Summary. This post is one of a series of analyses
on the various components of the Governor’s Behavioral Health
Modernization proposal. Earlier posts analyzed SB 326 (Eggman), which
would make far-reaching changes to the Mental Health Services Act
(MHSA). This post focuses on that bill’s counterpart, AB 531 (Irwin), as
amended on June 19, 2023, which proposes a $4.7 billion bond for
behavioral health facilities and housing for veterans. The Governor’s
proposed bond uses an appropriate funding mechanism to address a
well-documented need for behavioral health facilities and veterans
housing—priority areas for the Legislature. These elements of the
Governor’s proposal are broadly reasonable. The Governor, however,
proposes a limited role for the Legislature in the design and
implementation of the bond. We recommend amendments that would ensure
the Legislature would have an active and ongoing role in ensuring the
bond’s success.

Background

Counties Are Primarily Responsible for Funding and
Delivering Community-Based Services for Low-Income Individuals With the
Highest Service Needs. Counties play a major role in the
funding and delivery of public behavioral health services. In
particular, counties generally are responsible for arranging and paying
for community behavioral health services for low-income individuals with
the highest service needs through Medi-Cal, the state’s Medicaid
program. Community behavioral health services comprise publicly funded
outpatient and inpatient mental health and substance use disorder (SUD)
treatment and medications provided primarily in community settings.

Individuals Receive Treatment in Many Facility Types
Across Behavioral Health Continuum. As an individual’s
behavioral health needs change, the level of service they receive and
setting in which they receive care also ideally change. In order to
provide individuals appropriate care, the behavioral health system must
offer a wide range of services in a variety of settings, commonly
referred to as a continuum of care. Ideally, behavioral health services
would be offered in sufficient supply to allow for individuals to move
through this continuum as their needs change. Otherwise, individuals may
receive care at a higher or lower level of acuity than they need.

Various Types of Entities Provide Services in Hundreds of
Facilities Statewide. In January 2022, the Department of
Health Care Services (DHCS) released a report
titled Assessing the Continuum of Care for Behavioral Health
Services in California. The report examines the statewide capacity
to provide behavioral health services across the full spectrum of
behavioral health care. Based on data from the federal Substance Abuse
and Mental Health Services Administration, DHCS estimated that over 600
facilities provide outpatient mental health services and nearly 800
facilities provide substance use disorder services. DHCS also estimated
that over 100 facilities provided inpatient care—ranging from
psychiatric units within general acute care hospitals, freestanding
psychiatric acute care hospitals, and psychiatric health facilities.
Behavioral health facilities are operated by various entity types,
including public, private nonprofit, and private for-profit
entities.

Counties Can Use a Variety of Funding Sources for
Community Behavioral Health Facilities. Counties rely on a
variety of major, dedicated, ongoing fund sources to finance their
community behavioral health activities, including facilities. These
sources include (1) dedicated vehicle license fee and sales tax revenue
streams known as “realignment” funds, (2) revenues from the Mental
Health Services Fund (MHSF)—established by the MHSA and funded through a
1 percent tax on incomes over $1 million, and (3) federal funding
accessed through Medi-Cal. (In addition, counties may use local funds to
supplement these state dollars, although the extent of this local
funding contribution is unknown.) Although each of these funding sources
has its own set of objectives and rules dictating how funds can be
spent, there is sufficient overlap in purpose between these funding
sources for counties to use them relatively flexibly to meet their
community behavioral health service obligations. Notably, under current
law, funding that counties receive from the MHSF is required to be spent
according to certain parameters, including (1) direct services and
(2) prevention and early intervention activities. Up to 20 percent of
the amount counties receive from the MHSF for direct services can be
used on capital (including facility acquisition and renovation),
technology, workforce development, or to build reserve funding. However,
the amount within this allowance (and of counties’ overall behavioral
health funding) that counties spend on acquiring or renovating community
behavioral health facilities is unknown.

