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The California Women’s Well-Being Index

September 2024 | By Hannah Orbach-Mandel and Laura Pryor

A woman wearing a blue shirt and a denim jacket, standing confidently with a neutral background.
The 2024 Women’s Well-Being Index was updated in collaboration with the California Commission on the Status of Women and Girls, which provided funding, communications, outreach, and engagement support. 
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key takeaway

California voters will decide on November 5th, 2024 whether to pass Proposition 35, which would 1) require the state to request federal approval for the Managed Care Organization tax on an ongoing basis and 2) allocate those dollars for certain health care investments.

Access to health care is essential for everyone to be healthy and thrive. In California, Medi-Cal, the state’s Medicaid program, provides free or low-cost health care to over one-third of the state’s population. Medi-Cal covers a wide range of services to Californians with modest incomes, and many children, seniors, people with disabilities, and pregnant individuals rely on it. About half of Medi-Cal beneficiaries are Latinx, highlighting Medi-Cal’s role in promoting health equity.

California’s shortage of health care workers undermines the availability and quality of care for communities across the state. When people can’t find a provider in their area or experience long wait times for appointments, they don’t have meaningful access to health care. Enrolling in Medi-Cal and navigating the health care system can also be difficult, underscoring the need to invest in outreach and enrollment supports. While state policymakers have made considerable investments in recent years to bolster the health care workforce, more progress is needed.

what is health equity?

When everyone has the opportunity to be as healthy as possible and no one is disadvantaged from achieving this because of their race, gender identity, sexual orientation, the neighborhood they live in, or any other socially defined circumstance.

This year, policymakers had to make challenging decisions about health care investments due to the state’s recent budget shortfall and resistance from some state leaders to raise ongoing revenues. This has led to debates over the allocation of revenue from the state’s recently approved Managed Care Organization (MCO) tax. In response, many representatives of the health care industry have proposed Proposition 35, which would: 

  1. Require the state to request federal approval for the MCO tax on an ongoing basis.
  2. Allocate MCO tax revenue for certain health care investments.

There are merits to having dedicated funding to invest in the state’s health care system. However, this approach would reduce flexibility in the state budget and could negatively affect available funding for other key services that improve the lives of Californians. This Q&A provides a high-level overview of Prop. 35, including how Californians with low incomes might be impacted by its passage as well as implications for the state budget.

table of contents

What is the Managed Care Organization (MCO) tax?

Managed Care Organizations (MCOs), also known as health insurance plans, are responsible for managing health care services as a way to control costs, utilization, and quality of care. Anthem Blue Shield and Kaiser Permanente are two examples of MCOs in California. These health insurance plans oversee the health care benefits that people receive, often requiring prior authorization or referrals to ensure that people receive appropriate and cost-effective care.

MCOs manage health care services for people with private health insurance as well as Medi-Cal enrollees. They contract with Medi-Cal to receive payments based on the number of Medi-Cal recipients they serve. Medi-Cal is a joint federal-state program, with the federal government covering part of the cost and the state covering the rest.

Federal law allows states to impose a tax on MCOs and other health-related services to help cover the state share of Medicaid health care costs, but states must comply with federal regulations and receive federal approval for these taxes. Eighteen states reported having an MCO tax in place during the 2023 state fiscal year.

California’s MCO tax is a charge based on enrollment in Medi-Cal managed care plans and private health insurance plans. The MCO tax is distinct from other types of state taxes in that the primary state fiscal benefit comes from the additional federal dollars drawn down as a result of the tax. MCOs bear very little of the cost, as they receive Medi-Cal payments from state and federal funds that offset the portion of the tax levied on Medi-Cal enrollment. By drawing down additional federal funding, the MCO tax frees up state General Fund dollars that would otherwise have been used to support existing Medi-Cal services.

California’s MCO tax was most recently approved in December 2023, and it will expire at the end of 2026 unless it is renewed again. However, state leaders are seeking additional changes to the MCO tax structure to draw down more federal funding. These changes are still pending federal approval. 
The state is expected to receive net revenues of $7 billion to $8 billion annually while the tax is in effect, assuming the federal government approves recent changes. Essentially, the net revenues are the additional federal funds the state is able to draw down minus the cost of the state’s portion of payments to MCOs to offset the cost of the tax. Under the enacted 2024-25 budget, most of that revenue will be used to offset state General Fund spending on existing Medi-Cal services, with a smaller portion going to increased provider rates and augmentations.

How do policymakers currently plan to use MCO tax dollars?

Policymakers outlined a plan — which Prop. 35 would overturn — to use revenue from the MCO tax in the 2024-25 budget package, with the majority of dollars allocated to offset General Fund spending on Medi-Cal and maintain existing services in the program. Assuming that the federal government approves the changes to the MCO tax that state leaders are seeking, the budget includes the following MCO tax dollars to sustain existing services in Medi-Cal:

  • $6.9 billion in 2024-25
  • $6.6 billion in 2025-26
  • $5.0 billion in 2026-27

Policymakers also allocated funding from the MCO tax for new targeted Medi-Cal provider rate increases as well as other investments. These budget allocations include:

  • $133 million in 2024-25
  • $728 million in 2025-26
  • $1.2 billion in 2026-27

The rate increases from the current MCO tax spending plan are intended to build on investments that policymakers made in previous years. As shown below, the majority of funds for rate increases that will go into effect on January 1, 2025 will support emergency department physician services, abortion care and family planning, and ground emergency medical transportation.

