Title
Receive a report on the Mental Health Services Act (MHSA) fund balance.
Report
RECOMMENDATION:
It is recommended that the Budget Committee of the Board of Supervisors:
Receive a report on the Mental Health Services Act (MHSA) fund balance.
SUMMARY/DISCUSSION:
At the October 2019 Budget Committee (BC) meeting, the County of Monterey Health Department’s Behavioral Health Bureau (Bureau) presented an overview of Proposition 63, the Mental Health Services Act (MHSA), and the status of MHSA reserves. During the presentation, staff indicated that new developments affecting the MHSA fund balance would be presented to the Budget Committee, which occurred during the January 2020 meeting. At this meeting, the Budget Committee requested quarterly reports on the MHSA fund balance. At the June 30, 2021, meeting, the Committee moved to a semiannual report. This report serves as the most recent update on the fund balance, additional information regarding the MHSA, and potential impacts on the fund balance.
In addition to the quarterly/semiannual reports to BC, on March 1, 2022, the Board of Supervisors (BOS) submitted Referral No. 2022.11 requesting a comprehensive presentation from the Bureau on the current uses of MHSA funds, an expenditure plan to utilize reserve funds and annual updates to the BOS on expenditures and effectiveness of MHSA funded services and strategies. The comprehensive presentation was first brought to the BC at its April 25, 2022, meeting, and subsequently to the BOS at its June 21, 2022, meeting, with annual updates to be presented in the future as requested by the BOS. The most recent update to the BOS occurred at its February 6, 2024, meeting in which the Bureau provided a report on Proposition 1, which was approved by voters in the March 2024 primary election.
FY 2022-23 In Review
The FY 2022-23 beginning MHSA fund balance was $41,782,873 with budgeted revenues estimated at $39,363,786 and budgeted expenditures at $41,278,361 for an estimated budgeted ending MHSA fund balance of $39,868,298, please reference Attachment A, Table 1, Graph 1. Final revenues for FY 2022-23 were $23,772,835. The Bureau reported on this projected decrease in revenues in the July 2023 BC report noting that this decrease was due, in part, to income tax filing extensions by the Internal Revenue Service and the Franchise Tax Board due to the 2021 winter storms. Final expenditures for FY 2022-23 were $46,253,900. The increase in expenditures is attributed to increases in services in all components. The actual ending MHSA fund balance for FY 2022-23 was $19,251,809. This represents a decrease of $20,616,489 to the beginning fund balance of $41,782,873, please reference Attachment A, Table 1, Graph 1.
FY 2023-24 Budget and Forecast
FY 2023-24, the beginning MHSA fund balance is $19,251,809 with budgeted revenues of $39,894,716 and matching expenditures of $39,894,716, please reference Attachment A, Table 2, and Graph 2. As of the day of this report, all FY24 MHSA revenue has been received with a final total of $42,411,123. For FY24 expenditures, the Bureau projects expenditures at approximately $44,070,325. The actual FY24 expenditures will be reported in the next semi-annual report once FY24 has been closed. Please reference Attachment A, Table 2, Graph 2. The Bureau projects a further reduction to the MHSA fund balance in FY 2023-24 of approximately $1,659,202 from $19,251,809 to $17,592,607 as shown in Attachment A, Table 2, Graph 2. The Bureau will provide updates on these figures at the next BC meeting.
FY 2023-24 Reversion Risk
For FY 2023-24, the Bureau identified $1,178,652 in Prevention and Early Intervention (PEI) funds at risk of reversion if not spent by June 30, 2024. As previously reported, these funds have been spent and will not be reverted. Please reference Attachment B.
FY 2024-25 Budget
The Bureau’s approach to maximizing services to the community leveraging MHSA funds continues onto FY 2024-25, the Bureau projects an initial fund balance of $17,592,607 and budgeted revenues and expenditures of $29,279,500 and $32,774,197 respectively for an estimated decrease in ending fund balance of $3,494,697 from $17,592,607 to $14,097,910. Please reference Attachment A, Table 3, Graph 3.
Proposition 1
On March 19, 2023, Governor Newsom announced a strategy to reform the State’s Behavioral Health System. The strategy is a combination of Senate Bill 326 (SB326) and Assembly Bill 531 (AB531) which was placed on the March 2024 ballot as Proposition 1. The Bureau has made three presentations to the BOS in May 2023, August 2023, and February 2024 to provide an overview of the impacts on MHSA as a result of Proposition 1.
Proposition 1 was narrowly passed by voters with a 50.2% to 49.8% margin, and it took over two weeks of vote counting for officials to make an announcement. Proposition 1 approves the issuance of $6.4 billion in general election bonds to construct new clinic beds; build permanent, supported housing for individuals experiencing or at risk of homelessness who have behavioral health conditions; and build unlocked community behavioral health treatment and residential settings. Proposition 1 also restructures MHSA and renames it as the Behavioral Health Services Act (BHSA), adds coverage for Substance Use Disorder, changes funding withheld by the State from 5% to 10%, and redirects funding received by the county from previous components. Proposition 1 has no immediate effect on the FY 2024-25 budget; however, the transitional period will begin in January 2025. The Bureau is currently exploring alternatives on approaches to relay information to the Budget Committee, Board of Supervisors, internal staff, providers, and the community in general on the impacts and opportunities of Proposition 1.
The Bureau will continue to analyze impacts due to Proposition 1 as well as monitor all funding streams closely and will adjust where necessary as soon as the need is identified. The Bureau will apprise the Budget Office of these developments and will seek its collaboration on any required actions.
OTHER AGENCY INVOLVEMENT:
No other departments were involved.
FINANCING:
There will be no impact on the General Fund in receiving this report.
BOARD OF SUPERVISORS STRATEGIC INITIATIVES:
Check the related Board of Supervisors Strategic Initiatives:
☐ Economic Development:
• Through collaboration, strengthen economic development to ensure a diversified and healthy economy.
☒ Administration:
• Promote an organization that practices efficient and effective resource management and is recognized for responsiveness, strong customer orientation, accountability, and transparency.
☒ Health & Human Services:
• Improve health and quality of life through County supported policies, programs, and services, promoting access to equitable opportunities for healthy choices and healthy environments in collaboration with communities.
☐ Infrastructure:
• Plan and develop a sustainable, physical infrastructure that improves the quality of life for County residents and supports economic development results.
☐ Public Safety:
• Create a safe environment for people to achieve their potential, leading businesses, and communities to thrive and grow by reducing violent crimes as well as crimes in general.
Prepared by: Fabricio Chombo, Finance Manager II, 755-4578
Approved by:
___________________________Date___________________
Elsa Mendoza Jimenez, Director of Health Services, 755-4526
Attachment(s):
Staff Report
Attachment A - Tables 1 - 3 and Graphs 1 - 3
Attachment B - Reversion Letter