DraftCalifornia Department of Health Care ServicesPolicy N/A

Behavioral Health Services Act fund allocations and governance

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Proposed amendments to Welfare and Institutions Code Section 5892 and new Section 5892.2 governing allocation, reserves, exemptions, planning, prioritized populations, and minimum expenditure methodology for Behavioral Health Services Fund distributions to California counties.

Policy Summary

PayerCalifornia Department of Health Care Services

PolicyBehavioral Health Services Act fund allocations and governance

Policy CodePolicy N/A

Change TypeAdded allocation, reserve, planning, reporting, and enforcement rules

Effective DateJul 1, 2028

Next Review DateN/A

Key ActionCounties must submit integrated plans and annual updates with specified budgets, workforce strategies, and outcome alignments and certify them for departmental posting.

SourceLink

POLICY UPDATE CHANGES

Specific percentage allocation requirements for counties: 30% for housing interventions, 35% for full-service partnerships, and 35% for other behavioral health services and supports.

Prudent reserve rules and maximum reserve caps (general cap 20%; <200,000 population cap 25%; temporary 2027-28 caps of 10% and 15%).

New county flexibility and exemption processes allowing State DHCS to approve exemptions from allocation requirements, with required 30-day decision timelines and collaboration with county associations.

Establishment of minimum expenditure methodology and multi-year minimum expenditure levels computed annually by DHCS (new Section 5892.2).

Prioritization of specific populations (chronically homeless, justice-involved, reentry, at risk of conservatorship/institutionalization; children/youth in juvenile justice or child welfare).

State-level set-asides and permissible uses prior to county allocations, including workforce initiative (minimum 3%), population-based prevention (minimum 4%), innovation fund cap ($20M annually for 2026-27 to 2030-31), and planning/operational caps (5% and up to 2%/4%).

Expanded and specified integrated plan and annual update content requirements, including budgets, alignment with statewide and local goals, workforce strategy, equity and access provisions, and multiple program categories to be included.

New reporting and metrics obligations: county annual County Behavioral Health Outcomes, Accountability, and Transparency Report with specified data elements and workforce metrics; department to establish metrics.

Enforcement authorities for the department including corrective action plans, monetary sanctions, and temporary withholding of payments for noncompliance, with sanctions deposited to a new Behavioral Health Services Act Accountability Fund.

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DraftCalifornia Department of Health Care ServicesPolicy N/A

Behavioral Health Services Act fund allocations and governance

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Sign up for all California Department of Health Care Services policy alerts

Know when California Department of Health Care Services releases new policies or updates existing guidance.

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Policy Summary

PayerCalifornia Department of Health Care Services

PolicyBehavioral Health Services Act fund allocations and governance

Policy CodePolicy N/A

Change TypeAdded allocation, reserve, planning, reporting, and enforcement rules

Effective DateJul 1, 2028

Next Review DateN/A

Key ActionCounties must submit integrated plans and annual updates with specified budgets, workforce strategies, and outcome alignments and certify them for departmental posting.

SourceLink

POLICY UPDATE CHANGES

Specific percentage allocation requirements for counties: 30% for housing interventions, 35% for full-service partnerships, and 35% for other behavioral health services and supports.

Prudent reserve rules and maximum reserve caps (general cap 20%; <200,000 population cap 25%; temporary 2027-28 caps of 10% and 15%).

Establishment of minimum expenditure methodology and multi-year minimum expenditure levels computed annually by DHCS (new Section 5892.2).

Prioritization of specific populations (chronically homeless, justice-involved, reentry, at risk of conservatorship/institutionalization; children/youth in juvenile justice or child welfare).

30%housing allocation

35%full-service partnerships

35%other behavioral health

20% / 25%prudent reserve cap

10%revision threshold

Jul 1, 2028operative date (5892.2)

Allocation, Planning, and Expenditure Criteria

County allocation and spending criteria

County allocation requirements for Behavioral Health Services Fund distributions. Counties must use distributed funds in the following proportions and follow reserve, transfer, and prioritization rules.

