Would use Prop 63 tax revenues to pay back homeless housing bonds

Proposition 2, on the November ballot as a legislatively referred tax statute, proposes to ratify already-approved issuance of $2 billion in revenue bonds for homelessness prevention housing for persons in need of mental health services. Because the bonds are to be paid back with income from Proposition 63 (the “Millionaire’s Tax” to support mental health services throughout the state), as a tax, it must have voter approval.

In 2004, voters approved Proposition 63 as the Mental Health Services Act. It provided funding for county mental health services by increasing the income tax rate paid by people with an income over $1 million.

In 2016, the Legislature passed the No Place Like Home Act that authorized $2 billion in bonds for use by counties for permanent supportive housing for people who are eligible for treatment under Prop 63, and are homeless or at risk of chronic homelessness.

The bonds were to be paid off with interest over 30 years using money from the revenue raised by Prop 63. A system for awarding the bond money to counties and for establishing programs to use it also was created by these bills.

In California, counties are responsible for providing mental health care for people who lack private health insurance. Some counties, although not all, already provide housing, substance abuse treatment and other services for those suffering from mental illness.

No bonds were issued under the NPLHA because the state was required to ask for a court decision as to whether the legislation was within the scope of Prop 63 in also extending housing to people with substance abuse and other issues, rather than only to severely mentally ill patients. The court has yet to determine if voters must approve the bonds. The court decision is pending.

As an alternative to court validation, this measure seeks direct voter approval of NPLHA as a way of speeding up the process of awarding funds for housing construction, while avoiding waiting for the pending court decision.

Proposition 2, Use Millionaire’s Tax Revenue for Homelessness Prevention Housing Bonds Measure, “approves” the No Place Like Home Act, approves issuance of the $2 billion in bonds to support NPLHA and amends the provisions of Prop 63 to allow use of its tax revenue to fund housing for people eligible for treatment under Prop 63.

Unlike general obligation bonds, revenue bonds do not require a public vote in California. Prop 2 was referred to the ballot because the revenue for the bond would come from a tax that was created through a ballot initiative — thus requiring a public vote.

Supporters claim Prop 2 will help alleviate the problems of homelessness arising from mental health issues; that supportive housing will help facilitate coordinated care of those with mental illness; and that money used for housing will come from funds (Prop 63) already earmarked for mental health services.

Opponents claim that Prop 2 will spend money on “buildings” rather than treating mental health issues; that some counties already use Prop 63 revenue to offer housing to severely mentally ill persons; and that the measure does not address problems of zoning laws’ restrictions on building housing for homeless people.

The nonpartisan Legislative Analyst’s Office estimates that if voters approve Prop 2, 20,000 supportive housing units could be available by 2020 or early 2021. This is based on the administration awarding $262 million each year for seven years, beginning in late 2018; and that the net fiscal effect is negligible since bonds will be repaid through already earmarked tax revenue.

Media editorials throughout the state are largely supportive. Committees in support of the measure have raised more than $2 million while there is no opposition financing as of June 31. The next deadline for campaign finance reports is Sept. 27.

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