Recent Budgets Have Included Major Funding for New
Behavioral Health Infrastructure. Recent state spending
plans have included billions of dollars for behavioral health
facilities. In particular, the 2021‑22 budget included $2.2 billion
($1.7 billion General Fund and $530 million federal funds) on a one-time
basis for the Behavioral Health Continuum Infrastructure Program
(BHCIP). Funding for five rounds have been awarded as follows: (1)
$145 million for mobile crisis infrastructure, (2) $16 million for
county and tribal planning grants, (3) $519 million for “launch ready”
projects, (4) $481 million for projects targeted at children and youth,
and (5) a general-purpose round totaling $480 million. The 2023‑24
budget delayed the sixth and final round totaling $481 million to
2024‑25 ($240 million) and 2025‑26 ($240 million).

Shortage
of Adult Psychiatric and Community Residential Beds

Recent Study Estimated Shortage in
California. A recent study
released by the RAND Corporation assesses the state of adult psychiatric
and community residential beds in California. The study was funded by
the California Mental Health Services Authority, a county-level joint
powers authority, to assess both the capacity and unmet needs of key
components of the public behavioral health system. Generally, the
researchers used state licensure data to estimate the current (as of
2021) capacity of adult beds in the state. RAND used three approaches
for estimating the shortage of beds: (1) surveying psychiatric
facilities to gather data on bed occupancy, wait list volume, and other
information; (2) convening an expert panel to estimate bed need based on
available research; and (3) assessing national and state survey data
concerning the prevalence of serious mental illness to determine the
regional variation in the need for beds. The study classifies
psychiatric beds in three categories: acute (individuals with the
highest level of needs, typically served for days to weeks), subacute
(moderate to high level of needs for multiple months), and community
residential (lower level of need for up to multiple years). The
researchers estimated that the shortage of adult beds totals about 2,000
beds at the acute level, 2,800 beds at the subacute level, and about
3,000 beds at the community residential level. As shown in Figure 1, the
estimated shortage is significant and particularly severe at the
community residential level. RAND notes that the shortage in beds
results in occupancy rates that are higher than generally accepted
levels, long wait lists, and facilities unable to transfer patients to
settings of more appropriate levels of care. Other key findings and
recommendations from, as well as limitations of, the study include:

• RAND Estimates Shortage Varies Substantially by
  Region. RAND found that the shortfall of beds varied
  widely across regions and by categories of beds. On a per-100,000
  residents basis, RAND estimates the statewide need for beds to be about
  26 beds at the acute level, 24 beds at the subacute level, and 22 beds
  at the community residential level. Figure 2 displays RAND’s estimates
  of the regional shortfall by facility type. In the South San Joaquin
  Valley, Inland Empire, Central Coast, and San Francisco Bay Area, RAND
  estimates a general shortfall across all categories. The shortage is
  generally most severe in these regions. In other areas—such as in Los
  Angeles County, North San Juaquin Valley, San Diego-Imperial, and the
  Superior region (northern inland counties)—RAND estimates a shortage in
  some categories but a surplus in other categories.

• RAND Recommends Focusing on Hard-to-Place
  Populations. RAND found that one-half of facilities were
  unable to place adults with co-occurring conditions, such as dementia,
  and two-thirds of facilities were unable to place justice-involved
  individuals. In addition, facilities struggle to place individuals with
  unique needs, such as those requiring oxygen. These hard-to-place
  populations contribute to bottlenecks in the system. RAND recommends
  that efforts to address the shortfall in adult beds be designed with
  this particular problem in mind.

• Study Did Not Estimate Need for Beds for Children and
  Adolescents. The RAND researchers did not include children
  and adolescents in the scope of their analysis. The researchers
  indicated that children and adolescents have “subtle but important
  differences” in care needs and thus the sufficiency of facilities for
  this population should be assessed separately from adults.

• Researchers Stressed Significant Data
  Limitations. While the RAND research approach generally
  appears reasonable, the researchers indicated that poor state licensure
  data casts significant uncertainty upon their estimates of existing
  facilities. Notably, based on information from county officials, the
  researchers removed 30 percent (about 1,800) of facilities from the
  state data. Reasons that facilities were removed from the state data
  included facility closures, an absence of licensed psychiatric beds, or
  facilities not accepting patients with mental health
  conditions.

