Proposition 1

ANALYSIS BY THE LEGISLATIVE ANALYST

OVERVIEW

Proposition 1 has two major components related to providing mental health care and drug or alcohol treatment to people and addressing homelessness. The proposition:

• Changes the Mental Health Services Act that was passed by voters in 2004, with a focus on how the money from the act can be used.
• Approves a $6.4 billion bond to build (1) more places for mental health care and drug or alcohol treatment and (2) more housing for people with mental health, drug, or alcohol challenges.

MENTAL HEALTH SERVICES ACT

BACKGROUND

Counties Provide Mental Health Care and Drug or Alcohol Treatment to Certain People. Counties receive money to provide mental health care and drug or alcohol treatment. Counties generally provide these services to people with low incomes and severe mental illnesses.

A Tax on People With High Incomes Helps to Pay for County Mental Health Services. Counties receive roughly $10 billion to $13 billion per year in statewide taxes and federal money to provide mental health care and drug or alcohol treatment. Roughly one-third of the money counties receive to provide mental health services comes from a tax on people with high incomes. This tax has been collected since 2005, after California voters approved Proposition 63, also known as the Mental Health Services Act (MHSA). The act taxes people with incomes over $1 million per year and requires that the money collected from the tax be used for mental health services. The tax typically raises between $2 billion and $3.5 billion each year (annually).

Under MHSA, Counties Have Some Choices About How to Provide Services. Nearly all the money from the tax—at least 95 percent—goes directly to counties, which use it for mental health services. The rest of the money goes to the state to support mental health programs. Counties can only spend the MHSA money on certain types of services, but have flexibility in how to provide those services. The services include treatment for people with mental illness and prevention programs for people who may develop a mental illness. While counties can spend MHSA money on treatment for drugs and alcohol, the people receiving treatment must also have a mental illness.

PROPOSAL

No Changes to Tax. Proposition 1 does not change the tax on people with incomes over $1 million per year.

State Gets Larger Share of Tax. As shown in Figure 1, Proposition 1 increases the share of the MHSA tax that the state gets for mental health programs. The proposition also requires the state to spend a dedicated amount of its MHSA money on increasing the number of mental health care workers and preventing mental illness and drug or alcohol addiction across communities. Because the state would receive a larger share of the tax, counties would receive a somewhat smaller share.

Changes to How Counties Provide Services. Proposition 1 requires that counties spend more of their MHSA money on housing and personalized support services like employment assistance and education. While counties currently can use MHSA money to pay for these types of services, they are not required under MHSA to spend a particular amount on them now. Counties would continue to provide other mental health services under the proposition, but less MHSA money would be available to them for these other mental health services. Examples of other mental health services include treatment, responding to people in a mental health crisis, and outreach to people who may need mental health care or drug or alcohol treatment. How much counties would spend on different services would depend on future decisions by the counties and the state. The proposition also allows counties to use MHSA money on treatment for drugs and alcohol for people without a mental illness.

$6.4 BILLION BOND

BACKGROUND

California Does Not Have Enough Places Where People Can Get Mental Health Care and Drug or Alcohol Treatment. People receive mental health care and drug or alcohol treatment in different types of places based in part on their need. California does not have enough places where people can get this care and treatment. This shortage means that many people wait for care or do not receive care at the right type of place. To address the shortage, places for treatment in California would need to be able to see over 10,000 more people at any one time than is possible today.

State Program Provides Money to Build More Places for Mental Health Care and Drug or Alcohol Treatment. The state budget recently included about $2 billion to build more places for mental health care and drug or alcohol treatment. The program gives grants to local governments, tribes, nonprofits, and companies. About 75 percent of this grant funding has been awarded so far. Many of these places are now being built. Examples of the types of places that are being built by this program include: (1) places where people can stay for a short amount of time in order to receive treatment for drugs or alcohol; (2) places where people can stay while they transition from intensive mental health care to lower levels of care; and (3) places where people receive the most intensive treatment and care, such as psychiatric hospitals. This program will address less than half of the statewide shortage of places for mental health care and drug or alcohol treatment. Currently, no additional state funds for this purpose are planned.

Many People in California Experience Homelessness. The high cost of housing in California means many people cannot afford housing. As of January 2022, there were 171,500 people who were experiencing homelessness in California. Of this total, 10,400 were veterans.

