Proposition 1E - Redirecting Portion of Mental Health Funding

Voter Guide
This measure appeared on the May 2009 California state ballot.

What it does

Proposition 1E is a legislative Constitutional amendment that would, for two years, redirect money from a set-aside fund used for new or expanded mental health services to existing mental health programs now supported by the General Fund. This would help reduce the current budget deficit.

To understand what Prop. 1E does, it may help to understand the current conditions.

In 2004, voters created a set-aside fund for youth mental health services (Prop. 63). Its revenues come from a one percent surcharge on the portion of an individual’s taxable income that exceeds $1 million. To date, annual Prop. 63 revenues range from $900 million to $1.5 billion. Prop 63 revenues must be used to expand mental health services, and the state may not reduce General Fund support for mental health services below 2003-04 levels. Due to the time needed to ramp up the program after the tax was approved, all the funds could not be spent in the early years, so approximately $2.6 billion sits in a reserve to be spent in future years.

Revenues are dedicated to specified programs. Supported programs have five major purposes and are currently at different stages of planning and implementation. The state Dept. of Mental Health contracts with county mental health agencies (the primary mental health providers for people who cannot afford private care) for delivery of approved Prop. 63 programs.

Separate from Prop. 63 programs, the federal government requires states to provide a broad range of screening, diagnosis and medically necessary treatment services— including mental health services— to Medi-Cal beneficiaries under 21 years old. Total expenditures for these mental health services, which include group and individual counseling and assistance for stabilizing children and young adults who experience a mental health crisis, now exceed $1 billion annually. The federal government and the state General Fund roughly split the cost.

Prop. 1E would temporarily redirect some Prop. 63 funds to pay for the state’s portion of the federally mandated program. About $227 million would be redirected in 2009-10, and an equal or slightly larger amount in 2010-11. This $460 million offset of General Fund costs over two years would help to balance the state budget. Because the temporary redirection of funds is not consistent with the intent of Prop. 63, it must be approved by the voters.

Why it is on the ballot

Similar to Prop. 1D, Prop. 1E allows the legislature to temporarily use money from a set-aside fund with $2.6 billion in unspent money, to help cover the General Fund deficit. The redirection would fund the state’s share of a federally-mandated mental health services.


  • Prop. 1E is “needed to help reduce the magnitude of cuts that would otherwise occur in other state funded programs.” It only lasts for two years, and would only take about 20 percent of the unspent $2.6 billion in Prop. 63 reserves. Those reserves are nearly twice what Prop. 63 programs have been able to spend since voters approved the measure in 2004. A state audit has criticized the state’s tardy implementation of the program.
  • The income tax source of funds for Prop. 63 programs is likely to grow over time, since the threshold is fixed at taxable income over $1 million. As inflation reduces the value of the dollar, more Californians, and larger shares of their income, will be subject to Prop. 63’s tax. Since Prop. 63 passed, the number of millionaire taxpayers increased 48.6 percent, while the total number of personal income taxpayers increased 8.6 percent. The amount subject to Prop. 63’s tax increased by 65 percent. That will decline during this recession, but will rebound.


  • If Prop. 1E passes, less money would be available for mental health programs.
  • The will of the majority who voted for Prop. 63 should be respected. Prop. 63 programs are working and are saving the state money and saving countless families and individuals a great deal of pain and unhappiness. Diverting Prop. 63 funds will keep us from serving even more people.

SPUR's analysis

We recognize that mental health programs are a vital public service to individuals and families served and to the community. However, in these extraordinarily difficult budget times for the state, we must make some very difficult decisions. Tapping into the unspent funds is the right thing to do in this dire situation. We were ultimately persuaded to support the measure by the state’s extraordinary budget problems, the draconian cuts that would be required if Prop. 1E fails, the two-year limit on diversions and its replenishing source of funds.

SPUR recommends a “Yes” vote on Proposition 1E.