Housing
and Homelessness Programs for Veterans and Others With Behavioral Health
Needs

Many Individuals Experiencing Homelessness Also Have
Behavioral Health Needs… Although housing affordability is
the most significant factor in the state’s homelessness crisis, there
are many individuals experiencing homelessness who also have behavioral
health needs. Estimates vary on exactly how many individuals
experiencing homelessness also suffer from behavioral health disorders.
According to the U. S. Department of Housing and Urban Development’s
2022 point-in-time count, 23 percent (39,700) of the 171,500 people
experiencing homelessness in California suffered from severe mental
illness and 21 percent (36,000) suffered from a chronic SUD. (There is
likely overlap between these two populations, the degree to which is
unknown.) Furthermore, the same point-in-time count found 6 percent
(10,400) of people experiencing homelessness in California were veterans
and over 70 percent of these veterans experienced unsheltered
homelessness. How many veterans also had behavioral health needs is
unclear. However, the prevalence of behavioral health disorders appears
to differ for distinct categories of people experiencing homelessness.
For example, researchers have estimated that the prevalence of mental
illness and SUD is higher for people experiencing unsheltered
homelessness than sheltered homelessness. Available research also
indicates that experiencing homelessness may lead some individuals to
develop or exacerbate existing behavioral health issues due to the
chronic stress of living without stable housing.

…And Could Benefit From Receiving Housing Support Paired
With Behavioral Health Services. For individuals who both
experience homelessness and have behavioral health needs, behavioral
health services could be an essential component of addressing their
homelessness. As discussed earlier, the chronic stress of living without
stable housing may lead an individual to develop a behavioral health
disorder. In turn, this can make it more difficult for an individual to
exit homelessness as their behavioral health issues make it even more
challenging to maintain housing stability. Accordingly, these
individuals could particularly benefit from a more comprehensive
approach to care that includes housing supports paired with behavioral
health services.

State Housing and Homelessness Programs for Veterans and
People With Behavioral Health Needs. The state administers
various housing and homelessness programs for veterans and people
experiencing or at risk of homelessness with behavioral health
needs.

• No Place Like Home (NPLH) Act of 2018.
  The NPLH Act of 2018 (Proposition 2) authorized $2 billion in bonds to
  construct new, and rehabilitate existing, permanent supportive housing
  for people who need mental health services and are experiencing
  homelessness or are at risk of homelessness. The housing support
  provided through NPLH is paired with mental health services. All bond
  funding has been allocated as of August 2022. The bonds will be repaid
  over time using MHSA funds. NPLH has supported 247 projects and 7,852
  housing units are anticipated. As of August 2022, 119 projects are under
  construction, 30 projects have been completed, and 498 units have units
  have been completed and are occupied.

• The Veterans and Affordable Housing Bond Act of
  2018. The Veterans and Affordable Housing Bond Act of 2018
  (Proposition 1) authorized $4 billion in general obligation bonds for
  various housing programs. The bond set aside $1 billion for veteran
  homeownership, which is administered by the California Department of
  Veterans Affairs (CalVet). Based on data provided by CalVet in
  March 2023, the department has lent $364 million to veterans for home
  purchases. There is $636 million in bond authority remaining and the
  next release of funding is anticipated in fall 2023.




• Veterans Housing and Homeless Prevention Bond Act of
  2014. The Veterans Housing and Homeless Prevention Bond
  Act of 2014 (Proposition 41) restructured $600 million in existing
  general obligation bonds for veteran multifamily rental
  housing. The funding is administered through the Department of Housing
  and Community Development’s (HCD’s) Veterans Housing and Homelessness
  Prevention Program (VHHP). (The restructuring was necessary because
  $900 million in general obligation bonds authorized in 2008 for veteran
  homeownership did not experience the demand that was projected
  before the housing downturn during the Great Recession.) HCD indicates that, of the $600 million that was restructured for VHHP funding, $62 million remains available. According to HCD, it has accepted applications for this remaining VHHP funding from Proposition 41. The applications HCD has received have collectively requested $109 million in funding, more than is available for award. Once HCD selects awardees, Proposition 41 funds are expected to be exhausted.

