Receive Mental Health Services Act update relating to the Annual Plan and the budget for fiscal year 2025-26, including implementation of the Behavioral Health Services Act and updated data pertaining to options for addressing the existing structural deficit. (No general fund impact) (Morales) (Est. Staff Presentation: 10 min)

Receive an updated report on the Mental Health Services Act (MHSA) budget for fiscal year 2025-26, as it relates to the MHSA Annual Plan Update.  This presentation will include updated data to better inform options presented to the Board for consideration in addressing the existing structural deficit in the FY2025-26 MHSA budget.  The presentation will also include information relevant to local implementation of the Behavioral Health Services Act (BHSA) that was implemented by Proposition 1, which will take effect on July 1, 2026.  

To address MHSA deficit of approximately $4 million in fiscal year 25/26, staff recommends a budget approach that reduces funding to both County and contracted provider services, and which allocates MHSA fund balance and additional funding sources to reduce impacts to service levels.  As such, staff recommends the following:

The current three-year MHSA Plan is in effect from July 1, 2023, through June 30, 2026, but requires an Annual Update each year to monitor the progress of the existing plan and to implement any necessary changes to the plan. The Annual Update process includes a community planning process that allows stakeholders to provide input on local behavioral health needs and priorities. 

On June 3, 2025, the Yolo County Board of Supervisors received a report from the Yolo County Health and Human Services Agency (HHSA) regarding the Mental Health Services Act (MHSA) Annual Plan Update. At that time the Board was advised that the FY2025-26 Annual Plan Update was far behind schedule, as MHSA requires multiple steps prior to approval (including a 30-day public comment period, a hearing at the Local Behavioral Health Board, and Board approval) prior to submission for final approval with the Behavioral Health Services Oversight and Accountability Commission (BHSOAC). MHSA requires for the FY2025-26 MHSA Annual Update to be approved by June 30, 2025, and it was not going to be possible to meet this deadline because of uncertainties with the MHSA budget due to an approximately $11 million structural deficit. Thus, the need for the board to quickly identify the future of the MHSA budget.    


The Board was also advised that FY2025-26 would be the last year of the Mental Health Services Act due the enactment of the Behavioral Health Services Act that was implemented by Proposition 1 in the 2024 California election.  The Behavioral Health Services Act (BHSA) makes significant changes to the Mental Health Services Act, including alterations of funding allocations, increasing the scope of treatable conditions to include substance use disorders, and mandating increased spending on supportive housing. Proposition 1 also shifts the state's share of MHSA tax revenue from 5% to 10%, reducing the county allocation from 95% to 90%.  Most significantly, counties are now required to direct more of their funding toward housing and personalized support services for people with the most serious mental health and substance use needs, especially those who are homeless or at risk of homelessness.  Beginning July 1, 2026, counties must dedicate 30% of their MHSA funding to housing interventions for individuals with the most significant behavioral health needs. 

At the June 3, 2025, the Board was advised that the $11 million structural deficit in MHSA for FY2025-26 could be addressed by utilizing existing fund balances, but that this action would exhaust the fund balances without addressing the structural deficit.  Additionally, the structural deficit would likely be magnified in FY2026-27 by the following factors:

HHSA staff advised that the culmination of these factors create a scenario where the actual structural deficit will continue to grow if we don’t start to implement reductions. HHSA staff also took into account the priorities established by the Board on June 3, 2025:

On September 9, 2025, the Yolo County Board of Supervisors received a report from Yolo County HHSA that provided an update on the status of the structural deficit in the FY2025-26 MHSA budget.  The Board was advised that the deficit had been reduced to approximately $4 million through administrative reductions that included: a transfer of the Full-Service Partnership (FSP) program (serving adults) from a contracted provider to internal staff; increased Medi-Cal revenue projections; salary and benefit allocation corrections; reductions in overhead costs; and other programmatic reductions. The presentation also provided three options for the Board to consider in reducing the structural deficit, which consisted of comprehensive and balanced approaches to reducing contracts, HHSA staffing, and HHSA programming. This report did contain data discrepancies, which the Board directed HHSA to address. The board also directed staff to provide a runway for community-based organizations to ensure they had time to transition their programming. 

The report for the Board Meeting set for October 21, 2025 will provide the Board updated data to better inform the options presented to the Board on September 9, 2025 to consider in addressing the existing structural deficit in the FY2025-26 MHSA budget. The presentation will provide updated budget reduction scenarios and identify potential impacts of each proposed option. The presentation will also include information relevant to local implementation of the Behavioral Health Services Act (BHSA) that was implemented by Proposition 1, which will take effect on July 1, 2026.

The following options are being presented to the Board for consideration:

Yolo County Health and Human Services Staff met individually with leadership from all identified contracted providers to discuss the potential funding cuts and the degree to which reduced funding would impact their ability to provide services.  Staff also confirmed Results-Based Accountability (RBA) data with the providers for inclusion in this report. Additionally, staff met with the Yolo County Superintendent of Schools and the superintendents from the five school districts served by the K-12 School Partnership Program, and separately with the Vice President of Student Affairs of Woodland Community College, to discuss the potential impacts of any funding cuts to either the K-12 School Partnership or Woodland College Partnership programs and strategies to address them.  



To address the MHSA deficit of approximately $4 million in fiscal year 25/26, staff recommends a budget approach that reduces funding to both County and community organizations, and which allocates MHSA fund balance and additional funding sources to reduce impacts to service levels. As such, staff recommends Scenario 2 based on the directive from the board to preserve some of the fund balance to address future deficits and provide a runway for community organizations. This scenario would reduce the FY25/26 MHSA Budget by $3,908,310, which would add to the MHSA fund balance. This approach carries a potential impact of 5.0 to 10.0 FTE.

Staff is seeking direction from the Board to proceed with finalization of the FY 25/26 MHSA Budget and Annual Plan Update.

The following is the upcoming schedule to finalize the FY 25/26 MHSA Plan and transition to BHSA: