The 2023-24 Budget: Analysis of the Governor’s Major Behavioral Health Proposals

2023-24 BUDGET The 2023-24 Budget: Analysis of the Governor’s Major Behavioral Health Proposals GABRIEL PETEK | LEGISLATIVE ANALYST | FEBRUARY 2023 SUMMARY This brief analyzes the Governor’s three major behavioral health spending proposals and two proposed behavioral health budget solutions involving delays in planned spending. Recommend Only Providing Funding for CARE Program in 2023-24 and Require Reporting to Allow for Robust Assessment of Ongoing Funding Requirements. As a part of implementing the Community Assistance, Recovery, and Empowerment (CARE) program, the Governor proposes $22.6 million General Fund in 2023-24, increasing to $114.6 million General Fund by 2025-26 and ongoing, for the Department of Health Care Services (DHCS) to provide training, collect data, and distribute grants to counties. Due to the significant uncertainty in estimating the level of program participation and costs in future years, we recommend that the Legislature only approve the first year of requested funding and require regular data reporting from courts, counties, and DHCS to inform the ongoing costs of the program. Proposal to Assist County Transition to New Payment System Reasonable. Beginning July 1, 2023, counties will move to a new process for receiving Medicaid funds for behavioral health-related services. While less administratively burdensome, the new process requires county funds to be provided to the state in order to draw down federal matching funds, which may result in county cash-flow constraints. The Governor’s proposal to provide $375 million General Fund on a one-time basis is a reasonable way to assist counties make the transition to the new payment system. More Information Needed on Community-Based Continuum Demonstration Proposal. The Governor proposes $314 million General Fund ($6.1 billion total funds) over five years for a new program requiring federal approval—the California Behavioral Health Community-Based Continuum (CalBH-CBC) Demonstration—that would allow counties to receive federal reimbursement for mental health services provided in settings in which federal funding is currently unavailable. While the proposal appears to fit within the state’s broader efforts on expanding access to behavioral health services, much information is lacking to fully evaluate the administration’s proposal. We recommend that the Legislature request information about the administration’s multiyear spending plan and assumptions on the net fiscal impact to the state and counties of the proposal in upcoming budget hearings. Proposal to Delay Continuum Infrastructure Funding Reasonable; Defer Action on Housing Funding Until May Revision. To help address this year’s budget shortfall, the Governor proposes to delay $481 million in previously approved funding for the Behavioral Health Continuum Infrastructure Program (BH-CIP). Given the progress made so far in awarding funding for this program, and that the delay may allow for remaining program funds to better meet outstanding needs in what could be a prolonged period of constrained budget resources, the Governor’s proposed delay is reasonable. The Governor also proposes to delay $250 million in funding for the Behavioral Health Bridge Housing (BHBH) program. Because full implementation details of BHBH are not yet available, the Legislature may wish to defer action on this proposed delay until the May Revision, at which time the Legislature could better evaluate the extent to which BHBH continues to align with its priorities. www.lao.ca.gov 1 2023-24 BUDGET INTRODUCTION This brief analyzes the Governor’s three the California Advancing and Innovating Medi-Cal major behavioral health spending proposals (CalAIM) behavioral health payment reform; and and two proposed behavioral health budget (3) $314 million General Fund ($6.1 billion total funds) solutions involving delays in planned spending. over five years for the CalBH-CBC Demonstration, The spending proposals that we analyze include: which would enable the state to draw down federal (1) $22.6 million General Fund in DHCS to implement matching funds for an expanded list of services the CARE program for the first cohort of counties provided to adults and children with acute mental (this is a component of a $52.4 million proposal health needs and is a component of CalAIM. that also includes spending in the Judicial Branch); We then analyze two delays in planned spending (2) $375 million one-time General Fund to help for BH-CIP and BHBH programs that the Governor counties with cash-flow constraints resulting from proposes to help close the budget shortfall. CARE PROGRAM Background Counties that fail to comply with their obligations under the CARE plan could face fines. The penalty CARE Program. Chapter 319 of 2022 (SB 1338, revenue would be reallocated to the county that Umberg) established the CARE program—a new paid the fine for purposes of serving individuals who judicial process to compel individuals who meet would