This morning, California Director of Finance Joe Stephenshaw announced the details of Governor Gavin Newsom’s 2026-27 state budget proposal. Below are key highlights. The Governor’s proposed budget ended up being relatively status quo due to a significant infusion of unanticipated revenue over the past several months. Thus, for now, just a few items of note.
MCO Tax Behavioral Health—The Budget reflects $65 million in 2025-26 and $95.5 million in 2026-27 MCO Tax revenue for qualifying community-based mobile crisis services, transitional rent, and behavioral health rates from the calendar year 2025 behavioral health facility throughputs domain allocation.
Behavioral Health Funding—A placeholder of $150 million Behavioral Health Services Fund in lieu of General Fund for workforce and prevention programming at the Department of Health Care Access and Information and the California Department of Public Health with the specific proposal to be updated at the May Revision.
Integrated Substance Use Disorder Treatment Program (ISUDT)—The ISUDT Program was implemented in 2019 to combat alcohol and opioid addiction-related issues within state prisons. This program includes the use of medication-assisted treatment for incarcerated individuals with opioid and alcohol use disorders, cognitive behavioral treatment curriculum, development and management of patient treatment plans, as well as substance use disorder-specific pre-release transition planning. The Budget includes $285.3 million ongoing General Fund to maintain this program.
Telemental Health—Since 2019, the Administration has greatly expanded the Telemental Health Program, which includes psychiatry, psychology, and social work disciplines. The use of telehealth services has proven successful in enhancing CDCR’s ability to effectively and efficiently deliver medical and mental health care services to patients, while also supporting staff recruitment and retention for clinical positions that have historically been hard to fill. The Budget includes an augmentation of $8.9 million General Fund and 69 positions in 2026-27, and $13.5 million and 119 positions in 2027-28 and ongoing, to support expanded use of telemental health services, bringing the total ongoing Mental Health operations budget to $126.1 million General Fund.