November 2, 2004 Ballot Prop. 63

Introduction

Over a million Californians are estimated to suffer from serious mental illness. While many Californians receive treatment through their medical benefits, those without insurance, estimated at 19% of the population, do not always get the care they need. They must must rely on county health care agencies that struggle to provide psychiatric assistance, hospitalization, substance abuse treatment and other needed services. The county health care agencies depend on state and federal funding, which observers in the mental health field say is inadequate.

Proposition 63 proposes to expand mental health services in California and to pay for it by taxing individuals who make over $1 million a year. An unusual feature of Proposition 63 is that it targets a narrow segment of the population with a special tax. With taxpayer groups stiffly opposing the proposition and mental illness advocates enthusiastically endorsing it, Proposition 63 is one of the more controversial of the 2004 ballot propositions.

Background

State Funding
Under current law, counties are responsible for providing public mental heath services to their residents. The services are funded by a dedicated portion of state sales tax dollars and vehicle license fees as well as funds received from Medicare and other third party payers. In addition, the Short-Doyle/Medi-Cal program, established in 1972, provides cost-based reimbursement for mental health services. State and county funding of mental heath services is facilitated through the the 1957 Short-Doyle Act, which was designed to organize and finance services through locally controlled, county operated mental health systems. The Bronzan-McCorquodale Act reaffirmed the Short-Doyle Act structure in 1991. The system is based on concepts arising from the deinstituionalization movement of the 1960s, in which emphasis on mental health services was placed on local, community based systems rather than state run hospitals. While planning and delivery for county services is conducted on a local level, a 1991 California Senate Office of Research study ("The History of Neglect") found that state funds accounted for 85 percent of mental health services. The 2004-05 California budget allocates $2.5 billion for mental health services, according to the Governor's Budget Summary.

Proponents of additional spending on mental health services point to evidence of the failure of the current local-based county services. They claim that as a consequence of deinstitutionalization and budget cuts, thousands of mentally ill were transferred to communities that lacked local service systems of care. Between 1957 and 1988, the state reduced its state hospital population by 84 percent. Total mental health funding reached in a peak in the early 1970s and declined or stagnated over the next few decades. The result, critics of the system say, is an increase in the homeless population of people with mental illness. The National Alliance for the Mentally Ill claims that there are over 50,000 mentally ill homeless in California. In addition, mental health activists have cited a California State Department of Health study which claims that 10 to 20 percent of all inmates in California prisons are mentally ill. In 1985, California's per capita mental health expenditure was $33.51, far below the expenditures of most urban states (see "Public Mental Health Funding in California" under Background Reading below).

Income Tax 
California's personal income tax was established in 1935 and is the largest income source for the state. In 2004-05, it is expected to net $39 billion in revenues. The tax rate for California residents progressively increases to a maximum 9.3 percent. Those making over a million dollars a year pay income tax at the 9.3 percent rate. (See  "Personal Income Tax" in the Revenue and Taxation Reference Book 2003).

The taxation of incomes at the high income range has historically provided a large share of California tax revenue. However, the idea of a special income surtax on high income individuals has met with resistance. While supporters see it as a source of much needed income, opponents claim that it unfairly burdens one segment of the population with too much of the cost. Traditionally, the argument against taxing wealthier citizens has been that higher rates will force them to leave California, taking with them the money they use to create business and jobs. Proponents of higher tax rates say that this isn't necessarily true and that the wealthy have an obligation to pay more of the cost.

Background Reading

Elpers, J.R.
"Public Mental Health Funding in California, 1959 to 1989," Hospital and Community Psychiatry, v. 40, no. 8 (1989b), p. 799-804.

California. Legislature. Senate. Office of Research.
California's Mental-Health System: the History of Neglect. Sacramento: Senate Publications, 1991. 

California Conference of Local Mental Health Directors.
California's Local Mental Health System: Budget in Crisis: Conference of Local Mental Health Directors: Position Paper on FY 89-90 Funding Requirements For Local Programs Approved At: The June 1988 Conference in Sacramento. Sacramento: The Conference, 1988.