qualify for a CARE plan. certain criteria to engage with various behavioral health-related services. These criteria include CARE Program Implementation Plan the person being over the age of 18 as well as and Recent Developments. Senate Bill 1338 currently experiencing both a severe mental specified that one group of counties (“Cohort 1”)— illness and having a diagnosis of schizophrenia which included Glenn, Orange, Riverside, or other psychotic disorders. An individual (called San Diego, San Francisco, Stanislaus, and a “respondent”) can be referred to the program Tuolumne Counties—are generally required to by certain qualified members of the community begin CARE program operations no later than (including family members and licensed behavioral October 1, 2023. All remaining counties (“Cohort 2”) health professionals), and a court assesses whether are generally required to begin CARE program the respondent meets the specified criteria for operations no later than December 1, 2024. admission to the program. If the court determines In January 2023, Los Angeles County—a member that the respondent meets these admission of Cohort 2—announced plans to implement the criteria, the court may order the respondent to CARE program by December 1, 2023, a year earlier follow an individualized “CARE plan.” (In ordering a than required. Additionally, in January 2023, a group CARE plan, the court is required to make a finding of disability and civil rights advocates filed a lawsuit that the respondent is either “unlikely to survive with the California Supreme Court challenging the safely in the community without supervision and constitutionality of SB 1338 and seeking to block the person’s condition is substantially deteriorating” its implementation. or “in need of services and supports in order to Initial CARE Program Funding. The 2022-23 prevent a relapse or deterioration that would likely budget package included $77.2 million General result in grave disability.”) These plans consist of Fund for DHCS, $5 million General Fund for the the provision of behavioral health care, stabilization California Health and Human Services Agency, and medications, housing, and other supportive services, $6.1 million General Fund for the judicial branch to which are expected to be delivered by counties. administer the program in 2022-23. (Almost all the 2 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET funding provided to the health entities was one time • Grants to Counties. The proposal includes in nature.) Of the $77.2 million for DHCS, $57 million $16.5 million in 2023-24, increasing to was provided directly to counties for the planning $108.5 million in 2025-26 and ongoing, and implementation of the program. Of this amount, for grants to counties. Half of the funding $26 million was allocated proportionally (based would be for the costs associated with on population) to Cohort 1 counties to prepare for performing clinical evaluations. The other earlier implementation. The remaining $31 million half of the funding would cover county staff was provided proportionately to all counties time in CARE program court proceedings. (Cohorts 1 and 2). The administration states that the funding proposal does not include the cost of services Proposal and supports ordered under CARE plans. Multiyear Funding Proposal Across Judicial Counties would be expected to pay for those Branch and Health Entities. Figure 1 shows services with existing funding streams. previously approved 2022-23 funding and proposed • Data Collection and Training. The proposal funding for the CARE program to support state also includes $5 million in 2023-24 and and county implementation costs. In 2023-24, the ongoing for DHCS to provide optional administration proposes a total of $52.4 million training to, and collect trends and other General Fund—$22.6 million in DHCS and data on, “supporters” as required in $29.9 million in the judicial branch. Funding would SB 1338. Supporters are volunteers who increase to $214.6 million annually beginning in assist the respondent in all aspects of the 2025-26. This section focuses on the DHCS and CARE program, help to develop a CARE county responsibilities and costs in implementing plan, and ensure that respondents can make the CARE program. We discuss the judicial branch informed choices and maintain autonomy. responsibilities and costs in a separate report, The Additionally, the Governor’s budget includes 2023-24 Budget: Judicial Branch Budget Proposals. $1.1 million in ongoing funding to DHCS that DHCS-Specific Costs. Around half of was approved in the 2022-23 budget to provide the total proposed funding in the Governor’s technical assistance and oversight for counties on multiyear funding plan for the CARE program the implementation of the CARE program. would be for DHCS to provide training, collect data, and distribute grants to counties for CARE program implementation. Figure 1 Summary of Total Proposed CARE Program Funding General Fund (In Millions) 2025-26 Entity Purpose 2022-23 2023-24 2024-25 and Ongoing