The current MCO tax spending plan also includes additional rate increases and investments that would take effect on January 1, 2026, with the vast majority of dollars allocated to physician and non-physician professionals (e.g., physician assistants, nurse practitioners and certified nurse midwives). 

Policymakers also allocated $40 million one-time MCO tax dollars in 2026-27 to strengthen and support the development and retention of the Medi-Cal workforce. This amount reflects a decrease in health care workforce investments that state leaders made in the past. More substantial and sustained investments are necessary to build a health care workforce that can better meet the needs of Californians.

This MCO tax spending plan would be overturned if voters approve Prop. 35.

How does Prop. 35 differ from the current MCO tax plan?

Prop. 35 proposes a major shift to how state policymakers have used MCO tax revenue to essentially reduce, or offset, General Fund spending on Medi-Cal. If passed, Prop. 35 would overturn the current MCO tax spending plan that policymakers agreed upon in the 2024-25 budget. 

Prop. 35 would require the California Department of Health Care Services to request federal approval for the MCO tax on an ongoing basis in an attempt to make this funding stream more permanent. Federal approval is required for the state to levy health care taxes that draw down additional federal dollars. 

While Prop. 35 provides some flexibility for the state to structure future versions of MCO tax proposals to comply with federal regulations and ensure federal approval, it does set limits to the tax on commercial enrollment. This limitation could affect the state's ability to secure future approval for a tax that generates the same level of revenue as the current tax. The measure also specifies that the MCO tax would not go into effect if the state does not receive federal approval and federal funding in the future.

Additionally, Prop. 35 would establish rules for how MCO tax revenue would be spent in the short term (2025 and 2026) and long term (2027 and beyond). The key difference is that policymakers would no longer be able to use the bulk of the dollars to offset General Fund spending in Medi-Cal. Another notable difference is that Prop. 35 would require funds to be spent by the end of each calendar year or fiscal year, beginning 2027. Currently, policymakers have the flexibility to save funds for future years to help cover costs if the MCO tax is not approved in the future. 

If passed, funds would first cover a portion of MCOs’ cost of the tax as well as administrative costs. 

For calendar years 2025 and 2026, $2 billion would be used to offset General Fund spending in Medi-Cal. Specifically, this amount would cover a portion of the non-federal share of Medi-Cal managed care rates for health care services for children, adults, seniors, and people with disabilities. This represents the majority of funds (about 43%), as shown below. MCO tax revenue would also support health workforce initiatives, including primary care, specialty care, and emergency care.

For calendar year 2027 and beyond, Prop. 35 would allocate revenue from the MCO tax differently. After covering a portion of MCOs’ cost of the tax as well as administrative costs, the next $4.3 billion collected from the tax would be allocated for specific purposes. The majority of funds (44%) would support access to primary care and specialty care. Specifically, it would increase reimbursement rates for primary care services and increase the number of specialty care service providers. A smaller portion of funds would support other rate increases, such as emergency department services and family planning. Prop. 35 would allow the Department of Health Care Services to allocate 8% of funds — $344 million — to provide overall support to the Medi-Cal program.

If there are remaining MCO tax revenues after these funding allocations are made, the measure contains parameters to allocate the excess revenue. Examples of these other allocations include:

  • Additional General Fund offset to support existing services in Medi-Cal.
  • A grant program to expand the number of community health workers. 
  • Supporting the state’s ongoing efforts to reduce the cost of prescription drugs.
  • Providing additional funding to health workforce initiatives.

In addition, Prop. 35 would establish oversight and accountability measures, requiring the state controller to perform independent financial audits. It would also create an advisory committee that would provide input to the Department of Health Care Services on future MCO tax proposals. This advisory committee would be made up of mostly health care provider representatives.

Would Prop. 35 actually make the MCO tax permanent?

No, the MCO tax funding structure under Prop. 35 is entirely dependent on federal approval and ongoing renewals. Prop. 35 would require the California Department of Health Care Services to request federal approval for the MCO tax on an ongoing basis in an attempt to make this funding stream more permanent. Federal approval is required for the state to levy health care taxes that draw down additional federal dollars.

One issue with Prop. 35 is that the MCO tax may not be a sustainable, long-term funding source. While the federal government has historically approved California’s MCO tax, it has indicated that it may revise the rules governing state MCO taxes in the future, which would have implications for the amount of net revenue that future versions of the tax may bring into the state. 

Without federal approval and federal funding, the MCO tax and spending plan under Prop. 35 would not be implemented.

How would Prop. 35 impact the state budget?

While Prop. 35 would ensure more funding is dedicated for health care, its requirement to spend MCO tax revenues on specific services would also limit policymakers’ flexibility in making budget decisions. This is particularly concerning in years when the state is facing a budget shortfall because the reduced flexibility could lead policymakers to make cuts to other critical public services to balance the budget.