California, Dept. of Mental Health.
California Mental Health Services Act, Jan. 1985. Sacramento: Dept. of Mental Health. 1985. 

California. Legislature. Assembly. Revenue and Taxation Committee.
Revenue and Taxation Reference Book 2003. Sacramento: Assembly Publications Office, Jan. 2004

Proposition 63

If passed, Proposition 63 would establish a 1% state income surtax on incomes of over a million dollars. Approximately 25,000 to 30,000 Californians would become subject to paying the surcharge as of January 1, 2005. Under the measure, the State Controller would transfer specified amounts of state funding into the Mental Health Services Fund, a new state fund that would become operational on the first of the year. The amounts would be be based on estimates of the surcharge revenues. Revenues deposited into the fund would be used to create new county mental health programs and to expand existing programs. Adult systems of care, children's services, Preventive measures, workforce and training, and technology improvements are all programs that could receive the new funds. As the funds would not be provided through the annual state budget act they would not be subject to change by the legislature or the Governor, according to Legislative Analysts report on the measure. There are a number of prohibitions in the proposition. The revenues generated from the tax surcharge could only be used for expanding mental health services. It would prohibit current funds directed to mental health services from being re-directed to any other source. The state would be barred from reducing any levels in mental health services below their levels in the 2003-04 budget.

If passed, the tax surcharge would generate approximately $275 million in 2004-05 and increasing amounts every year after. The state and counties would also be subject to additional expenditures for mental health programs, mirroring the amounts raised by the surcharge.

The initiative was developed by a coalition of mental health groups: the California Mental Health Association, the Office of Assemblyman Darrell Steinberg, the California Mental Health Planning Council, and the National Alliance for the Mentally Ill, among others. The proponents claim that the initiative will provide much needed treatment to thousands of mentally ill Californians as well as comprehensive preventive measures and accountability to make sure funds are spent appropriately.

Opponents of Proposition 63 focus on the proposed method of paying for the initiative. Leveling a surcharge on individuals who make over $1 million a year, they argue, will induce millionaires to leave the state. They also say that the incomes of those that make over a million dollars a year are subject to change with economic trends. They complain that the law will fund programs currently in place that have not been proven effective or efficient. Opponents include the California Taxpayers Association, the Citizens For a Healthy California, and California State Assembly member Ray Haynes, among others.

Official Voter Information

Voter Information Guide

Campaign Finance:
Individual Campaign Committees
Total Contributions and Expenditures (select "Nov. 2004 election" and "Prop. 63" in dropdown boxes)

Key Websites

Ballotpedia

League of Women Voters 

California Department of Mental Health Web Site 

National Alliance For the Mentally Ill
California Chapter

HealthVote2004.org
HealthVote2004.org provides voters with facts and non-partisan analysis, as well as easy access to information on who supports and opposes the measures, who is paying for the campaigns, how much is being spent, results of statewide polls, and the latest news. HealthVote2004.org is a collaboration between two non-partisan, non-profit organizations—the California HealthCare Foundation and The Center for Governmental Studies.

Public Opinion

"Health-Related Propositions: Support for Prop. 71, Stem Cell Research Bond, continues to grow. Voters moving to the No side on Prop. 72, Health Insurance Requirements," Field Poll, Release #2147, October 31, 2004.

"Los Angeles Times Poll Excerpts," Los Angeles Times Poll, Oct. 20, 2004.
Responses to questions on Propositions 63, 66, 67, and 71.
Los Angeles Times Poll [Locate poll through website]

"Health-Related Propositions: Prop. 72 (health coverage) ahead by 16 points. Prop. 61 and 63 also lead, but Prop. 67 trails," Field Poll, Release #2140, October 12, 2004.

"Voters sharply divided on stem cell research bond measure: favor two other health-related propositions but oppose a fourth," Field Poll, Release #2130, August 15, 2004.