ALL of the following

ALL of the following
- Thirty percent of funds distributed to counties must be used for housing interventions programs pursuant to Part 3.2 (commencing with Section 5830).30% of county distribution
  Counties subject to exemption process described below
- Of the housing interventions allocation, 50% must be used for housing interventions for persons who are chronically homeless, with a focus on those in encampments.50% of housing allocation
- No more than 25% of the housing interventions allocation may be used for capital development projects pursuant to paragraph (2) of subdivision (b) of Section 5830.<=25% of housing allocation for capital development
ALL of the following
- Thirty-five percent of funds distributed to counties must be used for full-service partnership programs pursuant to Part 4.1 (commencing with Section 5887).35% of county distribution
- Housing interventions provided to individuals enrolled in full-service partnership programs shall be funded from the housing interventions allocation (the 30% allocation).
  Ensures housing costs for FSP enrollees come from housing allocation
ALL of the following
- Thirty-five percent of funds distributed to counties must be used for other Behavioral Health Services and Supports, including children's system of care services (Part 4), adult and older adult system of care services (Part 3), early intervention programs (Part 3.6), outreach and engagement, workforce education and training, capital facilities and technological needs, and innovative behavioral health pilots and projects.35% of county distribution
- At least 51% of this 'Behavioral Health Services and Supports' funding must be utilized for early intervention programs.>=51% of other services allocation to early intervention
- At least 51% of the early intervention funds must serve individuals 25 years of age and younger.>=51% of early intervention funds to <=25-year-olds
ALL of the following
- Programs funded under these allocations must prioritize specified populations including persons who are chronically homeless, justice-involved individuals, those reentering from incarceration or youth facilities, people at risk of conservatorship or institutionalization, and children and youth involved in juvenile justice or child welfare.

ALL of the following

Counties may maintain a local prudent reserve into which they may deposit Behavioral Health Services Fund revenues; the general maximum average prudent reserve cap is 20%.max 20% average prudent reserve
For counties with population less than 200,000, the maximum average prudent reserve cap is 25%.max 25% for <200,000 population
Temporary prudent reserve caps for 2027-28 may be set at 10% (general) and 15% for counties <200,000, per the statutory temporary provisions.10% / 15% temporary caps (2027-28)
Unspent funds revert on a schedule: general reversion after 3 years (longer 10-year reversion for capital, technology, and training investments); counties with population under 200,000 revert after 5 years. The Controller may offset monthly distributions to recover reverted funds and DHCS may withhold distributions per audit or monitoring findings.

ALL of the following

Counties may request transfers or shifts of funding between the defined purposes, subject to limits (up to a 14% shift between purposes overall and not decreasing any single purpose by more than 7%).
State approval required; see approval and exemption process
Requests to shift funding allocations require submission in the form and manner prescribed; the Department must respond (approve or deny) within 30 days of receipt or the request is deemed approved.
Operational submission and 30-day statutory response timeline

ALL of the following

The Department of Health Care Services will compute and publish county-specific minimum expenditure levels covering three fiscal years; counties must spend at or above the calculated minimum expenditure level commencing with fiscal year 2029-30.three-year minimums; binding from 2029-30
DHCS shall publish revised minimum expenditure levels if the revised level is lower by 10 percent or more compared to a previously published level; counties must meet revised levels when published.publish revision if >=10% lower
The minimum expenditure methodology and publication schedule are operative July 1, 2028.
Operative date for Section 5892.2

ALL of the following

State may set aside funds prior to county allocation for workforce initiatives (minimum 3%) and population-based prevention (minimum 4%), and may deposit up to $20,000,000 annually into an Innovation Partnership Fund for 2026-27 through 2030-31, subject to appropriations and consultation.

ALL of the following

Commencing with the 2026-29 county integrated plan cycle, counties with population less than 200,000 may request an exemption from the housing allocation requirement; DHCS shall establish criteria and a process and shall collaborate with county associations to ensure reasonable criteria and a timely process. Requests must be approved or denied within 30 days or are deemed approved.
May expand statewide for 2032-35 cycle per statutory language

Integrated Plan, Budgeting, Reporting, and Expenditure Requirements

Required integrated plan, annual update, budgeting, workforce and reporting requirements for counties receiving Behavioral Health Services Fund distributions.

ALL of the following

Each county shall prepare and submit an integrated plan and annual updates to the Behavioral Health Services Oversight and Accountability Commission and the Department; the county board of supervisors shall approve the plan and updates by June 30 prior to the fiscal year(s) covered.
The integrated plan and updates must be submitted in the form and manner prescribed by the Department and the Department will post plans online.

ALL of the following

Describe programs and services funded by federal, state, and local sources, including community mental health services, Behavioral Health Services Fund–funded programs, Substance Abuse Block Grant programs, Projects for Assistance in Transition from Homelessness, opioid settlement distributions, and other federal or county programs.

County and Provider Submission, Exemptions, and Enforcement Actions

Prior Authorization

County funding shift approval process — submit request to DHCS in prescribed form and timeline

After completing the required integrated planning and local stakeholder consultation (Sections 5963.02 and 5963.03), counties must submit any request to shift Behavioral Health Services Fund allocation percentages to the State Department of Health Care Services in the form, manner, and timelines prescribed by DHCS. Counties must provide any additional information, records, or reports DHCS deems necessary; DHCS will review requests based on compliance with allocation requirements and demonstration that the shift is responsive to local priorities. DHCS must respond, approving or denying the request within 30 days of receipt, or the request is deemed approved.