State leaders are required to balance the budget each year, and there are already several strict requirements on how some state funds are spent that make budgeting complex. By creating additional mandates on state spending, Prop. 35 would result in policymakers having even less flexibility in making budget decisions. While the measure gives policymakers some ability to modify the structure and uses of the MCO tax, changes would require a three-fourths vote in the Legislature — which can be difficult to obtain — and would need to further the purpose of Prop. 35. 

In years when the state is facing a budget shortfall, this limited flexibility could result in cuts to other critical public services that help Californians make ends meet and address vital needs, such as income supports, subsidized child care, food assistance, and investments in reducing homelessness and increasing affordable housing.  

Of course, cuts could be limited or avoided during budget deficits if state leaders are able to raise new revenues to address a shortfall. However, the state Constitution requires a two-thirds vote in the Legislature to raise taxes, while spending cuts can be approved with a simple majority, and state leaders have generally been more inclined to make cuts than to increase taxes.

In the near term, Prop. 35 would result in the recently enacted 2024-25 budget being out of balance. This is because a solution to the budget shortfall involves using some MCO tax dollars that were previously intended to support provider rate increases and other augmentations to instead offset General Fund spending on existing Medi-Cal services. Since Prop. 35 would require MCO tax revenues to be used for health program augmentations instead of offsetting existing spending, state leaders would have to identify other solutions — potentially spending cuts or delays, revenue increases, or additional budget reserve withdrawals — in next year’s budget to cover the difference. The Legislative Analyst’s Office estimates that the General Fund impact would be between $1 billion and $2 billion in 2025 and 2026, but in a legislative hearing on August 13, 2024, the Department of Finance noted that it estimates the impact could range from $2.6 billion and $4.9 billion in fiscal years 2024-25 through 2026-27.

In the long term, raising state General Fund revenues — through sources aside from the MCO tax — would help to increase the state’s capacity to cover the costs of existing Medi-Cal services and improve state health services and increase access to care, without jeopardizing other state services. This is especially important given that there is no guarantee the federal government will continue to approve an MCO tax that yields the amount of revenue anticipated from the currently authorized tax.

How would Prop. 35 impact Californians?

If passed, millions of Californians who receive health care services through Medi-Cal — about half of whom are Latinx — could have better access to care, especially for primary care and specialty health care services. Increasing provider participation in Medi-Cal is critical to improving access to a wide range of health care services, especially in historically underserved areas where there is often a shortage of providers. By increasing the number of providers in the Medi-Cal network, patients can receive more timely care, which can help improve health and well-being for all Californians, but especially Latinx communities. 

However, there are some critical health equity investments that are included in the current MCO tax spending plan that are either not included or not prioritized in Prop. 35. Examples include:

These potential cuts raise health equity concerns, as they would disproportionately impact people of color, children, older adults, and people with disabilities. Policymakers should explore alternative revenue-raising measures to sustain and advance these crucial health equity initiatives, if Prop. 35 passes.

Additionally, Prop. 35’s limitations on using MCO tax proceeds to offset General Fund spending on current Medi-Cal services could make policymakers more likely to make cuts to other state services when facing budget shortfalls. Such cuts would likely harm Californians with low incomes most. For example, in the difficult budget years during and following the Great Recession, deep cuts were made to safety net programs such as subsidized child care, income supports for families under the California Work Opportunity and Responsibility to Kids (CalWORKs) program, and income support for older adults and people with disabilities under the Supplemental Security Income/State Supplementary Payment (SSI/SSP) program.

Lastly, the passage of Prop. 35 would lock in spending decisions in the future, which would impact how Californians engage with the state budget process. Advocates and community members would have less opportunity to weigh in on how state resources should be allocated because the MCO tax spending decisions would be constrained by the ballot measure. Currently, Californians can contribute to conversations about how MCO tax revenue should be spent during the budget process via public hearings and interactions with policymakers.

What are arguments for and against Prop. 35?

Supporters of Prop. 35 believe the measure will protect and enhance access to care for Medi-Cal patients by ensuring that MCO tax dollars are directed toward patient care. They argue that it would prevent lawmakers from redirecting funds intended for health care to other purposes. Key supporters include the California Medical Association, Planned Parenthood Affiliates of California, the California Hospital Association, the California Primary Care Association, and the California Dental Association.

Opponents of Prop. 35 argue that the measure would reduce flexibility in how Medi-Cal dollars are allocated and overturn the commitments made in the 2024-25 budget to fund important services with MCO tax dollars, including continuous Medi-Cal coverage for young children and the rate increase for community health workers. Opposition groups include The Children’s Partnership, the California Pan-Ethnic Health Network, the California Alliance for Retired Americans, Courage California, and the League of Women Voters of California.

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key takeaway

Despite being eligible, many Californians lose vital Medi-Cal coverage due to complex paperwork and difficulty reaching county offices. Streamlining the renewal process and improving accessibility are crucial to ensure everyone keeps the health insurance they need.

Continuous access to health care is necessary for everyone to be healthy and thrive. Unfortunately, paperwork challenges often prevent people from obtaining and maintaining health coverage. A clear example of this: Too many individuals continue to be disenrolled from Medi-Cal, California’s Medicaid program, due to paperwork challenges.

