How the May Budget Revision aims to use BHSA funding to help balance California’s budget
Governor Gavin Newsom’s May 2026-27 Budget Revision is here—and it reflects the difficult fiscal realities facing the state.
The administration and Legislature are making difficult budget decisions and balance the budget, while protecting major behavioral health initiatives already underway.
The Behavioral Health Services Act (BHSA) represents a large portion of the state’s funding for mental health and substance use programs. The May Revision leverages BHSA funding in an attempt to balance the budget that directly impacts California’s behavioral health systems—both in terms of funding and access.
Below we summarize exactly how the May Revision proposes redistributing BHSA funding and what this could mean for California’s behavioral health landscape.
1. Using BHSA funding to keep mobile crisis teams operating
As we stated in our initial May budget revision reaction, mobile crisis teams will still become an optional benefit after federal funding expires in 2027—something we are concerned will result in mobile crisis programs being downsized or eliminated in counties.
But the May Revision proposes an additional $20.1 million in BHSA funding to cover the nonfederal share of Medi-Cal costs for mobile crisis teams from January 2027 to March 2027—the period of time after the enhanced federal matching rate expires, but before the Medi-Cal mobile crisis benefit becomes optional for counties to implement.
In January, the administration initially proposed using 988 fee revenue to cover the nonfederal share of costs during this time period. However, 988 fee revenue can only be used to cover the costs of mobile crisis teams that are dispatched through the 988 Crisis Lifeline. Due to implementation challenges related to this requirement, the administration determined that a different source—BHSA funding—would be more appropriate to fund mobile crisis teams.
2. Using BHSA State-Directed Purposes Funding to balance the budget
The administration projects that total BHSA revenue will be $4.37 billion in 2026-27. As required by the BHSA, approximately $641 million of this revenue is allocated to State-Directed Purposes Funding. It is required to cover specific programs and initiatives that fall into three categories: population-based prevention programs, workforce development initiatives, and state administration and oversight.
But, in an attempt to balance the budget and offset General Fund losses, more than 30% of these funds are also proposed to go to non-BHSA mandated initiatives. The table below breaks down exactly how the administration proposes to allocate state-directed purposes funding to non-BHSA initiatives:
May Revise BHSA Funding RedistributionsAn overview of how the administration proposes spending the state-directed purposes funding across its three buckets. |
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| BHSA State-Directed Purposes Funding Categories | BHSA Initiatives Allocation
This funding goes towards initiatives that must be funded under the BHSA’s state-directed purposes funding bucket. *required under BHSA |
Non-BHSA Initiatives Allocation*
This funding does not go to initiatives specified under BHSA’s state-directed purposes funding bucket. *to offset General Fund costs |
| Population-based prevention: $174.8 million | $119.8 million | $53.2 million
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| Workforce development: $131 million | $65.8 million
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~$28.3 million
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| State administration and oversight: $335.2 million | $215.1 million | ~$120.1 million
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Implications for using BHSA funds to supplant the General Fund
This package of General Fund offsets raises some concerns. The BHSA includes broad non-supplantation language, which also applies to its state-directed purposes funding. Specifically, it amended Section 5891 of the Welfare and Institutions Code to read:
- “These funds shall not be used to supplant existing state or county funds utilized to provide mental health services or substance use disorder treatment services.”
The state’s current fiscal challenges are real, and actions to stabilize the budget going forward are reasonable and necessary. However, the non-supplantation language is clear. Without a compelling argument for why these General Fund offsets are legally permissible, they risk breaching the Act.
In addition, to justify these fund shifts, these activities—previously supported by the General Fund—must fit somewhere within the three components of BHSA state-directed purposes funding: workforce development, population-based prevention, and state administration and oversight. While the majority of them appear to fit within these specified categories, some—like funding for equal representation in construction apprenticeships—don’t seem to meet that requirement.
Even if these fund shifts are ultimately deemed legal, it is not clear that this plan is aligned with the spirit of the BHSA as the voters intended. Another concern: previous funding that would have been available for state behavioral health expansions—new services, infrastructure, workforce investments, and additional prevention efforts—would no be longer available. This trade-off will persist in future budget years as some of the proposed fund shifts are planned for multiple years or appear to be ongoing.
Finally, if approved, this proposed use of BHSA funding establishes a concerning precedent. BHSA funding risks becoming merely a mechanism for backfilling the General Fund during challenging fiscal times.
Additional May Budget Revision Line Items
To meet federal requirements, the administration also proposes transitioning all undocumented individuals enrolled in the Medi-Cal program from managed care and into the fee-for-service delivery system. In effect, this transition means undocumented individuals across the state will no longer have access to ECM and Community Supports.
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Conclusion
With the state facing significant budgetary challenges, the May Revision takes several steps to balance the budget that have direct implications for how California’s behavioral health system, specifically programs funded under the BHSA, could operate.
Amidst a mental health crisis and impending health care cuts due to HR1, we urge leaders to closely examine this plan to determine that it is in the spirit of the BHSA. Even in challenging budget times, it’s vital that behavioral health funding remains a top priority for the state this budget cycle.