Submit request after fulfilling integrated plan and local stakeholder consultation requirements (Sections 5963.02 and 5963.03).
Submit in form, manner, and timelines prescribed by DHCS and provide any information DHCS deems necessary.
DHCS will review for compliance with allocation paragraphs and responsiveness to local priorities using local data and community input.
DHCS must approve or deny within 30 days of receipt or the request is deemed approved.

Prior Authorization

Publication Thresholds and Minimum Expenditure Notices

inv-03: Minimum expenditure publication threshold

Policy triggerDHCS will publish a revised minimum expenditure level when the revised level is lower than the prior minimum by 10% or more.

Publication timingDHCS calculates minimum expenditure levels by November 1 each year for the following three fiscal years and publishes revisions when triggered.

ApplicationRevised minimum expenditure publication applies to the revised minimum calculated upon updated Behavioral Health Services Fund local assistance revenue projections from the Department of Finance.

inv-04: Revised minimum expenditure publication threshold

Revision thresholdA revised minimum expenditure level is published if it is 10% or more lower than the prior minimum expenditure level.

Budget update requirement

Key Definitions

inv-08: Behavioral health services

Definition'Behavioral health services' means mental health services and substance use disorder treatment services, as defined in Section 5891.5.

ScopeIncludes activities such as outreach and engagement and may incorporate evidence-based and community-defined evidence practices.

Source provisionTerm defined for purposes of county allocations and program requirements under this act.

inv-09: Chronically homeless

Definition'Chronically homeless' means an individual or family that is chronically homeless as defined in 42 U.S.C. §11360, or as otherwise modified or expanded by DHCS.

DHCS modificationDHCS may modify or expand the federal definition for purposes of program implementation.

Policy Summary

PayerCalifornia Department of Health Care Services

PolicyBehavioral Health Services Act fund allocations and governance

Policy CodePolicy N/A

Change TypeAdded allocation, reserve, planning, reporting, and enforcement rules

Effective DateJul 1, 2028

Next Review DateN/A

Key ActionCounties must submit integrated plans and annual updates with specified budgets, workforce strategies, and outcome alignments and certify them for departmental posting.

SourceLink

On This Page

Include a budget that shows county planned expenditures and reserves for Behavioral Health Services Fund distributions and other funds that support the listed programs, including proposed adjustments required by statute.

Provide a description of how the integrated plan aligns with statewide behavioral health goals and outcome measures (including disparity‑reduction goals) and with local goals and outcome measures for behavioral health.

Describe how the county will address unique needs of specific populations (LGBTQ+ youth, justice‑involved youth, child welfare‑involved youth, justice‑involved adults, older adults) in housing intervention and Full Service Partnership programs.

ALL of the following

Include a workforce strategy describing actions to ensure county and contracted behavioral health workforce is well‑supported, culturally and linguistically concordant, and sufficient to achieve statewide and local goals.
Describe plans to maintain and monitor a network of high‑quality, culturally and linguistically concordant county and noncounty contracted providers sufficient to provide adequate access to services and supports.
Describe measures to meet federal and state standards for timely access to care, ensure health and welfare of individuals, promote community integration, and provide accommodations and accessible equipment for individuals with disabilities.

ALL of the following

County behavioral health director and county chief administrative officer must provide certifications regarding legal compliance and fiscal accountability for the integrated plan and updates.
Board of supervisors must attest to report completeness and accuracy before submission; the Department will post a statewide report annually.

ALL of the following

Annually submit a County Behavioral Health Outcomes, Accountability, and Transparency Report containing specified data elements including allocations, expenditures, unspent funds, nonfederal share, administrative costs, contracted services, services to non‑Medi‑Cal persons, and workforce vacancy and other workforce metrics as specified by the Department.
The Department will establish additional metrics and require the specified reporting elements; failure to submit or meet reporting requirements may trigger enforcement actions.

ALL of the following

The Department may require plan revisions, impose corrective action plans, assess monetary sanctions, temporarily withhold payments from the Behavioral Health Services Fund, and require other remedial actions for noncompliance including missing required data, failing to allocate or expend funds according to requirements, or failing to meet required metrics.
Monetary sanctions must be deposited to the Behavioral Health Services Act Accountability Fund and withheld funds will be returned to counties upon compliance.

ALL of the following

The Department may implement or interpret these provisions via plans, county letters, information notices, plan or provider bulletins, or similar instructions without further regulatory action.

