California SB 326: The Behavioral Health Services Act

California SB 326 is the 2023 state law that rewrote California’s Mental Health Services Act, renaming it the Behavioral Health Services Act, adding substance use disorders to what counties must treat, requiring 30% of behavioral health funds to be spent on housing, and pairing the overhaul with a $6.38 billion construction bond. Voters approved it as Proposition 1 in March 2024, and counties must be operating under the new framework by July 1, 2026.¹

What Changed From the Old Mental Health Services Act

The 2004 Mental Health Services Act, passed by voters as Proposition 63, put a 1% income tax surcharge on personal income above $1 million. That surcharge still generates roughly $2 to $3 billion a year for county behavioral health programs, and SB 326 leaves the tax itself untouched. What it changes is where the money goes.

The old law split funding into categories like community services, workforce education, and “innovative programs,” and it covered only mental illness. SB 326 eliminates the innovative programs category, replaces the old spending buckets with a new three-way split, and expands the law’s scope to include substance use disorders alongside mental health conditions.¹

Why It Needed a Vote

Because Proposition 63 was itself a ballot measure, the legislature could not amend it without going back to voters. SB 326 was placed on the March 5, 2024 primary ballot as Proposition 1 and passed by one of the thinnest margins in California ballot measure history: 50.18% to 49.82%. Opposition focused on concerns that the housing mandate would pull money away from existing mental health programs and that the state was taking over decisions counties had previously controlled. The narrow margin still gave the state a mandate to move ahead, and the Department of Health Care Services began issuing implementation guidance in 2025.

How Counties Must Now Spend Behavioral Health Money

The Behavioral Health Services Act splits each county’s allocation from the Behavioral Health Services Fund into three fixed shares:

Behavioral Health Services and Supports gets 35%, covering early intervention and ongoing community-based services. Within this share, 51% must go to early intervention, and 51% of the early intervention money must serve people age 25 and younger.
Full Service Partnerships get 35%, funding intensive wraparound programs for the most seriously affected individuals, including people with co-occurring mental health and substance use conditions.
Housing Interventions get 30%, a new mandatory category for housing people who are homeless, chronically homeless, or at risk of homelessness.²

Counties may also use up to 5% of their annual Behavioral Health Services Fund revenue for planning.³

The 30% Housing Mandate

Under the old law, housing was one allowed use of funds but never required. SB 326 makes housing a permanent line item. Every county receiving Behavioral Health Services Act money must run a housing intervention program serving people who are chronically homeless, currently homeless, or at risk of homelessness and who also have a mental health condition, a substance use disorder, or are children or youth in the behavioral health system.⁴

The law also dictates how the housing dollars split internally. At least 50% must go to people who are chronically homeless, with a focus on those living in encampments. Up to 25% may go toward capital projects such as building or rehabilitating housing units.²

Eligible interventions include rental subsidies, operating subsidies, shared housing, family housing for children, transitional rent, and other supports defined by the Department of Health Care Services. These programs are not restricted to people enrolled in Full Service Partnerships or Medi-Cal, so the housing funds can reach a broader group than most existing behavioral health services.⁴

Substance Use Treatment and Early Psychosis Programs

Expanding the law to cover substance use disorders is a structural change, not a footnote. County Full Service Partnership programs must include substance use treatment where appropriate, and Full Service Partnership teams must be able to provide integrated care for people with co-occurring conditions.²

SB 326 also creates a new early psychosis requirement. Starting July 2026, every county must operate a Coordinated Specialty Care for First Episode Psychosis program. Counties must participate in ongoing training and technical assistance, identify gaps in program fidelity by December 31, 2027, and demonstrate full fidelity to the model by June 30, 2029.²

The $6.38 Billion Bond

Proposition 1 also authorized $6.38 billion in general obligation bonds through a companion measure, AB 531, to build behavioral health infrastructure. Of that total, $4.4 billion is for treatment facilities, residential care settings, and other behavioral health construction. The remaining $2 billion funds housing for people experiencing homelessness, including $1 billion set aside specifically for veterans’ housing.⁵⁶

The administration committed to awarding all bond funding by 2026. As of early 2026, the bond has funded 177 projects expected to produce roughly 6,900 residential treatment beds and more than 27,500 outpatient treatment slots. Some projects have already faced delays and cancellations.⁶

Who Counties Must Prioritize

The law names specific priority populations for service design. Among children and youth, counties must prioritize those who are in or at risk of entering the juvenile justice system, reentering the community from a youth correctional facility, in the child welfare system, or at risk of institutionalization.

Among adults and older adults, the priority groups are people in or at risk of entering the justice system, people reentering the community from prison or jail, people at risk of conservatorship, and people at risk of institutionalization. The law directs the most intensive resources toward people whose behavioral health needs overlap with homelessness, incarceration, or involuntary commitment.²

County Deadlines and the Integrated Plan

SB 326 replaces the old county planning process with a new Integrated Plan. Each county must produce a three-year prospective spending plan covering all Behavioral Health Services Act categories. The first Integrated Plan covers fiscal years 2026 through 2029, is due by June 30, 2026, and the new framework takes effect July 1, 2026.

The planning process has its own rules, which took effect January 1, 2025. Counties must run an open community planning process, partner meaningfully with constituents on program planning, workforce, quality improvement, and budget allocations, and coordinate with local health jurisdictions and managed care plans. Each draft Integrated Plan must be circulated for at least 30 days of public comment, followed by a public hearing conducted by the local behavioral health board. The county Board of Supervisors must approve the final plan before it goes to the state.³

If you serve on a local behavioral health board, work in county behavioral health, or receive services previously funded by the Mental Health Services Act, the public comment window on your county’s draft Integrated Plan is the main formal opportunity to weigh in before the three-year cycle locks in.

Oversight and Reporting

The law renames the Mental Health Services Oversight and Accountability Commission to the Behavioral Health Services Oversight and Accountability Commission and expands it from 16 to 27 voting members. The commission keeps its core role of adopting regulations for programs funded under the act and overseeing how behavioral health money is spent.¹⁷

The State Auditor will release an implementation report by December 31, 2029, with follow-up reports every three years after that. Counties also owe annual reports to their local Board of Supervisors and to the Department of Health Care Services, including written responses to any substantive recommendations from the local behavioral health board that they did not adopt.³

1
California Legislative Information. SB-326 The Behavioral Health Services Act
2
California Department of Health Care Services. BHSA Components and Requirements
3
California Department of Health Care Services. County Integrated Plan
4
California Assembly Housing and Community Development Committee. SB 326 Committee Analysis
5
Governor of California. Governor Newsom Puts Historic Mental Health Transformation on March 2024 Ballot
6
Legislative Analyst’s Office. Building California’s Behavioral Health Infrastructure: Progress Update and Opportunities for the Proposition 1 Bond
7
Behavioral Health Services Oversight and Accountability Commission. Commission Composition Fact Sheet