State Program Provides Money to Turn Hotels, Motels, and Other Buildings Into Housing. The state has many programs that build housing for Californians experiencing homelessness or those with low incomes. One such state program gives grants to local governments and tribes for various purposes, including to turn hotels, motels, and other buildings into housing and construct new housing. Recent state budgets have given $3.7 billion to this program.

PROPOSAL

New Bonds to Build More Places for Mental Health and Drug or Alcohol Treatment and More Housing. Proposition 1 allows the state to sell $6.4 billion in new bonds. Bonds are a way that the state borrows money and then repays the money plus interest over time. For more information about bonds, see "Overview of State Bond Debt" later in this guide.

Use of Funds. Figure 2 shows how the bond funding would be used.

• Places for Mental Health Care and Drug or Alcohol Treatment. Proposition 1 would give up to $4.4 billion to the state program that builds more places for mental health care and drug or alcohol treatment. The types of places that would be built with bond funds would depend on future decisions by the state. Proposition 1 would require at least $1.5 billion of the $4.4 billion to go to local governments and tribes.
• Housing. Proposition 1 would give $2 billion to the state program that gives money to local governments to turn hotels, motels, and other buildings into housing and construct new housing. Local governments would get either grants or loans from the state. The housing added by the measure would be for people who are (1) experiencing homelessness or at risk of becoming homeless and (2) have mental health, drug, or alcohol challenges. Just over half of the $2 billion would be set aside for veterans.

FISCAL EFFECTS

MHSA

More MHSA Money to the State, Less to Counties. There would be no changes to the MHSA tax, but the money would be used differently. The proposition shifts roughly $140 million annually of MHSA money from the counties to the state. This amount would be higher or lower depending on the total amount of MHSA money collected annually.

Possible Increased Costs to Counties to Continue Current Programs. Counties would provide more housing and personalized support services, but would have less MHSA money for other mental health services. This means counties may need to use other county, state, or federal money to keep current service levels.

BOND

Increased State Costs of $310 Million Annually for 30 Years to Repay the Bond. We estimate the cost to repay the bond would be about $310 million annually over a 30-year period . Payments would be made from the state General Fund. (The General Fund is the account the state uses to pay for most public services, including education, health care, and prisons.) This would be less than one-half of 1 percent of state General Fund revenue. Since the state has to pay interest on the money it borrows, the total cost of the bond would be about 10 percent more expensive than if the state paid in cash.

Funding for Local Governments. Local governments and tribes would receive grants and loans funded by the bond to build more places for mental health care and drug or alcohol treatment and more housing for people with mental health, drug, or alcohol challenges. These governments would have to pay for some of the costs to operate these places and housing.

How Would the Bond Impact the Shortage of Places for Mental Health and Drug or Alcohol Treatment? The state government estimates that the bond would build places for 6,800 people to receive mental health care and drug or alcohol treatment at any one time. While the measure would build a lot of new treatment places, there may still be some need for new places after the bond funds are spent.

How Would the Bond Impact Homelessness? The state government estimates the bond would build up to 4,350 housing units, with 2,350 set aside for veterans. The bond would provide housing to over 20 percent of veterans experiencing homelessness. The number of housing units built by the bond would reduce statewide homelessness by only a small amount.

Visit sos.ca.gov/campaign-lobbying/cal-access-resources/measure-contributions/2024-ballot-measure-contribution-totals for a list of committees primarily formed to support or oppose this measure.

Visit fppc.ca.gov/transparency/top-contributors.html to access the committee's top 10 contributors.

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Vote YES on Proposition 1: Treatment, Not Tents

Why does California face a humanitarian crisis of homelessness, mental illness and substance abuse? Our mental health system is broken.

It goes back to the closure of the state's mental health hospitals in the 1960's and 70's when politicians dumped tens of thousands of patients into our communities and failed to provide alternative services to fill the gap.

Mental health treatment has been underfunded for decades, and the COVID pandemic only made things worse.

Proposition 1 will finally change that.

Proposition 1 combines compassion and common sense.

Proposition 1 authorizes $6.4 billion in bonds and directs billions more annually to finally fix our broken mental health system and move people permanently off the streets, out of tents and into treatment.

