California Proposition 63, Income Tax Increase for Mental Health Services (2004)
Proposition 63 levies an additional 1% tax on incomes of $1,000,000 or greater to fundamental health service programs beginning January 1, 2005. Approximately 25,000 to 30,000 taxpayers were to be directly affected by the tax, generating an estimated $750 million in revenue during fiscal year 2005-06. At the time of the election, California income tax rates ranged from 1% to 9.3%, depending on a taxpayer's income level.
Payments to consultants
In 2011, the Bay Area News Group conducted a review of spending undertaken under Proposition 63 after hearing of the concerns by the chairman of a Santa Clara County watchdog group who said that spending under the act had enriched private contractors.
The review by the Bay Area News Group agreed, saying, "Much of it has gone to a cottage industry of consultants earning up to $200 an hour, as well as a host of new programs that in many cases are only loosely linked to prevention, treatment and recovery."
Rose King, who co-authored Proposition 63, also agreed, saying, "The state of California clearly did not comply with the law and they did not keep and honor the contract with the voters. It's a corruption of purpose, and it's a boondoggle for consultants and entrepreneurs at the expense of core services."
The "worried well"
Mary Ann Bernard, an advocate for the mentally ill, said in 2011 that funds from Proposition 63 are being spent inappropriately. She wrote:
- "Not surprisingly, though contrary to the law they were supposed to be enforcing, the [Department of Mental Health/Mental Health Services Oversight and Accountability Commission] approved plenty of programs that had nothing to do with 'mental illness,' much less 'severe mental illness.' $133,571,200.00 in Proposition 63/MHSA prevention/early intervention funds were budgeted for allocation last summer. What got funded? elementary school programs about bullying, therapeutic gardening for unhappy Hmong refugees, horse therapy for troubled teens who are not mentally ill, a support group for gay and lesbian teens, parenting skills programs, a support program for unwed mothers, a hip hop car wash, a homework help programs for non-mentally ill students, yoga and 'Soul Chi,' for the stressed, among other things. These may be fine programs, but they are hardly 'effective' and 'successful' at preventing or shortening the duration of 'severe mental illness,' as required by [Proposition 63]."
Call for audit
The Associated Press released a report in 2012 detailing expenditures using Proposition 63 funds that included "Sweat lodges for Native Americans. Massage chairs for students. In San Francisco, city employees who have family histories of mental illness enjoy state-sponsored yoga classes."
The San Francisco Examiner wrote an editorial saying, "Perhaps most troubling, no one in state government has bothered to account for all the money that has been spent. No one knows how much money has been directed to such frivolous enterprises."
Jensen v. Tax Board
Jensen v. California Franchise Tax Board was filed against Proposition 63 on the grounds that it amounted to an unconstitutional violation of state and federal equal protection clauses because it disproportionately impacts wealthy individuals. The plaintiffs lost their case at the trial level and in October 2009, a California appellate court upheld the lower court.
MHA v. Schwarzenegger
In Mental Health Association in California v. Schwarzenegger, the Mental Health Association (MHA) filed a petition to compel the State of California to reinstate its $54,850,000 annual funding for the Homeless Adults Program. Then-Gov. Arnold Schwarzenegger had removed this funding from the state's budget by a gubernatorial veto in 2007, saying, "I am deleting the $54,850,000 legislative augmentation for the Integrated Services for Homeless Adults with Serious Mental Illness Program. While I support the goals of the program, this reduction is necessary to limit program expansions and to help bring ongoing expenditures in line with existing resources. To the extent counties find this program beneficial and cost-effective, it can be restructured to meet the needs of each county's homeless population using other county funding sources, such as federal funds, realignment funds, or Proposition 63 funds."
A California trial court denied the petition to compel the state to continue funding the Homeless Adults Program. On December 9, 2010, the Court of Appeals of California, First District, Division Three, upheld the trial court's decision.
Changes proposed in 2009
The California state budget problems in 2009 led to the California State Legislature putting California Proposition 1E (2009) on the May 2009 ballot in order to potentially free up some of the funds that Prop 63 dedicates to mental health care to the state's general fund. However, Prop 1E was resoundingly defeated.
Text of measure
The ballot title was:
The question on the ballot was:
- "Should a 1% tax on taxable personal income above $1 million to fund expanded health services for mentally ill children, adults, seniors be established?"
- Provides funds to counties to expand services and develop innovative programs and integrated service plans for mentally ill children, adults and seniors.
- Requires state to develop mental health service programs including prevention, early intervention, education and training programs.
- Creates commission to approve certain county mental health programs and expenditures.
- Imposes additional 1% tax on taxpayers' taxable personal income above $1 million to provide dedicated funding for expansion of mental health services and programs.
- Prohibits state from decreasing funding levels for mental health services below current levels.
- See also: Fiscal impact statement
The California Legislative Analyst's Office provided an estimate of net state and local government fiscal impact for Proposition 63. That estimate was:
- Additional state revenues of about $275 million in 2004-05 (partial year), $750 million in 2005-06, $800 million in 2006-07, and probably increasing amounts annually thereafter, with comparable annual increases in expenditures by the state and counties for the expansion of mental health programs.
- Unknown state and local savings from expanded county mental health services that partly offset the cost of this measure, potentially amounting to as much as the low hundreds of millions of dollars annually.
The "Yes on 63" campaign spent approximately $4.7 million. The largest donor was the California Council of Community Mental Health Services, which gave $733,389 to the campaign. The California Healthcare Association gave $541,735. The California Teachers Association kicked in another $302,555.
In comparison, opponents of the measure spent virtually nothing, with two separate "No on 63" campaign committees spending a cumulative total of just over $13,000.00.
- LAO analysis of Proposition 63
- Information & analysis about the progress of Proposition 63 after the Nov. 2004 election from HealthVote.
- November 2004 election results from the California Secretary of State
- Official Voter Information Guide with text of Proposition 63
- High tobacco taxes won't make the problem go away
- Guide to Proposition 63 from the California Voter Foundation
- Analysis of Proposition 63 from the Institute of Governmental Studies
- PDF of the mailed November 2, 2004 voter guide for Propositions 59, 60, 60A, 61-64, 66-72
- ↑ 1.0 1.1 Mercury News, "Mental health spending creating haves and have-nots", June 26, 2011
- ↑ California Progress Report, "Legislative Fix Needed To Stop Waste of Millions Earmarked For Severe Mental Illness", December 29, 2011
- ↑ 3.0 3.1 3.2 San Francisco Examiner, "Funds meant for mental illnesses", August 6, 2012
- ↑ Text of Jensen v. California Franchise Tax Board
- ↑ The Tax Professor, "California Court Upholds 1% Tax on Millionaires", October 18, 2009
- ↑ Mental Health Association in California v. Schwarzenegger
- ↑ Los Angeles Times, "May 19 election deadlines already drawing near", February 20, 2009
- ↑ Follow the Money
- ↑ Follow the Money