State Infrastructure
Financing

Two Ways the State Usually Pays for Infrastructure
Projects. The state’s infrastructure spending relies on
various financing approaches and funding sources.

• Pay-As-You-Go. Under the pay-as-you-go
  approach, the state funds infrastructure up front through direct
  appropriations of tax and fee revenues. Pay-as-you-go spending from
  special funds makes up a significant share of the state’s infrastructure
  spending, primarily in the transportation sector. (The recent funding
  for behavioral health infrastructure noted above is funded on a
  pay-as-you-go basis.)

• General Fund-Supported Bonds. The state
  traditionally has sold two types of bonds that are typically paid off
  from the General Fund: voter-approved general obligation bonds and lease
  revenue bonds approved by the Legislature. (The state also sells bonds
  repaid from special funds.)

How Bonds Work. Bonds are a way that the
state (as well as local governments and private companies) borrows
money. The state sells bonds to investors to receive “up-front” funding
for projects and then repays investors, with interest, over a period of
time.

• When and Why the State Uses Bonds to Finance
  Infrastructure Projects. A main reason for issuing bonds
  to finance infrastructure projects is that infrastructure typically
  provides taxpayers with a public benefit over many years. Thus, it is
  reasonable for taxpayers, both currently and in the future, to help
  contribute to the financing costs. Bonds can therefore promote
  intergenerational equity by spreading costs across generations of
  taxpayers roughly proportionate to the benefits that they receive.
  Another advantage to bond financing over pay-as-you-go financing is the
  full access to funding up front to complete a project rather than in
  stages over a longer period of time based on funding
  availability.

• The Costs of Bond Financing. After
  selling bonds, the state makes annual payments over the following few
  decades until the bonds are paid off. (This is similar to the way a
  family pays off a mortgage.) Although when compared with the
  pay-as-you-go approach, the up-front cost to the state of bond financing
  a project is significantly lower, overall costs are higher due to the
  interest on the debt. The amount of additional cost depends primarily on
  the interest rate and the time period over which the bonds have to be
  repaid. For example, assuming that a bond carries an interest rate of
  4 percent, the cost of paying it off over 20 years is close to $1.50 for
  each dollar borrowed—$1 for repaying the principal amount and about
  $0.50 for interest. This cost, however, after adjusting for inflation is
  considerably less—about $1.10 for each $1 borrowed.

About $71 Billion in Principal Outstanding From Issued
General Obligation Bonds. As of July 1, 2023, the total
amount of authorized general obligation bond debt that remains
outstanding was $95.2 billion. This is the combination of $70.7 billion
in bonds that have been issued but not fully repaid and $24.5 billion in
bonds that have been authorized by the voters but not yet sold to
investors.

Annual Debt Service Currently Represents Less Than
3 Percent of General Fund Spending. The 2023‑24 budget
package reflects $6.5 billion in debt service on general obligation
bonds, or 2.6 percent of General Fund revenues. These debt service costs
are about as low as they have been in recent decades, and roughly half
of debt service costs at their recent peak of about 6 percent in
2010‑11.

Several Bond Proposals Currently Under Consideration in
the Legislature. There are several bills currently moving
their way through the Legislature that would place general obligation
bonds before the voters. In the aggregate, the bonds that would be
authorized by these bills exceeds $100 billion. (We expect the amount of
bonds that the Legislature ultimately will place before the voters will
be lower than this amount.) Most relevant to AB 531, the proposals
include $25 billion for home ownership and construction (SB 834
[Portantino]), $10 billion for affordable rental housing and home
ownership programs (AB 1657 [Wicks]), and $5.2 billion for substance use
treatment and other behavioral health programs (AB 1510
[Jones-Sawyer]).