Judicial Branch Judicial Branch Court Operations $5.9 $23.8 $50.6 $68.5 Judicial Branch Legal Representation 0.3 6.1 21.8 31.5 Totals, Judicial Branch $6.1 $29.9 $72.4 $100.0 Health Entities CalHHS Training $5.0 — — — DHCS Training, Data Collection, and Other Activities 20.2 $6.1 $6.1 $6.1 DHCS County Grants 57.0 16.5 66.5 108.5 Totals, Health Entities $82.2 $22.6 $72.6 $114.6 Total CARE Program Funding $88.3 $52.4 $144.9 $214.6 CARE = Community Assistance, Recovery, and Empowerment; CalHHS = California Health and Human Services Agency; and DHCS = Department of Health Care Services. www.lao.ca.gov 3 2023-24 BUDGET Assessment Recommendations Ongoing Program Costs and Participation Approve One Year of Funding for Cohort 1. Uncertain… The state and counties currently are We recommend the Legislature only approve planning how to implement the CARE program. the requested funding for 2023-24. While we While the first cohort will begin implementation this recognize that there will be costs in subsequent fall, the ultimate costs for the program are not yet years that require state funding—for both the known. A key source of uncertainty is the number continued implementation by Cohort 1 counties of program participants. At full implementation, the and the scheduled implementation by Cohort 2 administration estimates 18,000 annual program counties—the Legislature currently lacks the petitions resulting in 12,000 potential participants. data to fully evaluate program needs and costs Of those potential participants, the administration beyond the budget year. By providing one year of estimates 10,000 will participate in a CARE plan or funding, the Legislature will have the opportunity to agreement. When SB 1338 was being considered evaluate Cohort 1’s implementation of the program by the Legislature, however, counties estimated the and better understand potential ongoing costs number of participants could be tens of thousands as the program ramps up to full implementation. higher than the administration’s estimates. Due to The Legislature also may choose to pursue the narrow, statutory definition and professional legislative changes to ensure the program is judgment on the part of the court and behavioral operating as desired or change how funding is health professionals in determining eligibility and provided to support the program based on the ordering a CARE plan, it is difficult to assess initial implementation. Delaying decisions about how many individuals would participate in the ongoing spending could help facilitate those CARE program. program adjustments. …And Data Will Not Be Available Before Full Require Interim Data Reporting Prior to Implementation. Senate Bill 1338 places a number Cohort 2 Implementation. We recommend the of data reporting requirements on counties, courts, Legislature require more regular data reporting from and state departments. Specifically, statute requires courts, counties, and DHCS on the program prior to that DHCS develop an annual CARE Act report that the full implementation of Cohort 2. While SB 1338 includes data such as participant demographics, requires an annual report with key program metrics services ordered and/or provided under CARE plans and outcomes—information which could inform the and agreements, outcome measures to assess program’s future funding requirements—this report effectiveness, and a health equity assessment. likely would not be available until after the 2024-25 While the data collection and program evaluation budget deliberations. As such, the Legislature could components of SB 1338 are robust, the first consider requiring periodic reporting by Cohort 1 annual report is not expected to be released until counties of key metrics that could include: (1) the October 1, 2024 at the earliest. Given Cohort 2 is to number of CARE petitions received and the number begin implementation December 1, 2024, the first of individuals admitted to the program; (2) the report will not be available to inform the funding number of, and hours spent on, clinical evaluations; requirements under full implementation. (3) the hours spent by county behavioral health 2023-24 Cost Estimate Appears a Reasonable staff preparing for, and appearing in, court; (4) the Starting Point. The underlying participation services and supports ordered, provided, and assumptions made by the administration in ordered but not provided in CARE plans; (5) the developing its budget proposal could end up reason a service or support was ordered and not overestimating or underestimating actual ongoing provided; and (6) the number of participants who program costs. This possibility is more pronounced have left the program to date and the reasons for in future years as the program ramps up to full leaving. Additionally, the Legislature could direct implementation. Despite these open questions, we counties to report on the funding streams used to find that the administration’s proposal for 2023-24 is support CARE program behavioral health services a reasonable starting point in light of the uncertainty. and evaluate potential capacity constraints. 