Last year, California began processing Medi-Cal renewals for the first time since the start of the pandemic. As a result, over 1.4 million Californians have lost Medi-Cal coverage from June 2023 to February 2024. About 9 in 10 Californians (87.4%) who lost Medi-Cal coverage during this period did so because they did not complete the renewal paperwork or had incorrect or missing information in their forms.

Completing the renewal process often involves complex paperwork and documentation requirements, which can be difficult to navigate. Additionally, many Californians have experienced extended call wait times when attempting to contact county Medi-Cal workers regarding their application.

Certain groups, including older adults and people with disabilities, are at greater risk of losing Medi-Cal coverage during the unwinding period.1Jennifer Tolbert and Meghana Ammula, 10 Things to Know About the Unwinding of the Medicaid Continuous Enrollment Provision (Kaiser Family Foundation, June 2023). Immigrants and their family members face unique obstacles in remaining covered, such as language barriers, privacy concerns, and fear of immigration-related consequences. Many Californians who are losing Medi-Cal coverage due to paperwork challenges may still meet the eligibility criteria.2Of the redeterminations that were received and processed in February 2024, about 9% were ineligible. See California Department of Health Care Services, Medi-Cal Continuous Coverage Unwinding Dashboard (February 2024), 14.

The high disenrollment rate due to paperwork challenges underscores the need to further streamline the renewal process and alleviate the paperwork burden on beneficiaries during the unwinding period and beyond. Addressing these challenges is essential to ensure that those who are eligible for Medi-Cal continue to receive vital health coverage.

While state leaders have implemented measures to reduce barriers to accessing and maintaining Medi-Cal coverage, they can take additional steps to prevent Californians who remain eligible for Medi-Cal from losing coverage. These include:

By taking additional action, state leaders can reduce barriers and ensure that all Californians, regardless of race, age, disability, or immigration status, can access and maintain the critical health coverage they need to be healthy and thrive.

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key takeaway

California’s CalWORKs program, while crucial for low-income families with children, penalizes them financially for not meeting work requirements. This is counterproductive as sanctioned families often face the most barriers to employment.

The California Work Opportunity and Responsibility to Kids (CalWORKs) program is a critical component of California’s safety net for families with low incomes. The program helps over 650,000 children and their families, who are predominantly people of color, with modest cash grants, employment assistance, and critical supportive services. However, the program has a problematic history of prioritizing work over family well-being, exemplified by financial penalties against families and counties that don’t meet narrowly defined performance indicators.

For many families, receiving cash assistance is conditional on engaging in employment or other specified “welfare-to-work” activities intended to lead to employment, such as on-the-job training or unpaid work experience. Additionally, families must navigate through various other paperwork-related stipulations, which further exacerbate the barriers to accessing the much-needed aid. Families who do not comply with all the requirements set forth by the state can be subject to a financial sanction that reduces their monthly cash grant.

California’s sanction policy is harsher than what is required by the federal government. The punitive approach to this safety net cash assistance is counterproductive. Research shows that sanctioned recipients are often those who face the most barriers to employment, such as limited education, learning disabilities, limited work history, physical and mental health problems, and a history of domestic violence.1Rachel Kirzner, TANF Sanctions: Their Impact on Earnings, Employment, and Health (Center for Hunger-Free Communities, Drexel University, March 23, 2015). These participants are often not aware of the financial penalties or cannot fully navigate the overly burdensome processes due to limited resources and information.

As states across the country are learning that harsh sanctions do not directly lead to gainful employment and family stability, many have reduced the amount by which cash grants are cut, recognizing that pushing families deeper into poverty only further jeopardizes their well-being. California, which is often at the vanguard of providing cash and safety net support, is unfortunately trailing significantly behind.

How do CalWORKs sanctions impact California families?

CalWORKs families cannot afford to be sanctioned. These artificial barriers put families at risk of falling deeper into poverty. Briana, a Parent Voices California advocate, experienced this reality firsthand. As a mother of four living in Contra Costa County, Briana has been on and off of CalWORKs since the age of 17. Even though her CalWORKs case manager did not help her to utilize the full scope of CalWORKs services (i.e., child care, school tuition assistance), Briana received her certified nursing assistant certification (CNA) and achieved her goal of working in the medical field, which she did for several years. A CNA certification course at Contra Costa College is approximately $322 in fees and CNA students pay over $100 in books, costs that could have been covered by CalWORKs benefits and not paid through Briana’s cash aid.

Special thank you to Briana Burks and Parent Voices California for sharing their testimony from the March 20, 2024, Assembly Budget Subcommittee No. 2 on Human Services hearing, as highlighted in this section.

While experiencing postpartum depression following the births of her son and daughter, Briana went back on CalWORKs assistance to help make ends meet. During this time, Briana was sanctioned several times for reasons such as:

  • Not having an up-to-date immunization card;
  • Not having one of her children’s birth certificates on file; 
  • Not turning in a check stub (despite the stub already being in the CalWORKs system); 
  • As well as other reasons unknown to Briana.