Proposal

Governor Proposes Major Changes to Behavioral Health
System and Additional Behavioral Health Beds and Veterans
Housing. In March, the Governor provided the Legislature
with a broad outline of a proposed package of changes intended to
modernize the state’s behavioral health system, combined with additional
funding for behavioral health housing. The proposal is currently moving
through the Legislature in two companion bills—SB 326 (Eggman) and
AB 531 (Irwin). Senate Bill 326 would make far-reaching changes to the
MHSA, including a restructuring of funding categories that would require
counties to allocate more MHSA funding towards Full-Service Partnerships
and housing interventions. By making more activities compete for a
smaller, flexible category of funding, the bill may also make it harder
for counties to prioritize capital facility needs. This post focuses on
that bill’s counterpart, AB 531, which proposes a general obligation
bond for behavioral health facilities and housing for veterans.

The Proposed $4.7 Billion Bond for Behavioral Health Beds
and Veteran’s Housing. The Governor proposes a
$4.7 billion general obligation bond for the March 2024 ballot to
construct or rehabilitate up to 10,000 behavioral health beds in
residential settings and housing units for veterans and other
individuals experiencing or at risk of homelessness. The total cost of
the bond, including interest, would be around $5.1 billion (in
inflation-adjusted terms). Bond proceeds would be continuously
appropriated, meaning that the Legislature would not be required to
appropriate the bond proceeds in the annual budget act to allow for
their expenditure. Up to 3 percent of the bond proceeds could be used
for administrative costs. Principal and interest on the bonds would be
repaid by the state General Fund. Projects funded by the bonds would be
deemed in conformity with local zoning rules and would be exempt from
California Environmental Quality Act requirements provided the projects
meet specified criteria. Grant recipients would be required to operate
the facilities and units added by the bond for at least 30 years. The
proposal is silent on the types of entities that would be eligible to
receive grants. The bond proceeds would be used as follows:

• Up to $865 Million Dedicated to Housing
  Grants. Assembly Bill 531 sets aside up to
  $865 million for HCD to award grants to construct and rehabilitate
  housing for veterans and others who are experiencing or at risk of
  homelessness and are living with a behavioral health challenge. HCD
  would not be required to award grants on a competitive basis.

• Remainder Would Be Used for Beds in Community-Based
  Treatment Settings and Residential Care Settings. Bond
  proceeds remaining after distribution to HCD—at least
  $3.8 billion—would be used for DHCS to award grants to construct and
  rehabilitate beds in unlocked, voluntary, community-based treatment and
  residential care settings. The bond would not fund acute-care
  psychiatric facilities. DHCS could choose whether to require matching
  funds or real property as a condition of receiving a grant.

Assessment
and Issues for Legislative Consideration

Bond
Appears Broadly Reasonable and Worthy of Consideration…

Proposal Addresses Well-Documented Need That Is a
Legislative Priority. The state has previously funded
housing and homelessness programs for veterans and others with
behavioral health needs. Similarly, the state has recently created the
BHCIP to fund additional behavioral health facilities. The shortage in
both housing and behavioral health facilities is well documented and a
pressing need. Addressing these issues is a priority for the
Legislature. As such, we think it is appropriate for the state to have a
role in funding the types of projects proposed to be funded by the bond.
The facilities and housing units would provide a public benefit over a
multi-decade period. Thus, we think financing the projects with a bond
and asking future taxpayers to share in the costs to develop the funded
infrastructure is reasonable. In our view, these elements of the
Governor’s proposed bond are broadly reasonable.

…But
Also Raises Questions for Legislative Consideration

How Would Local Governments Fund Ongoing Costs to Support
Permanent Housing? The veterans housing portion of the
bond is intended to support permanent housing development for veterans
and others who are experiencing or at risk of homelessness and are
living with a behavioral health challenge. Accordingly, local entities
would be responsible for funding the ongoing costs associated with
maintaining the properties and providing any associated services to
occupants. Local entities’ capacity to fund such new ongoing costs is
unclear and calls into question the state’s ability to preserve these
units in the long term. The Legislature may wish to ask the
administration for its perspective on the local capacity to fund these
new ongoing costs and what oversight of services and maintenance would
be provided.