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Specify Process for Development of Ongoing can better estimate ongoing costs associated Funding Requirements. We also recommend the with implementing the CARE program. While we Legislature adopt trailer bill language that would recommend the Legislature approve funding specify the process by which the estimate of the for only 2023-24 at this juncture, establishing a CARE program’s ongoing funding requirements for process for determining ongoing funding now could counties will be developed. Using the data outlined help ensure counties can implement the program in our previous recommendation, the Legislature according to the Legislature’s vision. CALAIM-RELATED SPENDING PROPOSALS Background of care coordination and community treatment opportunities for individuals with acute mental CalAIM Consists of Various Initiatives That health needs, increased access to a full continuum Impact Behavioral Health. Adopted in the of care including crisis stabilization, and early 2021-22 budget package, CalAIM is a large set of identification and engagement of adolescents reforms in Medi-Cal to expand access to new and and young adults with behavioral health needs. existing services and streamline how services are Additional guidance was released in 2021 allowing arranged and paid. Some key initiatives include states to receive federal reimbursement for longer (1) enhanced care management, which provides stays in Short-Term Residential Therapeutic comprehensive care coordination to certain at-risk Programs classified as IMDs for youth in the individuals; (2) community supports that provide child welfare system for a period of up to two housing support, transitional services, and other years. In January 2022, California received benefits that address the social determinants of federal approval of a waiver allowing the state to health; (3) various capacity building initiatives that receive federal reimbursement for substance use help counties and other service providers provide disorder services provided in IMDs by increasing a continuum of care that ranges from in-home the services available under the Drug Medi-Cal support to more intensive inpatient and residential Organized Delivery System. services; and (4) behavioral health payment reform to help counties transition to a less administratively Administration’s Assessment of the burdensome and more timely process for Continuum of Care for Behavioral Health receiving federal Medicaid funds for behavioral Services in the State. In January 2022, the health-related services. administration released findings on the landscape of behavioral health services in a report titled Opportunity to Receive Federal Match for “Assessing the Continuum of Care for Behavioral Short-Term Stays in Institutions for Mental Health Services in California.” One of the stated Disease (IMDs). In 2018, the Centers for Medicare reasons for the assessment was to support the & Medicaid Services (CMS) released guidance administration’s plans to submit a federal waiver that allowed states to request a waiver to receive to receive federal reimbursements for services federal reimbursement (a federal share of cost) provided to individuals in IMDs. In order to gain for services provided during short-term stays at waiver approval, the state would be required to residential treatment facilities that are considered build out necessary behavioral health infrastructure IMDs. Federal reimbursement is contingent to address identified statewide gaps for community on meeting a series of milestones that include behavioral health care. licensing and increased oversight of participating hospitals and residential settings, the expansion www.lao.ca.gov 5 2023-24 BUDGET Proposals To qualify, the state—along with counties that opt into the demonstration—must demonstrate a robust In this section, we describe the Governor’s two continuum of community-based services that major behavioral health-related spending proposals reduces the need for institutional care. There are that are components of CalAIM. two broad components of the demonstration: $375 Million General Fund for CalAIM (1) requirements placed on the state as a condition Behavioral Health Payment Reform. In the of receiving CMS approval of the waiver and 2021-22 budget, the Legislature approved a change (2) requirements placed on counties opting in to the to how counties are reimbursed under Medi-Cal. waiver in order to receive federal reimbursement Beginning July 1, 2023, counties will transition for services provided under the waiver. We discuss away from cost-based reimbursement to a less each of these in turn. administratively burdensome and more timely Statewide Demonstration Components process for receiving federal Medicaid funds for Required to Receive CMS Approval. The behavioral health-related services. Under the new Governor’s budget proposes the following state intergovernmental transfer (IGT) process, counties activities to meet the