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The Next Step to Transform California’s Behavioral Health System

Redesigning California's Behavioral Health System

Since 2019, California has embarked on investments and policy reforms to re-envision the mental health and substance use system, collectively known as the behavioral health system.

The State has invested more than $10 billion in resources to strengthen the continuum of community-based care options for Californians living with the most significant mental health and substance use needs. This proposal will complement and build on California’s other major behavioral health initiatives, including but not limited to the California Advancing and Innovating Medi-Cal (CalAIM) initiative, the California Behavioral Health Co​mmunity-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT) Demonstration proposal, the Children and Youth Behavioral Health Initiative (CYBHI)Medi-Cal Mobile Crisis and 988 expansion, and the Behavioral Health Continuum Infrastructure Program (BHCIP).

This proposal is intended to address remaining gaps in the continuum of care for the most vulnerable Californians, including new funding for housing, community-based residential care settings and the behavioral health workforce, refining the Mental Health Services Act to stretch limited dollars and meet the needs of those with the most severe mental health and/or debilitating substance use conditions, and strengthen county accountability and statewide access to behavioral health services. 

 Three Key Elements of Governor Newsom’s Proposal:

  • Authorize a general obligation bond to fund 11,150 new treatment beds and housing units:
    • Community behavioral health facilities and residential settings
    • Permanent supportive housing for people experiencing or at risk of homelessness who have behavioral health conditions
    • Housing for veterans experiencing or at risk of homelessness who have behavioral health conditions
  • Modernize the Mental Health Services Act – Behavioral Health Service Act
  • Improve statewide accountability, transparency, and access to behavioral health services

We look forward to working with the legislature, system and implementation partners, and a broad set of stakeholders, including those impacted by behavioral health conditions, in considering these reforms.

Stakeholder questions and input can be sent to

Three Key Elements of Governor Newsom's Proposal


California’s shortage of at least 6,000 behavioral health beds contribute to the growing crisis of homelessness for those with mental illness and substance use disorders, including for veterans. Upwards of 50% or more homeless veterans suffer from mental health issues and upwards of 70 percent or more are affected by SUD.

AB 531 proposes a $6.38 billion bond to build 11,150 new treatment beds and housing units for people with the most acute behavioral health issues as well as 26,700 treatment slots to help serve many tens of thousands of people annually:

  • $2.893 billion for grants for behavioral health treatment and residential settings building on the success of the Behavioral Health Continuum Infrastructure Program (BHCIP).
  • $1.5 billion to be awarded to counties, cities, and tribal entities for grants for behavioral health treatment and residential settings eligible under BHCIP.
  • $1.065 billion worth of housing investments for veterans who are at risk of homelessness, experiencing homelessness, or experiencing chronic homelessness who have behavioral health needs or a substance use disorder.
  • $922 million worth of investments for Californians (not specifically for veterans) who are at risk of homelessness, experiencing homelessness, or experiencing chronic homelessness who have behavioral health needs or a substance use disorder.

AB 531  would finance the largest expansion of California’s behavioral health treatment and residential settings in our state’s history – creating new, dedicated housing for people experiencing or at risk of homelessness who have behavioral health needs, with a dedicated investment to serve veterans.

  • The Mental Health Services Act (MHSA) has fundamentally changed how we deliver mental health care in California. For those with the most serious and persistent needs, the MHSA requires every county in the state to offer a core set of services through a program called Full-Service Partnerships (FSP) that helps keep some individuals off the streets, out of jails, and out of expensive hospital care. Today, over 80,000 Californians are enrolled in FSP programs.

    MHSA currently funds 30% of the state’s mental health system. But the MHSA has never undergone full scale reform. Since its initial passing in 2004, the Affordable Care Act and parity laws have significantly shifted the landscape, and  SB 326 would redesign the MHSA to account for expanded coverage under Medi-Cal.

    SB 326 proposes a set of reforms, which will be placed on the March 2024 Ballot. Key proposed reforms include:

    1. Rename the MHSA to the Behavioral Health Services Act (BHSA)
    2. Broaden the target population to include those with debilitating substance use disorders
    3. Focus on the most vulnerable and most at-risk, including children and youth
    4. Fiscal accountability, updates to county spending, and revise county processes
    5. Update Local Categorical Funding Buckets:
    • 30% for Housing Interventions for children and families, youth, adults, and older adults living with serious mental illness/serious emotional disturbance (SMI/SED) and/or SUD who are experiencing homelessness or are at risk of homelessness. Funding could be used for rental subsidies, operating subsidies (including for BH settings built through the general obligation bond), shared and family housing, capital and non-federal share for transitional rent. 
    • 35% for Full-Service Partnership (FSP) programs, which should be optimized to leverage Medicaid as much as is allowable.
    • 35% for Behavioral Health Services and Supports, including early intervention, outreach and engagement, workforce education and training, capital facilities, technological needs, and innovative pilots and projects, to strengthen the range of services individuals, families, and communities need.
      • A majority (51%) of this amount must be used for Early Intervention in the early signs of mental illness or substance misuse and at least 51% of these funds are directed to people 25 years and younger.
    • Population-Based Prevention (4% of total funding) through population-based programming on behavioral health and wellness to increase awareness about resources and stop behavioral health problems before they start.
      • A majority of Prevention (51%) programming must serve people 25 years and younger.
    • Workforce (3% of total funding) investments to expand a culturally competent and well-trained behavioral health workforce to address statewide demand.
    • Statewide oversight and monitoring (3% of total funding) to develop statewide outcomes, conduct oversight of county outcomes, train and provide technical assistance, research and evaluate, and administer programs.
      • $20 million annually (FY 2026–27 to 2030–31) for the Behavioral Health Services Act Innovation Partnership Fund to provide grants to develop innovation with non-government partners.

The proposal increases transparency and accountability for behavioral health funding and outcomes with the intention of ensuring that Californians can know how their government programs are performing.  The information collected and assessed must be presented publicly to demonstrate transparency and accountability to Californians on the value of these critical resources. 

  1. Creates a new County Integrated Plan for Behavioral Health Services and Outcomes, which includes all local behavioral health funding and services, including Medi-Cal.
  2. Establishes a new, annual County Behavioral Health Outcomes, Accountability, and Transparency Report to provide public visibility into county results, disparities, spending, and longitudinal impact on homelessness.
  3. Connects the Behavioral Health System statewide for Californians, to streamline coordinated services for the public and for providers.
  4. Creates a Behavioral Health Services Act Revenue Stability Workgroup.
  5. Directs the State Auditor to issue a comprehensive report on the progress and effectiveness of implementation of BHSA.

The proposal directs the Department of Managed Care and the Department of Health Care Services (DHCS) to develop a plan with stakeholder engagement for achieving parity between commercial and Medi-Cal mental health and substance use disorder benefits. This mental health parity plan may include, but is not limited to, phasing in alignment of service use management, benefit standardization, and covered services.

The proposal also authorizes DHCS to align the terms of the county behavioral health plan contracts regarding organization, infrastructure, and administration with Medi-Cal managed care plans.

Additional Resources