To What Extent Do Recent Budget Augmentations Address
Estimated Shortage of Behavioral Health Facilities? The
RAND study was conducted in late 2021, around the time when the state
began to infuse the behavioral health system with billions of dollars.
We understand that the administration’s intent is for the bond to
address the remaining shortage after the BHCIP has run its course. In
addition, the RAND researchers identified other factors that could
reduce the estimated shortfall over time—notably, the availability of
mobile crisis response teams, which are being implemented as a Medi-Cal
benefit. In considering the Governor’s proposal, the Legislature may
wish to ask the administration for detailed estimates of the extent to
which recent state efforts are expected to address the shortage of
behavioral health facilities and how the bond would fill in remaining
gaps.

What About Behavioral Health Facilities for Children and
Adolescents? The RAND study focused on the adult
psychiatric and community residential bed shortage and specifically
excluded needs for children and adolescents from the scope of
research. The administration has noted that the bond could be used to
fund community residential beds for children and youth. The Legislature
may wish to ask the administration about the extent, if any, of a
shortage of beds for children and adolescents and to what degree the
administration anticipates using bond proceeds to fund beds focused on
this population.

What About the Shortage of Acute Psychiatric
Beds? By focusing on unlocked, voluntary, community-based
treatment and residential care settings, the Governor’s proposed bond
would not address the nearly 2,000 acute bed shortage identified by
RAND. As such, the bond itself seemingly would do comparatively little
for the North San Joaquin Valley and North Coast regions where the acute
bed shortfall is greatest but where the need for other bed types is
relatively small. The administration has indicated that the BHCIP is
intended to address the shortage in acute beds. The Legislature may wish
to request more detail from the administration on how it plans to
address the acute bed shortage.

Will New Behavioral Health Facilities Reach Hard-to-Place
Populations? RAND found that challenges with placing
certain populations—those with co-occurring conditions, such as a
traumatic brain injury, certain justice-involved individuals, and
individuals with unique needs—can result in bottlenecks in the
behavioral health system. The RAND researchers recommended that
facilities be added to the behavioral health system with these
populations in mind. The Legislature may wish to ask the administration
how the beds funded by the bond would address these particular
challenges.

Weighing
Proposal Against Other Funding Priorities

No One “Right” Level to Spend on
Infrastructure. The amount of infrastructure spending
should reflect the state’s priorities for infrastructure compared with
other state spending. Authorizing General Fund-supported bonds, however,
obligates future General Fund resources for those bonds, meaning that
fewer resources will be available in the future for other
priorities.

Proposal to Fund Behavioral Health Facilities With
General Obligation Bonds Is a Novel Approach. While
general obligation bonds are a common tool for financing infrastructure
in K-12 and higher education, resources, transportation, housing, and
other areas, the state has very little experience with using such bonds
to finance health facilities. Funding health infrastructure with General
Fund-supported bonds may put pressure on the state in the future to use
bonds to fund similar health infrastructure. For example, hospitals have
long cited the financial challenges associated with meeting state
seismic safety standards, which have resulted in multiple delays in the
enforcement of these standards. The state could face additional
pressures to use bond funding to cover a portion of these costs, which
currently are not a state responsibility. The Legislature will want to
weigh this precedent-setting action carefully.

Consider Where Proposal Ranks Among Bonds Currently in
Legislative Process. With the state budget condition
tightening this year and bond debt service costs at a relatively low
level, it is understandable that the Legislature may want to look to
bond financing for certain infrastructure priorities. That said, the
Legislature will want to prioritize among the various bond proposals
that are currently under consideration. The Legislature will also want
to consider leaving some capacity for additional bonds in the coming
years, as a currently unanticipated need could arise and a
voter-approved bond commits General Fund resources for multiple decades.