These sanctions cost Briana hundreds of dollars, as highlighted in the preceding chart. With the $242 recouped from sanctions, every month, Briana could have paid for:

  • Six days of groceries for her family;
  • Three-quarters of her monthly utility bill;
  • 48 gallons of gas; or
  • Funds to support rent and car payments.

Briana’s sanctions coupled with remaining cash aid paying for her CNA certification exacerbated her financial insecurity. At the time that Briana shared her story at a March 2024 Assembly hearing, she was $300 short on her rent and car payment and had $0 left on her EBT card.

Briana’s story is just one example of how CalWORKs sanctions perpetuate the cycle of poverty and are rooted in a racist and sexist history popularized by figures like then California Governor Ronald Reagan that punished Black and other mothers of color, in particular. In the words of Briana: “Our future generations, our grandkids, somebody down the line is gonna need help. And I just want it to be easier for them. We need to defend these programs against cuts, get rid of these unnecessary sanctions, and reimagine CalWORKs into a program that opens those doors to help us get to where we want to go.”

How can policymakers ensure families in need have access to CalWORKs?

The governor’s commitment, outlined in his January budget proposal, to apply to a federal pilot aiming to center family well-being over work requirements offers California a great opportunity to reevaluate its sanction policy. Policymakers can make a significant difference in CalWORKs families’ lives, like Briana’s, by eliminating non-federally required sanctions and minimizing the amount sanctioned families lose each month. Additionally, policymakers should continue investing in CalWORKs and protect the program from harmful cuts. CalWORKs should center the well-being of families by removing barriers instead of amplifying them.

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The Supplemental Security Income/State Supplementary Payment (SSI/SSP) program is a critical lifeline that assists over 1 million low-income individuals with disabilities and adults age 65 or older in California by covering expenses such as housing, food, and other essential living costs.

The fiscal year 2021-22 state budget included a significant SSP grant increase of 24%, which became effective on January 1, 2022. This increase has helped to reduce the disparity between grant levels and the Federal Poverty Line (FPL). However, many participants in the program still struggle to afford basic necessities like rent.

Despite the recent increase, grant levels remain insufficient due to damaging budget cuts made by the state during the Great Recession. During this period, the state eliminated the Cost of Living Adjustment (COLA) for the SSP grant. Had the COLA been preserved, grant levels would have already exceeded the FPL. Restoring the COLA can ensure that grants keep up with rising costs especially given recent inflation trends.

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key takeaway

CalWORKs is a crucial safety net program supporting low-income families. However, proposed budget cuts prioritize short-term employment over long-term stability, potentially undermining the program’s effectiveness and contradicting the governor’s stated goals.

The California Work Opportunity and Responsibility to Kids (CalWORKs) program plays a crucial role in supporting children and families with low incomes. CalWORKs helps families with children struggling to meet their basic needs by providing them with modest monthly cash grants and important supportive services. Recent state reforms to CalWORKs have been designed to improve the program’s capacity to support parents in identifying goals, addressing barriers, and securing sustainable economic stability and family well-being.

However, the recent governor’s budget proposal shifts the program’s focus, aligning it more closely with the problematic roots of the federal program. The proposed cuts would narrow the program’s focus to basic cash aid by diminishing vital support services and case management. These cuts prioritize rapidly moving parents into paid employment over addressing the broader, longer-term barriers to work and the resources necessary for families to flourish. This contradicts and would likely undermine the governor’s commitment to pursue a new federal opportunity designed to strengthen the program by focusing on family stability and well-being.

What is the history of the CalWORKs program?

The Temporary Assistance for Needy Families (TANF), as CalWORKs is known federally, was enacted in 1996 as part of President Clinton’s welfare reform, aiming to grant states more autonomy in addressing poverty and assisting families. However, the program fell short of fulfilling its original intent due to the prevailing narrative that not all families were worthy of assistance. This included racist, sexist, and historical biases, such as the “welfare queen” stereotype popularized by figures like then California Governor Ronald Reagan. This narrative influenced the 1990s reform that ultimately cut assistance and imposed punitive “welfare to work” training and employment requirements on TANF participants. Since its inception, the federal program has focused on quickly pushing parents into paid employment over addressing longer-term barriers to work and resources needed to lead thriving lives.

In 1997, California mirrored these federal reforms with the establishment of the CalWORKs program, signed into law by Governor Pete Wilson. Echoing sentiments at the federal level, Wilson framed the program as a means to prompt welfare recipients to “escape from dependency” on assistance while stressing the strict time limits and work requirements. At the core of this is the idea of “self-responsibility” that minimizes the systemic barriers that affect program participants, including racist and sexist discrimination in workplaces and educational settings, as well as the generational trauma stemming from living in poverty.

What does the future of TANF look like?

On June 3, 2023, President Biden signed the Fiscal Responsibility Act (FRA) into law. This piece of legislation was significant to safety net policy because it was the first time Congress had made significant programmatic changes to the TANF program in nearly two decades and provided a window of opportunity to fundamentally change the short-sighted work-first approach to the TANF program. Among various provisions, the FRA includes a pilot program that would fund up to five states to test alternative performance indicators instead of the work participation rate (WPR). States selected to participate in the pilot program would be evaluated based on:

  • The percentage of work-eligible participants employed after exiting the program;
  • The level of earnings of these participants; and
  • Other indicators of family stability and well-being.

