SACRAMENTO — California lawmakers voted Tuesday to put a proposal before voters next March that would overhaul how counties pay for mental and behavioral health programs in an effort to address the state’s worsening homelessness crisis.

SB 326, a bill authored by Democratic state Sen. Susan Eggman (D-Stockton), was passed by the state Assembly and will need one more vote in the Senate if it is to make the ballot.

Two-thirds of Funds Would Go to Mental Health, Substance Abuse

In 2004, voters approved a special tax on millionaires to help pay for mental health programs. Money from that tax, one of the most unpredictable funding sources in the state, has mostly gone to county governments to use as they see fit under broad guidelines.

Democratic Gov. Gavin Newsom wants changes to restrict how local governments can use that money, with an emphasis on mental health and drug and alcohol use programs. Under his plan, two-thirds of revenue from the tax would pay for services for people who are chronically homeless and with severe mental health issues and unhealthy drug and alcohol use. Counties would also be required to use the same method to track and report spending.

“The intersection of behavioral health disorders and homelessness is playing out every day on our streets, in our schools, in the smallest of rural communities, in our largest cities,” Democratic Assemblymember Jim Wood said before voting for the bill. “This provides Californians with an opportunity to weigh in on how to address this.”

Newsom Seeks $6.3 Billion for 10,000 Mental Health Treatment Beds

The governor also wants voters’ permission to borrow $6.3 billion to pay for 10,000 new mental health treatment beds, up from an initial proposal of $4.6 billion, an increase that came after a coalition of mayors urged him to deliver more money to help cities address the homeless crisis.

California is home to more than 171,000 homeless people — about 30% of the nation’s homeless population. The state has spent more than $20 billion in the last few years to help them, with mixed results.

The initial proposal to change the tax sparked intense backlash from county officials and service providers, who worried it would take away local officials’ power to choose how to spend the money. They also worried the changes would pit programs for children against those for homeless people.

In August the administration amended the bill to address those concerns by setting aside money for children’s services and giving local governments more control. Under the changes, the state committee in charge of overseeing the money would remain independent from the governor and expand to include more members.

GOP Lawmakers Praise the Bill

“It is critical that we remove the existing barriers to supporting access to the substance abuse treatment,” Assemblymember Marie Waldron said. “Getting people who have that need through the system is going to be major.”

Lawmakers also must vote on the bill to borrow money, authored by Democratic Assemblymember Jacqui Irwin, before the last day of this year’s session on Thursday. Should both bills pass, they would appear as one item on the March ballot.

The bill to reform the tax enjoys support from Sacramento Mayor Darrel Steinberg, the author of the original millionaires’ tax, and the Steinberg Institute, a nonprofit policy group that focuses on mental health and substance use. Karen Larsen, the institute’s CEO, called the changes “urgent and necessary.”

“Failure to establish standard metrics and properly track, evaluate, and improve outcomes since the passage of the (Mental Health Services Act) has been one of the biggest failures of the current act,” Larsen said at a recent hearing. “Our system must be able to account for improving the lives of those living with the most significant behavioral health conditions, especially when it comes to homelessness, incarceration and hospitalization.”

Changes Would Harm Good Programs, Opponents Say

But opponents of the reform efforts remain skeptical. The new mandates would result in a loss of more than $1 billion for existing programs such as mental health outpatients, crisis, recovery, and peer-supported services, county officials said in a letter to Newsom over the weekend.

The legislation is among nearly 1,000 bills that lawmakers have been debating during the final two weeks of the Legislative session.