MHSA to BHSA: Understanding California’s Behavioral Health Funding Evolution

The biggest changes 2024’s Behavioral Health Services Act made to its Mental Health Services Act (MHSA) predecessor

The Mental Health Services Act (MHSA), established in 2004 through Proposition 63, created a stable funding source for community-based mental health programs, establishing the foundation for a modern behavioral health system.

Two decades later, the Behavioral Health Services Act (2024) seeks to strengthen and modernize that foundation — redefining how the state funds, measures, and delivers behavioral health care in the face of rising homelessness, substance use disorders, and workforce shortages.

Together, these two landmark acts tell the story of how California’s approach to behavioral health has shifted — from building access to care, to transforming a system to meet the scale of today’s crisis.

But what exactly changed under the BHSA — and how will it reshape California’s behavioral health system?

The Mental Health Services Act (MHSA)

California’s modern behavioral health system began with the Mental Health Services Act (MHSA), authored by Steinberg Institute founder Darrell Steinberg and passed by voters in 2004.

The MHSA established a 1 percent tax on personal incomes over $1 million, creating a permanent revenue stream for behavioral health services. It funded counties to expand community-based treatment, prevention, and innovation programs, laying the foundation for a more responsive system of care.

The revenue generated from the 1 percent tax was administered to counties across five components – Community Services and Supports (CSS), Prevention & Eearly Intervention (PEI), Innovation (INN), Capital Facilities & Technological Needs (CFTN), and Workforce Education and Training (WET). The State directed counties to spend specific percentages of their funding across these components, with CSS receiving the majority of funding (76%). Read more about the MHSA and how it’s structured here.

Although MHSA was transformative, providing billions of dollars for behavioral health programs across the state of California, several challenges prevented it from reaching its full potential:

• Complex reporting requirements
• Inconsistent county implementation
• Limited focus on people with co-occurring substance use disorders
• Insufficient accountability around outcomes

These challenges paved the way for reform — and for Proposition 1.

The Behavioral Health Services Act (BHSA)

In 2024, amid a worsening homelessness and substance use crisis, Californians voted to modernize the MHSA through Proposition 1. The measure, sponsored by Governor Gavin Newsom and Senator Susan Talamantes Eggman, replaced the MHSA with the Behavioral Health Services Act (BHSA) and made major structural updates.

The BHSA narrows the focus of county spending to fewer categories with clearer targets and greater accountability. It marks a shift away from broad prevention and community education toward housing, treatment, and measurable outcomes — a shift designed to meet the scale and urgency of today’s homelessness and substance use crises. Read more about the BHSA and its structure here.

MHSA vs. BHSA

There are four key changes the Behavioral Health Services Act (BHSA) made to the Mental Health Services Act (MHSA) that reshape how California’s behavioral health system works — from who can receive care to how counties must deliver and track it.

1. Reallocates Prevention and Early Intervention (PEI) Funding

Under the MHSA, 19% of all county funds were set aside for Prevention and Early Intervention (PEI) — programs aimed at reaching people before the onset or escalation of mental illness. These included stigma reduction campaigns and education programs in schools and communities.

The BHSA created three new components for counties to spend their funding on – and eliminated prevention as a funding category altogether. Counties may still fund prevention activities through BHSS or other sources like Medi-Cal, but they are no longer required to dedicate a fixed percentage to early intervention.

This change shifts the system’s focus from broad prevention to direct treatment and recovery supports for individuals already experiencing serious mental illness or substance use disorder.

2. Expands Eligible Populations to Include Substance Use and Co-Occurring Disorders

MHSA funding was limited to individuals with serious mental illness or serious emotional disturbance, leaving people with non co-occurring substance use disorders (SUDs) ineligible for services funded through the MHSA.

The BHSA closes that gap by explicitly including people with substance use or co-occurring disorders. This change reflects a more integrated understanding of behavioral health — acknowledging that mental illness and substance use are often interconnected and must be treated together.

3. Imposes More Standardized Implementation and Reporting Requirements on Counties

While the MHSA allowed counties flexibility to design programs, this led to inconsistent implementation and limited statewide data on outcomes.

The BHSA introduces new uniform planning and accountability standards. Counties must now:

• Develop Integrated Plans every three years, aligning with state priorities.
• Submit annual Behavioral Health Outcomes, Accountability, and Transparency Reports (BHOATR) detailing fiscal, service, and outcomes data.
• Engage in a more structured Community Planning Process (CPP) to ensure meaningful public participation and oversight.

The goal is to increase accountability and comparability across counties and ensure that public dollars are producing measurable results.

4. Emphasizes Housing and Full Service Partnerships (FSPs) as Core Components of Care

The MHSA did not dedicate funding specifically for housing. The BHSA now requires counties to allocate 30% of total BHSA funding to housing interventions such as permanent supportive housing, rental assistance, and residential treatment.

Under the MHSA, Full Service Partnerships (FSPs) were funded through the broader Community Services & Supports (CSS) category. BHSA elevates them to their own dedicated funding stream — 35% of county BHSA allocations — to strengthen intensive, “whatever it takes” wraparound care.

Together, these shifts prioritize housing stability and intensive supports to address California’s homelessness and mental health crisis.

Why It Matters

The BHSA represents a new era of behavioral health reform in California. It builds on the MHSA’s legacy while addressing long-standing gaps — expanding eligibility, prioritizing housing, and demanding measurable outcomes.

It also marks a shift toward integration: treating mental illness and substance use together, recognizing that recovery and housing stability are intertwined.

Where California Goes from Here

The BHSA’s full implementation, set for July 2026, will determine whether this historic reform delivers on its promise.

Counties, advocates, and providers must work collaboratively to ensure the system remains both compassionate and data-driven, balancing innovation with accountability and care with measurable outcomes.