The goal of the pilot program is to move away from evaluating program success based on work participation, which has been the single target metric since the program’s inception. The WPR is a process measure that only accounts for whether the parent is able to document their required hours of participation in a narrow set of approved activities. There is little evidence to suggest that work participation as a metric is indicative of long-term employment and self-sufficiency. Rather, research suggests that stringent work requirements push people into jobs similar to the ones they lost, leading up to their TANF participation. This creates an ineffective cycle of moving people between low-wage unstable employment and TANF benefits. There is no clear link between work requirements and reductions in poverty.

Are California policymakers prioritizing a family-first approach to CalWORKs?

In his January 10th proposed budget, Governor Newsom indicated, in reference to the federal pilot program, that “California plans to pursue this opportunity to reform the accountability tools in the CalWORKs program to improve outcomes for families.” While California has made significant progress toward tracking CalWORKs outcomes in creative ways with the introduction of the CalWORKs Outcomes and Accountability Review (Cal-OAR) framework and adopted an evidence-based behavioral approach to guide families in setting goals (CalWORKs 2.0), it has yet to make significant programmatic changes to disrupt the reliance on work participation as a metric for success.

Rather than expanding on this framework, the governor proposed significant cuts to the CalWORKs program, impacting administrative funding as well as reducing intensive case management services and effectively eliminating two programs that make a concerted effort to address barriers to employment and provide support to families with the most complex needs. The two impacted programs are:

How does the governor’s proposal to cut select CalWORKs programs align with the future of TANF?

The irony of the governor’s proposed cuts to CalWORKs is that they impact programs that would directly align with the intent of the new federal pilot program (described above). The ESE program has been successful in helping participants obtain work experience and development in their journey to finding a permanent job. This could lead to better outcomes in terms of employment and earnings after exiting the program, which is directly linked to the pilot objectives.

The FS program provides families with intensive case management and timely access to crisis management services, which directly aligns with the family stability and well-being goals of the pilot program. These services include a range of housing, mental health, substance abuse, and other supports critical to prevent family instabilities such as homelessness and child welfare system involvement. Additionally, the FS program is essential to remove barriers to work that may prevent participants from obtaining and maintaining employment. Together, these services better support families in exiting the program with sustainable economic security.

The governor’s budget proposal to effectively eliminate these two components of the CalWORKs program is contradictory to his goal of pursuing the federal pilot program. Taking away essential family support is reminiscent of the 1990s discourse that policymakers should move beyond. Rather than taking a step backward, California should continue to lead the way in creating a more family-centered CalWORKs program by leaning into the elimination of barriers to employment so that families can feel fully supported and be able to thrive. This will help ensure the state not only has a successful pilot application, but can demonstrate to the nation progress in the real family outcomes and pathways out of poverty that the pilot will assess. 

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key takeaway

California voters will decide on March 5th, 2024, whether to pass Proposition 1, a two-part initiative aiming to improve access to behavioral health services. This includes funding for treatment facilities, housing support, and changes to the Mental Health Services Act.

Millions of Californians who cope with behavioral health conditions — mental illness or substance use disorders — rely on services and supports that are primarily provided by California’s 58 counties. Improving California’s behavioral health system is critical to ensure access to these services for all Californians, regardless of race, age, gender identity, sexual orientation, or county of residence.

In recent years, state policymakers have launched various initiatives to transform California’s behavioral health system with the goal of improving access for Californians. The most recent of these initiatives is Prop. 1. Last year, state policymakers passed, with strong support from Governor Gavin Newsom, Senate Bill 326 and Assembly Bill 531. Together, these bills placed Prop. 1 on the March 2024 ballot.

On March 5, 2024, California voters will vote on Prop. 1, a two-part measure that would 1) amend California’s Mental Health Services Act and 2) create a $6.38 billion general obligation bond. The bond would fund:

  • Behavioral health treatment and residential facilities,
  • Supportive housing for veterans and individuals at risk of or experiencing homelessness with behavioral health challenges.

This initiative presents beneficial aspects as well as potentially adverse consequences for Californians. This Q&A provides a high-level overview of Prop. 1, including how Californians with behavioral health conditions might be impacted by its passage as well as implications for the state budget.

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Key Terms

Why Does Prop. 1 Matter for Californians?

Prop. 1 would impact how many Californians access mental health services and substance use disorder treatment in their communities. It would restructure a key funding source for county behavioral health services in ways that would increase housing supports but might adversely impact counties’ ability to provide behavioral health services.

The Mental Health Services Act (MHSA), which Prop. 1 would amend, accounts for about one-third of funding for county behavioral health services. The MHSA is essential in supporting services for Californians across different ages, addressing a spectrum of mild to severe behavioral health conditions.

Prop. 1 would also authorize a statewide bond to create mental health and substance use treatment beds, and housing with supportive services for unhoused Californians with behavioral health challenges. Increased supportive housing and access to treatment facilities is crucial for Californians. Capital funds accessed through the bond portion of Prop. 1 will slightly impact the state’s ability to make budgetary decisions year-to-year. However, the capacity of the state to issue future voter-approved bonds will decrease because California has a limited ability to finance bond measures.

