with unaddressed mental health and substance use issues. 

A majority of the money, $4.4 billion, would be used to build treatment facilities to help meet the state’s estimated 10,000-bed shortage. The rest of the bond money would be used on housing and managed by the state’s housing department.

Newsom wanted to move as fast as possible. Last year, he announced the state would release the bond money months ahead of schedule. During a press conference last year, Newsom told counties to move with a “sense of urgency.” 

“You’re either part of the problem or you’re not. Period,” he said at the time. 

But that timeline could neglect counties that have the fewest mental health resources.

“Moving this money out fast does come at a cost, because there will be some who are left behind,” said Susan Holt, Fresno County Behavioral Health director, during the Tuesday hearing.

Small and rural counties say they simply don’t have the manpower or expertise to navigate the complex grant requirements governing this one-time, multibillion-dollar investment. A recent Legislative Analyst’s Office report found that a majority of money distributed from programs similar to Prop. 1 in the past went to regions of the state that need it least. The area with the highest unmet need, the southern San Joaquin Valley, didn’t get any state money in previous rounds of funding.

To meet the population need, the region needs to nearly triple its capacity.

Prior to Prop. 1, Holt testified that Fresno County submitted nine grant applications for primarily acute care beds and did not receive any money from the state.

“I can speak with conviction and assurance that we understand the urgency,” Holt said. “Sometimes with this much money we need to go a little bit slower in order to go faster in the end.”

Counties are also concerned that the state has provided money for treatment facilities but not for workforce or services.

Ryan Miller, an analyst from the Legislative Analyst’s Office, examined how the state spent similar building funds in the past. His analysis found that the state has historically awarded funds to “launch ready” projects that can be completed on a quick timeline, a criteria that gives an advantage to more sophisticated counties. 

Which regions got more mental health funding?

For example, a 2022 RAND study found that Los Angeles and the greater Sacramento region have sufficient adult acute care capacity, yet collectively those areas received nearly three-fourths of the funding distributed for acute care beds, roughly $130 million, according to the analyst’s office. Instead, those areas have a higher need for sub-acute care and community residential treatment.

“A great deal of resources and staff are needed to put together a compelling launch ready project,” Miller said.

Other areas of the state that received less money than expected based on need were the Inland Empire, Central Coast and Bay Area, Miller said.

Assemblymember Jacqui Irwin, who authored the legislation that put Prop. 1 on the ballot, said voters were very skeptical about how the state spends its money and that promises were made to get the money to counties quickly. But the Democrat from Thousand Oaks also questioned whether the accelerated timeline was sensible.

Prop. 1 passed by the narrowest of margins last year, 50.2% to 49.8%.

“Do you think the administration’s…implementation has been too aggressive, or are the goals realistic?” Irwin said.

State backs projects it believes will succeed

Marlise Perez, a division chief for the Department of Health Care Services, pushed back against the notion that awards would leave small counties behind.

“I don’t want it to appear that we’re only awarding the shiniest applications,” Perez said, pointing to almost $200 million in grants that were awarded to small counties prior to Prop. 1. 

At the same time, the administration must support projects that can actually be completed, Perez said. 

According to the analyst’s office, 18 small counties received no funding in previous grant rounds. According to Perez, 16 of them didn’t apply. 

“Unfortunately we can only award who applies. That has been a challenge,” Perez said. 

Her office is helping those counties with the application and now expects seven to apply for the next round of funding. One of the more difficult grant requirements is that facilities guarantee they can provide services for the next 30 years.

Still with more than $3.3 billion rolling out in two months, there’s little room to pivot how the money will be targeted. This round of grants will focus once again on “launch ready” projects. The remaining $1.1 billion will be awarded by early 2026.

Applicants have submitted projects totaling more than $8.8 billion, double the amount of money available, an indication of the severe needs across the state.

Assemblymember Joaquin Arambula, a Fresno Democrat, said when the system rewards those who have historically been able to provide services there is a risk of “baking in historical inequities and disparities.” 

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.