• EXPANDS COMMUNITY-BASED SERVICES: Prop. 1 will expand community-based mental health and addiction services across the state and serve tens of thousands of Californians each year.
• BUILDS SUPPORTIVE HOUSING: The initiative will create supportive housing settings where over 11,000 Californians with the severest mental health needs can live, recover, stabilize and thrive.
• PROVIDES TREATMENT OVER INCARCERATION: One in three California prisoners has a diagnosed mental illness. Today, we spend over $100,000 per incarcerated person. Research shows it's costly and counterproductive. Prop. 1 will prioritize treatment not punishment for the mentally ill.
• HELPS HOMELESS VETERANS: It is disgraceful that over 10,000 California veterans, many suffering from PTSD, are homeless and on the streets. Prop. 1 will provide $1 billion to serve veterans experiencing homelessness, mental health and substance abuse issues.
• ADDRESSES SHORTAGE OF MENTAL HEALTH WORKERS: Currently, those with serious mental health issues can wait six months or longer just for an introductory appointment. Prop. 1 will help fund additional professionals so that people with mental health needs can get help in real time.
• REQUIRES STRICT ACCOUNTABILITY: Democrats and Republicans support Prop. 1 because it addresses mental health and homelessness without raising taxes. And Prop. 1 has strict accountability measures, including mandatory audits, to ensure that funds are spent as promised.

California has the most acute homelessness epidemic in the nation. Meanwhile, nearly 1 in 7 California adults experiences a mental illness.

This is a crisis only Californians can solve.

Join first responders, mental health professionals, California veterans, and organizations supporting veterans like the California Association of Veteran Service Agencies.

By voting YES on Proposition 1, we can finally establish a modernized mental health system that will serve the needs of all our residents, get our most vulnerable off the streets and offer every Californian a genuine shot at a brighter future.

Choose compassion and common sense.

Choose treatment over tents.

Vote YES on Proposition 1.

Learn more at: treatmentnottents.com

Brian K. Rice, President

California Professional Firefighters

James Espinoza, MS, President

The Veteran Mentor Project

Jessica Cruz, MPA/HS, Chief Executive Officer

National Alliance on Mental Illness—California

We work directly with people struggling with mental health. We urge you to vote "no" because Proposition 1 will cause EXTREME DAMAGE to existing mental healthcare programs.

Supporters don’t tell you WHERE Prop. 1 gets money to operate its programs, so we must: Prop. 1 CUTS existing county-level mental health services!

Prop. 1 DIVERTS one-third of existing funding from the voter-approved Mental Health Services Act (MHSA), allows many kinds of services to compete with mental healthcare for the remaining money, and sticks the state in charge of local programs and decisions.

The results will be DEVASTATING at the local level.

Cutting programs.

Firing healthcare workers.

Ending services for thousands of people.

Current MHSA programs are a LIFELINE for underserved communities and people without insurance. Many of these services WON'T SURVIVE Prop. 1's cuts.

Prop. 1's pricey bonds are a FALSE PROMISE on homelessness. Two-thirds of the money is for time-limited and potentially "locked" treatment beds, NOT PERMANENT HOUSING.

When people leave treatment, they'll be BACK ON THE STREETS, still disabled, unable to work, again without housing.

Prop. 1 also fuels a DANGEROUS trend toward forced treatment. Studies show it's ineffective and is associated with higher suicide risks. DISTURBINGLY, Gov. Newsom unveiled his Prop. 1 at L.A. County General Hospital, which FORCIBLY RESTRAINS patients at a rate 50 times the national average!

Prop. 1 doesn't "fix" a broken system, it BREAKS something that's WORKING: the MHSA.

DON'T RAID current mental health programs to pay for Prop. 1. Please vote NO!

Heidi Strunk, CEO

Mental Health America of California

Andrea Wagner, Executive Director

California Association of Mental Health Peer-Run Organizations

Paul Simmons, Executive Director

Depression and Bipolar Support Alliance of California

Governor Newsom's Proposition 1 is a nightmare for taxpayers, cities and counties, and people with mental illness.

