Overview

Proposition 1E: Mental Health Funding. Temporary Reallocation.

In 2004, voters approved Proposition 63 which imposed a surtax on taxpayers with personal incomes of over $1 million.  The revenue generated from this surcharge ranges from $900 million to $1.5 billion annually and is dedicated to support certain mental health programs.  Proposition 63 funding must be used to expand mental health services and the state is specifically prohibited from reducing General Fund support for such services below 2003-04 funding levels. 

Separate from Proposition 63 is the federally mandated Early and Periodic Screening, Diagnosis and Treatment (EPSDT) Program that requires states to provide a broad range of screening, diagnosis and necessary treatment services to Medi-Cal beneficiaries under age 21.  The annual cost for this program is over $1 billion and the federal government provides funding for about half and the state bears the cost for the remainder.

Proposition 1E would temporarily redirect $460 million from Proposition 63 to the state General Fund over the next two years – $226.7 million in 2009-10 and up to $234 million in 2010-11.  The funds would be used specifically to backfill General Fund support for EPSDT mental health services.  The purpose of this redirection is to achieve savings for the state General Fund as these funds would be used to offset state General Fund costs, which would allow the state to reduce funding for these programs over the same period. 

Approval of Proposition 1E could result in a decrease in federal funds through the Medi-Cal Program.  Additionally, the temporary reduction in funding for Proposition 63 support will make less money available for other mental health programs.  Because of the reduction in available Proposition 63 funding, there will likely be less support from local governments to provide mental health services for students.  This could shift the cost to school districts as they may now have to provide the services.

Failure of Proposition 1D in May will add $430 million to the budget deficit over the next two years.