Changes to the MHSA will impact a system that currently supports all Californians with behavioral health conditions. In contrast, the bond focuses on individuals with behavioral conditions who are at risk of or experiencing homelessness, which is a smaller portion of the unhoused population.

As thousands of Californians across the state experience the devastating effects of homelessness and barriers to behavioral health care, policymakers are asking Californians to consider if redirecting MHSA funds and authorizing a new general obligation bond is the right approach to addressing the state’s behavioral health and homelessness crises.

What Problem Is Prop. 1 Trying to Address?

Prop. 1 aims to support Californians who are most affected by severe behavioral health conditions (mental illness and substance use disorders) and homelessness. This initiative is designed to create designated funding for mental health services and housing or treatment units for people with behavioral health conditions who are or at risk of experiencing homelessness.

In early 2023, over 181,000 Californians were counted as experiencing homelessness — the traumatic effects of which can seriously harm individuals’ well-being. Research suggests the trauma of experiencing homelessness can cause people to develop mental health problems and worsen existing behavioral health challenges and coping behaviors like substance use.

There are data challenges in quantifying exactly how many unhoused Californians have a mental health condition or substance use disorder. The 2023 homelessness point-in-time count showed 25% of the 181,399 people experiencing homelessness in California had a severe mental illness and 24% had a substance use disorder. However, while there is likely overlap between these individuals, the full extent is not reported.

Access to mental health care and substance use disorder treatment can be challenging for Californians who are unhoused. A recent statewide study found that nearly 4 in 5 unhoused Californians surveyed reported experiencing a serious mental health condition at some point in life, and those with current mental health conditions reported limited access to treatment. Additionally, 1 in 5 unhoused Californians who reported regular substance use and wanted treatment were not able to receive it.

These challenges are compounded by California’s shortage of adult psychiatric and community residential beds, which prevents Californians with serious behavioral health conditions from accessing critical behavioral health services.

What Is the Mental Health Services Act?

In 2004, California voters approved the Mental Health Services Act (Prop. 63), which created a 1% surtax on personal incomes above $1 million to provide increased funding for mental health services. Its passage signified a commitment to improving mental health outcomes for Californians, with a focus on prevention, early intervention, and community-based care. This tax supports about one-third of the state’s public mental health system.

The Mental Health Services Act has five main goals:

How Are Mental Health Services Act Funds Used Today?

The majority of MHSA funding (95%) goes directly to counties, which have some flexibility in how to use these funds.

Under current law, a small percentage of MHSA dollars (5%) is reserved for state-level administration.

How Would Prop. 1 Change Mental Health Services Act Spending?

Prop. 1 proposes significant revisions to the Mental Health Services Act (MHSA). These include:

  • Changing its name to the Behavioral Health Services Act (BHSA),
  • Expanding its scope to encompass treatment for substance use disorders.

Additionally, it would modify how MHSA funds are allocated, and introduce changes related to oversight, accountability, and the community planning process. This overview will focus on outlining the new funding structure under Prop. 1.

Under Prop. 1, counties would continue to receive the bulk of BHSA funds (90%). However, the allocation across different spending categories would change, without an increase in revenues. Counties would allocate their BHSA funds as follows:

Prop. 1 could provide some exemptions for counties with a population of less than 200,000. In addition, during the first two years of implementation, counties might have the flexibility to transfer up to 14% of their funding between these categories, with a limit of 7% per category. However, this flexibility is still pending state approval and has not been confirmed.

Another notable change is that Prop. 1 would shift a small percentage of dollars from counties to the state (from about 5% of total MHSA funding to about 10%). This would result in about $140 million annually redirected to the state budget. However, this amount could be higher or lower depending on the total amount of revenue collected from the tax.

Prop. 1 would also revise the allocation of state-level funds:

  • At least 3% to the Department of Health Care Access and Information to implement a statewide behavioral health workforce initiative.
  • At least 4% to the California Department of Public Health for population-based mental health and substance use disorder prevention programs. A minimum of 51% of these funds must be used for programs serving Californians who are 25 years or younger.

It’s worth noting that Prop. 1 would not change the tax on people with incomes over $1 million per year. This means counties would be expected to expand their scope of services without an increase in revenue. In fact, county leaders have repeatedly raised concerns about the disruption that Prop. 1 could cause. Specifically, the MHSA restructuring could result in significantly less funding for core services, which could lead to counties:

  • Canceling contracts with community-based organizations. 
  • Closing programs that are currently serving Californians.
  • Reducing county staffing.

If passed, the exact impact of Prop. 1 will vary by county and depend on how much revenue is collected in any given year. It’s important to keep in mind that the MHSA funds services for Californians of all ages for a range of conditions — mild to moderate to severe. The restructuring of MHSA funding would target a subset of this population. Therefore, programs and services for prevention and early intervention in some counties, for instance, could experience disruptions due to the new prioritization of funding.

What Can We Expect from the Behavioral Health Infrastructure Bond?

The Behavioral Health Infrastructure Bond would create a $6.38 billion general obligation bond for:

  • Infrastructure development of treatment and residential care facilities,
  • Supportive housing units for veterans and other Californians with serious mental health conditions and substance use disorders.

