State Report Criticizes Health Fund Transfers

Ventura County routinely transfers millions of dollars from a special mental health trust account to other budgets without properly documenting why the diversions take place, a new state report finds.

While county supervisors have authority to move the money around, state law requires the county to document that the transfers will result in the best use of trust funds, said Ann Arneill-Py, director of the California Mental Health Planning Council.

Ventura is one of 18 California counties that did not perform a credible analysis, she said.

Ventura County is also faulted for failing to adequately notify local mental health boards before transferring the money, according to the council’s report, obtained by the Los Angeles Times.

Community-based advisory boards, charged with overseeing the provision of local mental health services, cannot fulfill their duty unless they are notified when transfers are proposed, Arneill-Py said.

“There is a lot of unmet need for mental health services in this state,” said the director, whose group oversees the state’s mental health system. “Mental health boards need to be given notification so they can plead their case.”

The report is the most detailed critique yet in a controversy about the county’s practice of transferring mental health funds to pay for overhead costs at the county hospital and other health services.

State Department of Mental Health auditors are in Ventura this week conducting a separate investigation into these transfers and other funding practices in the county’s health departments. Their report is due in May.

Opponents say the mental health transfers have occurred because the public was not fully informed of what is happening.

But the county’s chief administrator, Lin Koester, said all transfers were part of the regular countywide budget process. Anyone who wants to comment has an opportunity to do so during public budget hearings held each summer, Koester said.

There is no need for a separate economic analysis because county managers and supervisors hash out what is the most cost-effective way to distribute dollars when drawing up the overall budget, Koester said. State law is not specific about how the appropriateness of a transfer is to be documented.

“There has been disclosure and backup written information and public input,” he said.

The Mental Health Planning Council decided to survey counties because members were concerned that transfers were taking place without good reason, Arneill-Py said. The council asked the state’s 58 counties to report how much money was transferred during a four-year period and whether they had performed a separate economic analysis before each shift, she said.

The reports shows 40 counties transferred no money. But Ventura County was one of 18 counties that routinely moved money earmarked for mental health services to other accounts.

During the four years studied by the council, the county moved $3.1 million from the mental health fund to another health account. The shifted money was used to run the Ventura County Medical Center and the county’s public health and environmental health departments.

Beginning in 1991, counties began receiving special funding earmarked to provide services in the areas of mental health, health and social services. The state Legislature gave counties discretion to transfer among the three accounts up to 10% of the funds, called realignment revenues, deposited each year.

Since 1991, Ventura County has transferred more than $4 million of the mental health funds. Also, $1.8 million was shifted out of the social services account.

Another $1.5 million is budgeted for transfer for the fiscal year that ends in June.

Advocates for the mentally ill say they are angry that county officials did not inform them of the shifts. Although the Ventura County Mental Health Board is an advisory panel on mental health operations, including budget decisions, the group was never notified about the transfers, said John Chaudier, chairman of the local board.

Even those seasoned in scouring budgets said they learned about the practice only recently.

“We were told nothing. Absolutely nothing,” said Lou Matthews, a founding member of the local chapter of the National Alliance for the Mentally Ill. “The budget for the mentally ill is complex. You can really hide things, and you can do it in a way where you don’t even know what has occurred.”

Matthews said her group was finally informed of the transfers last year by Steve Kaplan, the former director of the county Mental Health Department. But Kaplan was in the midst of a campaign to separate his department from the Health Care Agency--a move the national alliance opposed--and she did not believe him, Matthews said.

“We couldn’t find it in the budget, so we thought it was a power play by Kaplan,” she said.

Koester and other county officials point out that mental health was the beneficiary of a $459,400 transfer out of the social services account in 1991. That year, supervisors scooped $1.4 million out of the county’s general fund to offset a mental health budget shortfall, they note.

“We have to look at the big picture,” Supervisor Frank Schillo said. “If we have additional funding that can be used for overhead at the hospital and it is legally possible to do so, why not do that?”

The state Mental Health Planning Council is recommending that counties perform an analysis to satisfy the state’s requirement that any transfers among the three funds would result in the most effective use of the money.

It also recommends that counties directly notify mental health boards about proposed transfers and provide board members with copies of their analyses at least one month prior to the public hearing. The council intends to repeat its survey in three years, Arneill-Py said.

If nothing has changed, it will consider proposing legislation to tighten counties’ responsibility, she said.

Koester said he will look at the council’s recommendations to see if the county can do more to open up the process.

“If we can make things more meaningful, we will do that,” he said.

Change is already coming to Ventura County. Chaudier of the county mental health board said the board will pursue an aggressive review of budget planning and ask questions about transfers long before they end up in a budget document.

Matthews said the National Alliance for the Mentally Ill also intends to be vocal about proposed transfers, urging county supervisors to keep every dollar in mental health accounts to pay for needed services, such as supervised housing. She said learning about the transfers has made national alliance members distrustful of county government.

“We would like to work cooperatively with the county. But they have not been upfront with us,” Matthews said. “It has forced us into this position where we have to do what we have to do.”