requirements to receive CMS will transfer funds covering their nonfederal share approval of the demonstration waiver. of cost into a state account, which will be used to draw down the associated federal funds. This new • Strengthen Continuum of process could create cash-flow issues as counties Community-Based Services. will be paying the full cost of services in addition to The administration proposes improving paying their nonfederal share of costs to the state existing benefits and providing new services prior to federal reimbursement. To help implement to children and youth. Some of these include this change, the Governor proposes $375 million in incentives to encourage collaboration one-time General Fund in 2023-24. The one-time between health and child welfare agencies General Fund roughly covers counties’ share of and activity stipends for children in the child cost for the first three months of 2023-24, mitigating welfare system. potential disruptions to counties’ cash-flow during • Support Practice Transformation. the transition. The administration proposes using federal $6.1 Billion Total Funds Over Five Years funds to establish statewide Centers of for CalBH-CBC Demonstration Waiver. Excellence that will provide training and The Governor proposes $314 million General technical assistance to counties and Fund ($6.1 billion total funds) over five years to providers on improving the continuum of care. DHCS and the Department of Social Services for Additionally, the demonstration includes a the new CalBH-CBC demonstration. In 2023-24, statewide incentive for counties to build a the Governor’s budget specifically proposes quality improvement program and funding for $311,000 General Fund ($6 million total funds) in tools to help individuals connect to behavioral the DHCS Medi-Cal budget. The demonstration health services. would allow for federal reimbursement under • Improve Statewide County Accountability Medi-Cal for eligible services provided in IMDs for Medi-Cal Services. A key component to certain individuals with acute mental health of receiving federal waiver approval is needs. Under the current waiver, counties improving accountability and oversight of can receive federal reimbursement only for the community-based continuum of care. substance use disorder services provided in IMDs. The administration anticipates amending The CalBH-CBC demonstration waiver—if approved the county managed health plan contract to by the federal government—would allow for federal establish accountability standards, build on reimbursement of mental health services provided the standards included in the state’s Medi-Cal in short-term (less than 60 days) IMD stays. Comprehensive Quality Strategy, and outline incentive payment opportunities. 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET County Opt-In Components Required to Assessment Receive Reimbursement. If a county opts in to Facilitating CalAIM Behavioral Health the demonstration program under the waiver, it Payment Reform Merits Legislative is required to do the following in order to receive Consideration. Under the current cost-based federal reimbursement under Medi-Cal for an reimbursement model, counties pay providers for expanded set of services provided in IMDs. eligible services and submit the claim (through • Enhance Community-Based Services. DHCS) to the federal government for reimbursement Federal reimbursement of the IMD services of the federal share of cost. This process requires is conditioned on a county providing a set of extensive documentation of costs and can take community-based services, which themselves significant time to receive reimbursements. are eligible for federal reimbursement Under the new IGT process, in addition to paying as an incentive to providing them. The providers, counties also are required to submit community-based services that must be their nonfederal share of cost to the state prior to provided are listed in Figure 2. As noted in the receiving federal reimbursement. In other words, figure, most of the services are already eligible counties will be paying both the full cost of services for federal reimbursement under Medi-Cal. to providers as well as their share of cost to the The administration also proposes changes state early in the claims process. This dual payment that would help to draw down additional requirement raises a cash-flow issue for counties federal funds. that the Governor’s proposal intends to address. • IMD Oversight and Accountability. The cost of the proposal roughly matches the In addition to providing all of the estimated costs that would be incurred by counties community-based services listed in Figure 2, during the first three months of the budget year. counties will need to ensure IMD facilities meet While counties could use their own general funds all CMS requirements on facility accreditation or other sources to fund the initial IGT payment, the and make efforts to decrease the length of proposal is a reasonable way to help the CalAIM stay in IMDs. payment reform be successful