Is Orange County leaving mental health dollars on the table?

Counties across California are under increasing scrutiny for how they use — or don’t use — state funds earmarked for mental health services. 

A recent state audit found that California counties were collectively sitting on an unused stash of $2.5 billion in funds from the Mental Health Services Act. The issue has taken front stage in Orange County, where officials are scrambling to provide housing and services to homeless people, some with mental illness, as part of a federal court settlement. 

County Supervisor Todd Spitzer was livid at a recent meeting where he said he had just learned that OC had nearly $380 million in unused mental health funds.

"I’m embarrassed because I’ve been led to believe until today that we were doing everything in our power to put money on the street to help people who need our help,” he said. 

The Mental Health Services Act, passed by California voters in 2004, imposed a 1 percent tax on people who make over $1 million. The proceeds are distributed to counties to fund mental health services, including substance abuse counseling and permanent supporting housing for people suffering from mental disorders.

Some of those funds are supposed to revert to the state if they go unused. According to the recent audit, $231 million in funds distributed to counties should’ve been sent back to the state in the 2015-2016 fiscal year to be reallocated for other mental health services. 

The legislature gave counties a one-time pass last year on sending the money back, but the state auditor said the Department of Health Care Services "had failed to put pressure on county health care agencies to spend the funds in a timely manner."  

Now, Orange County seems intent on tapping deeper into its mental health account. The Board of Supervisors voted this week to spend $70.5 million in spare MHSA funds to house homeless people with mental illness who were evicted in February from a large encampment along the Santa Ana River. 

At the same time, a group of nonprofits wants the county to turn over $51 million dollars in unspent funds to private grant-makers to distribute to community providers.  

"There are a lot of foundations and grant-making organizations in Orange County that are consistently effective in distributing funds,” said Michael Arnot, executive director of Children’s Cause OC, which is spearheading the effort. “And they would probably be in a better position to target and get the money out more effectively than our current system.”

Arnot said the county, which makes a plan each year for spending MHSA funds, under-budgets for the amount of tax revenue it gets and then doesn’t fully implement its plan, leaving money on the table. And he said oversight has been lax. 

A county spokeswoman said no one from the OC Health Care Agency, which oversees mental health programs, was immediately available to discuss MHSA funding. In an emailed statement, she said the health care agency plans its mental health services yearly "to ensure it is efficiently projecting expenditures appropriately based on available funding with the goal of maintaining existing program sustainability for five years." 

Matt Holzmann, vice chair of the OC Mental Health Board, the community group tasked with overseeing mental health services, said he thinks the reports of unspent funds could be overblown. He said funds should be saved to ensure the long-term sustainability of mental health services. 

"If we have programs going and suddenly we can’t fund them, that hurts a lot of people,” Holzmann said.

He applauded the OC Board of Supervisors’ recent vote to audit the county’s mental health services.
 
“I think we need to do a deep dive,” he said.