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Millionaires' tax is slow to trickle down 

Two billion dollars to help the mentally ill remain unspent

Voters approved a measure in 2004 to dedicate to mental health services a new 1 percent tax on Californians who earn more than $1 million per year.  It was described at the time as a way to fulfill decades-old promises made when California began to turn away from treating anyone but the criminally insane in mental hospitals.

So far, however, critics complain the impact of the money raised under Proposition 63 has been limited and what money has come in is threatened by Sacramento’s raging budget battle.

Bureaucratic lags have kept much of the money that has been collected from reaching its intended beneficiaries. According to a May 2008 audit of the program by the California Department of Finance, of $3.2 billion that had been collected, only $726 million had been distributed to counties and at least $80 million of that was promptly dedicated for required county reserve funds instead of mental health services.

A more recent review, released Jan. 9 by the state Department of Mental Health, reported program results had only marginally improved. It said that of $4.1 billion collected, $2.1 billion had been distributed and that plans were underway to increase distributions over the next two years.

Despite the delays, according to state officials, the act is working, having served 215,000 people in various ways ranging from counseling to contact with “mobile crisis” teams, while 18,000 have gotten intensive “whatever-it-takes” treatment. The state also says it’s seeing signs that fewer people are reporting to emergency rooms with mental health emergencies.

The money that has found its way to San Luis has been put to good use, advocates and officials say. San Luis Obispo County expects to receive slightly more than $5 million for this fiscal year, which will be used to provide a variety of new services including:

• Intensive intervention efforts for adults and children

• Spanish-language outreach for adults and children.

• Increased job placements through Transitions Mental Health Association.

• Advocates to help families navigate the health system.

• Specialized treatment for people with serious mental illness, including working closely with mentally ill people released from jail.

Of the money that’s come to San Luis Obispo, however, about $2 million has also been put into a reserve fund instead of funding services; the proposition requires such reserve funds.

State Department of Mental Health officials attribute the lag in distributing the money statewide in part to the act’s requirements that spending be driven by a community “stakeholder process.” That process has meant plenty of meetings, and the meetings have taken time. More broadly, regulations that would allow distributions haven’t been completed for four of the five components of the act.

The delay, along with the Department of Finance finding, has fueled critics. The president of the Howard Jarvis Taxpayers Association recently wrote an opinion piece calling for the proposition’s immediate repeal, saying it has “failed abjectly to accomplish its goals and thus reflects the worst example to date of ballot box budgeting.”

Even some early supporters are calling Proposition 63 a failure. Rose King, who served on the drafting committee for the proposition and was considered instrumental in its passage, wrote in a recent editorial that the effort has helped an “infinitesimal number of clients” get better treatment while creating a two-tiered system that funds new programs while starving the system that was already in place. She calls the current situation “heartbreaking.”

Local officials say the money is being put to good use, but note the process has been slow.

“I think the issue for most counties has been that the Department of Mental Health has made it pretty cumbersome for counties in order to get the funds,” said Karen Baylor, director of SLO County’s Behavioral Health Department.

In California, counties are the main providers of mental health services for people without private coverage, paying for their services with a mix of state, local, and federal funds. But the system has been widely criticized for leaving major gaps between different counties.

One stipulation in the act was that the new revenue source would not be a substitute for revenue streams already in place. In other words, it was supposed to provide a net increase in funding. But critics say that provision has been ignored in recent budget cycles. Editorial boards across the state cried foul when Gov. Arnold Schwarzenegger withdrew money from a program called AB2034 that was deemed effective in treating homeless mentally ill people, arguing that Proposition 63 funds could do the same job. Perhaps the new money can fill the same needs eventually, advocates say, but meanwhile thousands of homeless people have lost assistance.

Now politicians are again eyeing Proposition 63 funds during the current budget crisis in which the state faces a nearly $40 billion deficit.

Both Schwarzenegger and Republican lawmakers have proposed taking the Proposition 63 money to pay for ongoing, state-funded mental health programs. A non-partisan legislative analyst also recently backed the idea, which would require voter approval, but Democrats who control the Legislature oppose the move.

Locally, officials oppose the changes as well.

“We want the money to be able to stay with what the act intended it to be spent on,” said Baylor.

At Transitions Mental Health Association, the SLO-based nonprofit, they’re following the budget battles closely because Proposition 63 funds are being used for several programs including subsidized job placements.

“Everything seems to be kind of up in the air,” said Public Relations Director Hannah Brown. “I think we’re all kind of holding our breath and watching.” ∆

Managing Editor Patrick Howe can be reached at

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