when launched, and as such merits legislative consideration. Figure 2 Enhanced Community-Based Services Required to Be Provided by Counties Opting-In to Demonstration Waiver Program Currently Reimbursable Service Description Under Medi-Cal Assertive Community A multidisciplinary team delivers services and support directly to Yes Treatment beneficiaries in their community. Forensic Assertive Community A multidisciplinary team delivers services and support directly to Yes Treatment justice-involved beneficiaries in their community. Coordinated Specialty Care for An early intervention approach aimed at treating individuals following an Yes First Episode Psychosis initial psychotic episode. Community health worker Community health workers support county behavioral health providers Yes Services by performing outreach and supporting engagement in behavioral health prevention. Supported Employment Vocational assessment, job-finding assistance, and job skills training for No individuals with acute mental health needs. Rent or Temporary Housing Up to six months of rent support or temporary housing to high-needs No beneficiaries that are homeless or at risk of homelessness. Must be medically appropriate based on clinical and other health-related social needs criteria. www.lao.ca.gov 7 2023-24 BUDGET As currently structured, however, this proposal is For example, what activities will be funded, and at a one-time expenditure and would not be repaid what level, by the General Fund over most of the by counties. As such, the Governor chose to delay term of the program is unknown. Additionally, as or reduce an additional $375 million General Fund the waiver has not been approved by CMS, there elsewhere in the budget in order to prioritize this is uncertainty on what the final demonstration will proposal. In an environment of constrained budget entail and how it could differ from what is known resources, this proposal arguably merits extra about the current proposal. scrutiny as the Legislature weighs it against its County Participation Unclear. Receiving other priorities. a waiver for expanded use of IMD treatment CalBH-CBC Waiver Builds on Previous would reduce county behavioral health costs by Behavioral Health Initiatives… CalAIM has drawing down additional federal funds. Given introduced a number of initiatives that have the requirements on counties to implement the expanded access to services for individuals with demonstration project, however, whether there acute mental and behavioral health needs. In order would be a net fiscal benefit is uncertain. We are to receive federal reimbursement under the waiver not aware of any comprehensive information for an expanded set of services provided in IMDs, on current county costs associated with IMD the state, along with counties that opt in, will have treatment that would become reimbursable under to establish a robust community-based continuum the waiver. As the demonstration would impose of care to limit the number of individuals in IMDs new funding requirements related to the provision as well as their length of stay. The administration of community-based services on counties that considers a number of recently enacted initiatives, opt in, whether the newly available federal funding for example, the Children and Youth Behavioral would exceed the costs of the counties’ new Health Initiative, to be key components in a funding requirements is unknown. Accordingly, continuum of care for individuals with acute mental estimating the number of counties that may choose and behavioral health needs. The proposal appears to participate is difficult. to fit within the state’s broader efforts on expanding Solicit More Information During Budget access to behavioral health services and many Hearings. We therefore recommend that the of the proposals within the demonstration, such Legislature use upcoming budget hearings as as expanding the number of community-based an opportunity to request more information from services counties may receive federal the administration on the demonstration waiver reimbursement for, have merit in this context. proposal. The Legislature might want to seek …But Much Information Is Lacking to Fully clarity on the administration’s multiyear spending Evaluate the Administration’s Proposal. As the plan as well as the likely net fiscal impact to the administration has not provided the Legislature state and counties if this proposal is approved. with its multiyear spending plan for the term of the This information will put the Legislature in a better demonstration program, the Legislature is unable position to weigh the policy merits of the proposal to assess the budgetary impacts beyond 2023-24. against its costs and trade-offs. 8 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET ACTIONS TO HELP ADDRESS BUDGET PROBLEM Background Proposals BH-CIP. The 2021-22 budget package included Delays $481 Million in BH-CIP and $1.7 billion one-time General Fund ($2.2 billion $250 Million in BHBH Funding. The Governor’s total funds) over 2021-22 and 