Consider Reprogramming Recent Commitments.
In recent years, and in particular in the 2021‑22 and 2022‑23 budget
packages, the state made tens of billions of dollars in one-time or
temporary commitments. While much of the funding has been encumbered or
liquidated, a significant share remains available to reprioritize.
Should the Legislature agree with the Governor that this proposal is a
funding priority, given the constrained budget situation and competing
priorities for bond dollars, the Legislature may wish to consider the
extent to which temporary commitments in recent budgets could be
reprogrammed for this purpose.

Legislative
Role in Bond Implementation and Oversight

Governor’s Proposal Would Give Administration Broad
Latitude in Implementing the Bond. While the
administration generally has a broad plan for administering the bond
funds, many key details are missing from the statutory proposal. For
example, while we understand that the administration plans to base grant
eligibility on recent housing and behavioral health programs, the
statutory proposal is silent on what types of entities, such as public
agencies and private entities, could receive grants from the proceeds of
the bond. Other details that are missing from the statutory proposal
include the methodology for allocating grant funds, the anticipated
implementation time line, the extent to which a portion of the bond
proceeds would be set aside for veterans housing, and the prioritization
of bond proceeds for various types of behavioral health facilities. The
statutory proposal defers to the administration key decisions such as
whether matching funds or real property should be required as a
condition of receiving grants for behavioral health facilities. The
statutory proposal also continuously appropriates the bond proceeds,
meaning the administration would not have to seek further authority from
the Legislature to award behavioral health facility and veterans housing
grants.

Important for Legislature to Have Active Role in
Implementation. Data limitations and the limited scope of
the RAND study make the precise extent of the shortfall in behavioral
health facilities uncertain in terms of facility types, target
population (adults versus children and adolescents), and geographical
region. In addition, recent state efforts have already begun to fund new
behavioral health facilities, making the shortage a moving target. These
efforts include the BHCIP, which has awarded $1.6 billion in behavioral
health infrastructure grants, and mobile crisis response teams, which
are being implemented as a Medi-Cal benefit and can help to alleviate
the need for behavioral health facilities. The Legislature will want to
have an ongoing and active role in monitoring these developments and
potentially adjusting the focus of the bond to ensure the dollars are
targeted at the areas of highest need.

Recommend Increased Legislative Role in Bond
Implementation and Oversight. Should the Legislature agree
with the Governor that this bond proposal should be prioritized this
year, we recommend that the Legislature amend the statutory proposal to
provide more direction to the administration and ensure an ongoing
legislative role in the bond’s implementation. First and foremost, this
should include making the bond funds subject to appropriation in the
annual budget act rather than the proposed continuous appropriation.
Requiring the administration to submit proposals to spend the bond
proceeds will help the Legislature ensure that the administration is on
the right track in its targeting of funds. In addition, the Legislature
will want to consider having an increased role—either by providing more
direction in AB 531 or tabling certain key decisions for the second year
of the legislative session—in determining:

• The types of entities eligible for grants.

• The methodology for allocating grant funding.

• The extent to which bond proceeds should be spent on veterans
  housing versus behavioral health facilities.

• Any required legislative approval to transfer funds between the
  HCD and DHCS administered portions of the bond.

• Whether matching funds or real property should be required as a
  condition of receiving grants for behavioral health facilities and
  whether HCD should be required to award grants on a competitive
  basis.

The Legislature will also want to consider oversight and reporting
requirements to gauge the extent to which the bond is meeting
legislative goals now and in the future.

Conclusion

Governor’s Proposed Bond Merits Consideration, but Larger
Role for Legislature Needed. The Governor’s proposed bond
uses an appropriate funding mechanism to address a well-documented need
for behavioral health facilities and veterans housing—priority areas for
the Legislature. The Governor’s proposal is broadly reasonable and
merits legislative consideration. The proposed bond, however, could set
new expectations for the state in funding future health infrastructure,
which the Legislature will want to consider carefully. The Governor also
proposes a limited role for the Legislature in the design and
implementation of the bond. We recommend amendments that would ensure
the Legislature would have an active and ongoing role in ensuring the
bond’s success.