California’s protection & advocacy system

For legal assistance call 800-776-5746. For all other purposes call 916-504-5800 in Northern CA

or 213-213-8000 in Southern CA. TTY 800-719-5798.


Re: Mental Health 4440 – Education 6110 - Budget Item: AB 3632

January 24, 2011

Honorable Holly J. Mitchell
Chair, Assembly Budget Subcommittee on Health and Human Services
Capitol Building Room 6026
Sacramento, CA 95814

Dear Assembly Member Mitchell:

Disability Rights California is a statewide nonprofit that has worked to advance the rights of Californians with disabilities for over thirty years, and is the designated protection and advocacy agency for people with disabilities under federal and state law. We recognize the fiscal challenges the state faces but also believe that creative “outside the box” thinking can result in economic efficiencies, eliminate out-dated models of providing services and achieve good policy outcomes.  

While this letter pertains to the AB 3632 budget proposal, we want to point out: The Brown FY 2011-12 budget reduces every health and human services program, causing real harm to Californians with disabilities. Not only will many people lose services from more than one program, these reductions come on top of the cuts in both income and services they have borne in recent years. There is a better way; we propose that the governor and Legislature consider the mental health funding strategies included in this letter, details of which we can provide.

The Brown AB 3632 budget proposal

Includes $98.6 million General Fund to cover mental health services for students, mandated under federal law, for prior year costs incurred by counties per a state mandate created by AB 3632.

Shifts Mental Health Services Act (MHSA) funds to the Department of Mental Health, to replace the General Fund for AB 3632 services, the Early and Periodic Screening, Diagnosis and Treatment Program and mental Health Managed Care General Fund savings of $861.2 million in 2011-12.

Realigns to counties AB 3632, EPSDT, and mental health managed care and replaces MHSA funding with dedicated revenue commencing 2012-13.

Prior Year Costs for AB 3632
We support funding of prior year costs incurred by counties for the AB 3632 program.

One-year funding shift to Mental Health Services Act
We support continued funding of the AB 3632 program, EPSDT and mental health managed care.  However, we are concerned that using Mental Health Services Act (MHSA) money will lead to a reduction in community mental health services and violate maintenance of effort and non-supplantation requirements of the MHSA even though the governor does not believe it will. 

A reduction in community mental health services could lead to homelessness, institutionalization, an increased use of emergency rooms and incarceration of people currently served by MHSA programs.  The governor’s proposal could radically shift the focus of the state’s mental health system from home and community services primarily to hospital and institutional care.  This would most likely violate the “integration mandate” under the Americans with Disabilities Act (ADA). (42 U.S.C § 12132; 28 C.F.R. § 35.130(d)).  The United States Supreme Court in Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581 (1999), held that the “integration mandate” required that persons with disabilities be served at home and in the community when (1) community services would be appropriate, (2) the individual does not oppose community services, and (3) community services can be reasonably accommodated. Id. at 607.

Further we recommend that the state move forward with the AB 3632 study in order to assess the strengths and weaknesses of the current fiscal and service delivery system, and identify options for improving accountability for effective services and positive student outcomes.

Existing law provides for General Fund support of: AB 3632 mental health services for special education students(1), EPSDT (Early and Periodic Screening, Diagnosis and Treatment) supplemental mental health services for individuals under age 21, and mental health managed care.

Governor’s proposal: Under the governor’s proposal, funding for these programs would be shifted for the 2011-12 fiscal year, to the MHSA which was enacted by the voters in 2004 as Proposition 63.(2)   The governor’s proposal would result in state general fund savings in FY 2011-12 of $861 million for the following three programs:  mental health managed care ($183.6 million state general fund) EPSDT supplemental mental health services ($579 million state general fund) and AB 3632 special education services.

Approximately the same amount of money ($861 million) would have to come out of the $1.5 billion that is expected to be available under the MHSA in the 2011-12 fiscal year.(3)   According to Governor Brown the MHSA contains a $558 per year maintenance-of-effort requirement for state general fund expenditures as well as a non-supplantation requirement on the state and counties.  One of the purposes of the MHSA, as stated in the initiative itself, is to “expand mental health services.”