2022-23 for grants to budget proposes to delay the sixth round of develop new behavioral health treatment facilities. BH-CIP grant funding previously budgeted for The grants are available to cities, counties, tribes, 2022-23. Half of the delayed funds would be nonprofits, and corporations. Grant funding can be provided in 2024-25 with the remaining amount used to construct, acquire, or renovate facilities, provided in 2025-26. In addition, the Governor’s activities that are generally expected to occur over budget proposes to delay $250 million in multiple years. Grants provided under this program BHBH funding previously budgeted in 2023-24 fund a variety of community behavioral health facility to 2024-25. types to treat individuals with varying levels of Assessment behavioral health needs. LAO Criteria for Evaluating Reductions BH-CIP Grants Awarded in Six Rounds. To date, four of the six rounds of BH-CIP funding and Delays. We think revenues are unlikely to meet the estimates on which the Governor’s have been awarded as follows: (1) $145 million budget is based and have recommended that for mobile crisis infrastructure, (2) $16 million for the Legislature plan for a larger budget problem county and tribal planning grants, (3) $519 million than that identified in the Governor’s budget. for “launch ready” projects, and (4) $481 million In our report, The 2023-24 Budget: Overview of for projects targeted at children and youth. Round the Governor’s Budget, we detailed criteria that five, a general-purpose round totaling $480 million, we recommend the Legislature use in evaluating currently is underway. By the end of the current whether to maintain augmentations made in recent fiscal year, the administration expects that awards budgets. Generally, we recommend the Legislature will have been made for $1.6 billion of $2.1 billion maintain augmentations that specifically address in funding for BH-CIP (excluding state operations an ongoing legislative priority, with particular funding). Round six, totaling $481 million, is intended emphasis on programs that serve populations to address remaining needs based on an assessment of concern and that meet an acute, rather than conducted by DHCS. long-term, need. BHBH Program. The 2022-23 budget package included $1 billion General Fund in 2022-23 and BH-CIP Delay Reasonable. After the fifth round of grants are awarded, DHCS will have $500 million General Fund 2023-24 for grants to local allocated $1.6 billion of $2.1 billion (excluding entities to develop transitional housing for individuals state operations funding) for BH-CIP, a substantial experiencing homelessness who also have serious allocation of funding towards a clear legislative behavioral health conditions. The funding is intended priority. Given the progress already made in to provide immediate bridge housing options implementing the program, and that the benefits for this population until the longer-term housing from many of the projects funded by BH-CIP will and behavioral health facilities funded in BH-CIP take time to materialize, we think delaying the and recent housing augmentations come online. remaining $481 million in grants is reasonable. The administration plans three rounds of funding: This delay also would allow for a more robust (1) $908 million distributed via a formula to county evaluation of outstanding need, which will allow behavioral health departments, (2) $50 million to the remaining funding to be more effectively tribal entities, and (3) a competitive round of grants targeted to the most acute of the outstanding for counties and tribes totaling $250 million. (These need and may improve the cost-effectiveness of amounts exclude a total of $42.1 million in state the program. operations funding.) The first round of funding is expected to be released in February 2023. www.lao.ca.gov 9 2023-24 BUDGET Reevaluate BHBH Delay at May Revision. As of mid-February, the administration had yet to Like BH-CIP, BHBH is intended to address a clear release full implementation details that would aid legislative priority—transitional housing for individuals the Legislature in evaluating the extent to which the experiencing homelessness with serious behavioral spending plan for BHBH should be modified. The health conditions. In reviewing the proposal last Legislature may wish to consider deferring action year, we raised a number of questions about how on this proposed delay until the May Revision, at funds would be targeted, how the program would which time the Legislature will have a better sense integrate with related state efforts, and the strategy of the extent of the state’s budget problem and the for long-term success of the program. extent to which funding for BHBH continues to align with its priorities. 10 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET www.lao.ca.gov 11 2023-24 BUDGET LAO PUBLICATIONS This report was prepared by Ryan Miller and Will Owens, and reviewed by Mark C. Newton and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 12 LEGISLATIVE ANALYST’S OFFICE