Prop. 1 is so huge, expensive, and destructive, it's already attracted a BIPARTISAN coalition of opponents. Vote NO because:

PROP. 1 WILL COST TAXPAYERS MORE THAN $10 BILLION. Prop. 1 puts taxpayers on the hook for DECADES to pay back new bonds. This isn’t "free money!" It's credit card borrowing from Wall Street. According to Howard Jarvis Taxpayers Association, bonds are the most expensive and inefficient way to pay for a government program. And with interest rates today, it's a VERY BAD TIME to be taking on new bond debt, adding at least 60% IN INTEREST COSTS, costing taxpayers an estimated $10.58 - $12.45 billion. This will take decades to pay back. The State should have prioritized spending through the budget process when we had a $100 billion state budget surplus. Our children will be paying our debts, and their streets won’t be any cleaner for it.

PROP. 1 ISN'T A SOLUTION TO HOMELESSNESS. The State has failed at reducing California's homelessness problem. Sacramento has already thrown $20 billion at the crisis in the last five years without making significant progress. The number of unhoused people increased 6% last year. The State Auditor's Office is still trying to find where the billions went. We will indeed have more tents in our neighborhoods and fewer people in treatment if Prop. 1 passes.

If the state wants a grand solution for homelessness, it should attack the heart of the problem through the regular budget process–not expensive bond measures that RAISE TAXPAYER COSTS LONG-TERM. Californians are already some of the most over-taxed people in the country.

PROP. 1 CUTS SERVICES FOR THE MENTALLY ILL. In 2004, the voters passed Proposition 63, the Mental Health Services Act (MHSA), which dedicated funds for community-based mental health services. Prop. 1 STEALS AWAY almost 1/3 of that guaranteed annual funding from the "millionaire's tax" leaving already underfunded programs to fight for the remaining money. That's why CalVoices, California's oldest mental health advocacy agency, opposes it.

PROP. 1 MANDATES STATE CONTROL OVER LOCAL CONTROL, WITH REDUCED OVERSIGHT. California's 58 urban and rural counties all have different needs. Prop. 1 brings a one-size-fits-all program and puts a huge, unaccountable state agency in charge. The voter-approved MHSA was locally based, allowing counties to set their own priorities, with mandatory, independent oversight and accountability. Under Prop. 1, oversight and accountability are watered down, instead giving authority to the governor and his bureaucrats. This threatens effective programs that counties already offer.

Leave it to Sacramento to find a way to INCREASE COSTS, CUT VITAL PROGRAMS, and offer only UNPROVEN IDEAS! Far from being a magic solution, Prop. 1 is a multibillion dollar disaster that will hurt the very people it claims to help. And who's left holding the bag when Prop. 1 fails? The taxpayers, once again.

THIS IS THE WRONG APPROACH. VOTE NO ON PROP. 1.

Senate Minority Leader Brian W. Jones

Assemblymember Diane B. Dixon

Heidi Strunk, CEO

Mental Health America of California

Opponents of Proposition 1 want to ignore the crisis of homelessness, mental illness and substance abuse plaguing communities across California.

Their position is isolated and extreme

Proposition 1 overwhelmingly passed the California Assembly and Senate with support from Democrats and Republicans because it’s based on compassion and common sense .

• Proposition 1 doesn't raise taxes. Leading business organizations, including California Retailers Association, support Proposition 1 because it addresses the crisis for the long term without raising taxes.
• Proposition 1 makes better use of existing money. First responders and mental health experts support Proposition 1 because it provides badly needed reforms to the Mental Health Services Act by prioritizing housing solutions that get people off the streets and into care.
• Proposition 1 strengthens local control. Bi-partisan mayors across the state support Proposition 1 because it gives local communities desperately needed mental health and addiction treatment services to manage the crisis on the ground.
• Proposition 1 has tough guarantees. Veterans support Proposition 1 because it was written with strict accountability measures, including mandatory audits, to ensure that funds are spent as voters intend.

We can finally fix our broken mental health system and put tens of thousands of Californians on a path to greater health and dignity.

Vote YES on Proposition 1: Treatment, Not Tents

Learn more at: treatmentnottents.com

Stephen Peck, Director

California Association of Veteran Service Agencies

Jennifer Barrera, CEO

California Chamber of Commerce

Alan W. Barcelona, Chair

Orange County Coalition of Police and Sheriffs (OC Cops)

Arguments printed on this page are the opinions of the authors and have not been checked for accuracy by any official agency.

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