The governor believes that a two-thirds vote of the Legislature is all that is required to shift the state general fund funding to the MHSA since the Legislature can adopt amendments that “further the purpose” of the MHSA by a two-thirds vote. The governor’s reasoning seems to be that the new dedicated funding stream for mental health managed care, EPSDT and AB 3632 will enable those programs, and existing mental health programs under current realignment, to receive 8% per year in growth funds rather than the 2% they has been receiving under current realignment. The belief is that this 8% growth will maintain the current general fund maintenance of effort, allow for the $861 million one year MHSA reduction to be paid back, and provide increases in overall mental health funding as well. Because of this overall increase in funds, the establishment of the dedicated revenue stream will further the purposes of the MHSA, thereby justifying the one-year MHSA cut.  If this proposal fails, the Department of Finance’s budget default is to cut $861 million in mental health funding from the General Fund.

Realignment of programs to the counties
“Realignment” refers to a shift of responsibility for programs between state and local governments.  The idea is that the entity that is responsible for administering a program should have discretion in how to administer the program together with a dedicated revenue stream for funding the program.

A portion of funding for community mental health services was realigned in 1991-92, by shifting funding to the counties.  This included funding for some, but not all, specialty mental health services provided under the Medi-Cal program.  The Governor proposes to realign the rest of the Medi-Cal specialty mental health program by also transferring these parts of the program to the counties.  Slated for transfer are the following General Fund funding streams: AB 3632 mental health services for special education students, EPSDT supplemental mental health services to individuals under age 21, and mental health managed care.

Under the governor’s proposal, the entire Medi-Cal specialty mental health program, including EPSDT, would become a county obligation.

The governor proposes to “realign” these services by transferring funding to the MHSA for FY 2011-12.  (This would reduce funding for MHSA services by approximately $861 million.)  Beginning in FY 2011-12, these services would be permanently transferred to the counties and funded with a dedicated portion of the current, temporary 1% sales tax, .15% VLF and .25% income tax.(4)   After expiration of these taxes, the state would find a permanent funding source for the realigned programs.  The state would continue current realignment of mental health services with a portion of the current ½% of the sales tax and 74.99% of the VLF.  However the entire mental health realignment funding stream would be separated from the social services and health funding streams.  According to the Governor, this would enable growth in realigned mental health programs of about 8% per year rather than the 2% per year under current realignment. 

We support continued funding of these programs, however, since the details of the allocation formula are very much up in the air right now, we are unable to take a position on the realignment proposal.

Funding Strategies

Children’s Mental Health Services including Residential Placement
1. Restore the AB 3632 mental health program (and avoid the potential loss of federal special education funds) and transition to a new, more efficient system based on recommendations from a legislatively funded study expected in June 2011, and by restoring funding in the interim.

2. Draw down new federal Medicaid funds for mental health services for special education students via a new Medicaid waiver. In 2001, the Little Hoover Commission issued a report on children’s mental health services that included a recommendation that California maximize federal funding for children who do not otherwise qualify for Medi-Cal.(5)   In addition The Bazelon Center has reports that describe how Medicaid waivers can be used to provide services to children with mental health disabilities.(6)   Such a waiver could target children who do not otherwise qualify for Medi-Cal services.  

Please let me know if we can provide further information or you have questions about this letter.

Very truly yours,

Margaret Johnson, Esq.
Advocacy Director
Disability Rights California

CC:   Honorable Members of the Assembly Budget on Health and Human Services Subcommittee
CC:   Nicole Vazquez, Consultant, Assembly Budget on Health and Human Services Subcommittee
CC:   Andrea Margolis, Consultant, Assembly Budget on Health and Human Services Subcommittee

(1) Funding for this item in the current fiscal year 2010-11 was vetoed by Governor Schwarzenegger and the mandate suspended.

(2) The MHSA is funded by a 1% surtax on the amount of annual incomes that exceed one million dollars.

(3) $1.2 billion is expected to be available under the MHSA in the 2010-11 fiscal year--$1.9 billion was available in the previous fiscal year.

(4) Continuation of these taxes for five years will require voter approval.

(5) “Young Hearts & Minds: Making a Commitment to Children‘s Mental Health,” available from 

(6) link and link


Helpful links and resources

Legislation and budget archive

Back to "2010 Position Letters"

Back to "In the legislature"