These funds are estimated to create up to 4,350 housing units, with 2,350 set aside for veterans, and 6,800 mental health and substance use treatment places for an approximate total of 11,150 new behavioral health and supportive housing units statewide. An estimated 26,700 outpatient treatment slots will also be created that may serve thousands of Californians annually.

Projects funded by the Behavioral Health Infrastructure Bond will be eligible for local streamlined review processes if they meet select criteria. The bond funds will be allocated as follows:

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What Would the Infrastructure Bond Mean for the State Budget?

Under Prop. 1, the state would issue up to $6.38 billion in general obligation (GO) bonds, with the funds going toward:

  • Grants or loans for vital treatment and residential care facilities,
  • Supportive housing units.

California voters have a record of funding large infrastructure projects through bonds as it does allow the state to access impactful funding amounts that are designed to serve public interests at large over many years.

In issuing bonds, the state must repay the bond debt service (which is the principal bond amount plus interest) through General Fund dollars. The most recent cost estimate assumes a 30-year debt service resulting in projected payments of roughly $310 million per year. Under this estimate, it would cost the state approximately $9.3 billion to repay the total bond debt, not including the cost of inflation. California currently spends roughly 2.5% of the state budget on repaying various bond obligations voters have decided on in the past.

While there are ways to equitably reform the state budget’s revenue streams, policymakers must balance the yearly limited discretionary flexible dollars in the General Fund. GO bonds in essence prioritize increased debt-service payments to be drawn from the General Fund over potential ongoing or one-time funding. Repaying the bond portion of Prop. 1 is a trade-off that will slightly reduce the flexible dollars left for other vital public services that may already serve Californians with behavioral health conditions and those at risk of or experiencing homelessness. It also challenges the state’s capacity to fund future voter-approved bonds since California has limitations on financing bond measures.

Another consideration is the ongoing operating costs that will be needed to adequately sustain the facilities produced through Prop. 1. As explained above, the MHSA restructuring does designate 30% to housing interventions which includes rental and operating subsidies. The funds can presumably help sustain facilities that are projected to be secured through the bond funding. However, it is uncertain whether these funds and those from other sources will be sufficient and accessed efficiently to ensure adequate upkeep, staffing, and proper care for the Californians receiving housing and services through these projects.

The infrastructure projects funded under the bond would build on existing state programs that received one-time funding through previous budget allocations or voter-approved bonds which are close to being depleted.

How Might Californians Be Impacted by Prop. 1?

The proposal presents various promising aspects. First of all, the expansion of services to substance use disorder treatment is positive. This broadened scope recognizes that mental health challenges and substance use disorders sometimes occur together. In fact, more than 1 in 4 adults living with a serious mental illness also have a substance use disorder. This underscores the importance of providing treatment for both conditions.

Another positive aspect of this proposal is the prioritization of treatment facilities and supportive housing infrastructure for Californians at risk of or experiencing homelessness with behavioral health conditions. Due to racism, ableism, and other forms of discrimination, some Californians are more likely to experience the devastating effects of homelessness at some point in their lifetime. This disparity is particularly stark for Black, Indigenous and Pacific Islander Californians, adults without children, older adults, and transgender and other LGBTQ+ individuals.

Notably, the new investments and prioritization of funds under Prop. 1 target a small but important share of the unhoused population. The majority of unhoused Californians face short-term homelessness (61%), for which deeply affordable permanent housing is needed. For those who are chronically homeless (39%) and may have behavioral health challenges, the increased supportive housing units are crucial if they are appropriately sustained with wraparound supportive services.

One concern about Prop. 1 is the restructuring of funding under the Mental Health Services Act (MHSA). While the exact consequences of this change are not entirely clear for each county, it could have adverse effects. The MHSA has been instrumental in providing innovative, community-based services for historically underserved communities, including people of color and LGBTQ+ communities. Given that county leaders have expressed that this initiative could result in less funding for core services, Prop. 1 could negatively impact services for Californians of color and LGBTQ+ communities that are currently supported by MHSA funding.

A key flaw of this initiative is that it expands the scope of the MHSA and prioritizes funding for people who are or at risk of experiencing homelessness without increasing the tax or providing new revenue to support existing county behavioral health programs. This approach is concerning, as it redirects funds originally allocated for a specific purpose to address a different need.

What Are Supporters and Opponents Saying?

supporters

Supporters claim that Prop. 1 would prioritize existing funds and generate new funds for Californians with the most severe behavioral health needs and those living in encampments. Other supporters assert that the proposition is a beneficial component in advancing the variety of interventions needed to address California’s housing and homelessness challenges. Supporters of Prop. 1 include California Big City Mayors as well as some behavioral health and housing advocates.

opponents

Opponents, including disability rights advocates and peer support advocates, argue that Prop. 1 represents a significant regression in the treatment of mental illness and substance use disorders, likening its impact to a 50-year setback. This perspective stems from allowing funding to be used for involuntary or forced treatment facilities. Opponents also claim that Prop. 1 could result in reduced mental health services for Black, Indigenous, and other people of color and LGBTQ+ Californians.

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