ALL of the following

DHCS will compute and publish minimum expenditure levels by county covering three fiscal years; counties must spend at or above the calculated minimum expenditure level commencing with fiscal year 2029-30, subject to limited prudent reserve use under specified conditions.
DHCS will publish revised minimum expenditure levels if a revised level is lower by 10% or more than a previously published level; counties must meet published revised levels when issued.

Exemption request process — DHCS-established process with 30‑day decision timeline

DHCS may establish an exemption approval process allowing counties to request exemptions from the housing allocation requirement; initially this process applies to counties with population under 200,000 and may be expanded statewide beginning with the 2032–35 integrated plan. DHCS will collaborate with county associations on reasonable criteria and must approve or deny exemption requests within 30 days of receipt (otherwise they are deemed approved).

Exemption process established commencing with 2026–29 integrated plan for counties <200,000 population.
DHCS will collaborate with the California State Association of Counties and the County Behavioral Health Directors Association on criteria and an efficient exemption process.
Commencing with 2032–35 integrated plan, DHCS may apply the exemption process regardless of county population size.
Requests must be responded to, approved, or denied within 30 days of receipt or are deemed approved.

Denial Risk

Enforcement and remedial actions — corrective plans, sanctions, and withholding of payments

If DHCS determines a county or Medi‑Cal behavioral health delivery system fails to meet required submissions, allocations, expenditure requirements, planning processes, or established metrics, the department may impose corrective action plans, monetary sanctions, temporarily withhold payments from the Behavioral Health Services Fund, and require plan revisions. Monetary sanctions are deposited into the newly created Behavioral Health Services Act Accountability Fund and withheld funds will be released when DHCS determines the entity has come into compliance.

DHCS may impose corrective action plans, monetary sanctions, or temporarily withhold payments pursuant to Section 14197.7 for failures such as missing required data, not allocating or expending funds per requirements, or not following required processes.
Temporarily withheld payments shall be withheld from the Behavioral Health Services Fund and DHCS may withhold amounts necessary to secure compliance; withheld funds will be released upon DHCS determination of compliance.
Monetary sanctions collected are deposited in the Behavioral Health Services Act Accountability Fund and may be allocated and distributed back to the county that paid the sanction once the county comes into compliance.

Counties must update the budget in their integrated plan or annual update for any fiscal year when the minimum expenditure level is higher or lower than the prior year's level by 10% or more.

Triggering dataRevised minimums are calculated upon receipt of an updated Behavioral Health Services Fund local assistance revenue projection from the Department of Finance.

RelevanceUsed to determine priority populations and to apply allocation sublimits (e.g., housing interventions prioritization).

inv-10: Community-defined evidence practices

Definition'Community -defined evidence practices' means culturally anchored interventions reflecting community values, practices, histories, and lived experiences.

ValidationThese practices come from the community and organizations that serve them and are found to yield positive results as determined by community consensus over time.

Role in service deliveryCounties may include community-defined evidence practices alongside evidence-based practices in outreach, engagement, and service provision.

inv-11: Eligible children and youth

Age rangePersons 25 years of age or under (includes early childhood and transition-age youth).

Eligibility criteriaMust meet criteria specified in subdivision (d) of Section 14184.402 (notwithstanding age limits) or have a substance use disorder as defined in subdivision (c) of Section 5891.5.

Medi-Cal enrollmentEligible children and youth are not required to be enrolled in the Medi-Cal program.

inv-12: Eligible adults and older adults

Age rangePersons 26 years of age or older (adults and older adults).

Eligibility criteriaMust meet criteria specified in subdivision (c) of Section 14184.402 or have a substance use disorder as defined in subdivision (c) of Section 5891.5.

Medi-Cal enrollmentEligible adults and older adults are not required to be enrolled in the Medi-Cal program.

inv-13: community-defined evidence practices

Definition restatedCommunity‑defined evidence practices are culturally anchored interventions that reflect community values and are validated by community consensus over time.

OriginThese practices originate from the community and organizations that serve them.

Use caseRecognized as an alternative or complement to evidence-based practices in county programs.

inv-14: eligible children and youth

Alternate entry (children/youth)'Eligible children and youth' — persons 25 years of age or under, including early childhood or transition-age youth who meet specified criteria or have a substance use disorder.

Statutory cross-referenceReferences criteria in subdivision (d) of Section 14184.402 and subdivision (c) of Section 5891.5 for substance use disorder definitions.

Enrollment noteNot required to be enrolled in Medi‑Cal to be eligible.

inv-15: eligible adults and older adults

Alternate entry (adults)'Eligible adults and older adults' — persons 26 years of age or older who meet specified criteria or have a substance use disorder.

Statutory cross-referenceReferences subdivision (c) of Section 14184.402 and subdivision (c) of Section 5891.5 for definitional criteria.

Enrollment noteNot required to be enrolled in Medi‑Cal to be eligible.