A California city was making a difference on homelessness. Then the money ran out

A new homeless outreach program pairing a social worker with a police officer in Grass Valley, a small town in the Sierra Nevada foothills, seemed to be working.

The state-funded effort sent the team to homeless encampments, where they helped build trust among vulnerable people and persuaded them to accept help, according to nonprofit Hospitality House, which ran the program. 

It blew past its goal of engaging 90 people in three years, instead meeting with more than 200. It even helped move some people directly into housing, including an 80-year-old veteran. 

But when the three-year grant paying for that outreach ended in June, there was no money to replace it. So the program came to a screeching halt, to the disappointment of all involved.

“It is a profound loss to not be able to do this,” said Nancy Baglietto, executive director of Hospitality House. 

That loss embodies the worst fears of homeless service providers across California, as they struggle to piece together new funding sources after their state grants expire. Many had hoped that Gov. Gavin Newsom and legislative leaders would change that dynamic in the state budget deal they announced last week by committing ongoing funds for homelessness that nonprofits, cities and counties could rely on year after year.

It didn’t happen.

Instead, Newsom and lawmakers settled on another round of one-time funding.

“It really defies logic that the state budget once again fails to include funding to match the scale of the crisis we are experiencing,” said Carolyn Coleman, executive director and CEO of the League of California Cities, which pressed Newsom’s administration for a guaranteed $3 billion a year in homelessness funding.

‘Unprecedented’ homelessness funding under Newsom

As California grapples with how to provide for its massive population of more than 170,000 unhoused residents, Newsom has stepped up homelessness funding to unprecedented levels. He’s funneled nearly $21 billion into housing and homelessness since the 2018-19 fiscal year. 

This year, for the third year in a row, the state budget allocates $1 billion to the Homeless Housing, Assistance and Prevention fund, which local officials can use for housing, outreach at encampments, emergency shelters and more.

But the vast majority of Newsom’s homelessness spending has been in one-time grants, which providers say makes it difficult to fund the kind of long-term programs that could make a noticeable dent in the crisis. 

California would need to spend $8.1 billion a year for a dozen years to eliminate homelessness in the state, according to a report by the Corporation for Supportive Housing and the California Housing Partnership, two nonprofit advocacy groups.

The governor’s office defended this approach to funding homelessness, pointing out that the state has provided an “unprecedented” $15.3 billion for the issue since he took office at the start of 2019. The governor has also proposed a 2024 ballot measure to amend the Mental Health Services Act that would provide $1 billion a year for housing for people with mental illnesses and substance abuse disorders. That amendment would require voter approval to take effect.

“This budget provides not just funding to address homelessness — it builds in the accountability needed to ensure that tax dollars are being maximized to produce real results,” Daniel Lopez, Newsom’s deputy communications director, said in an emailed statement. “Ultimately, the challenge of homelessness and housing must be met not only with dollars, but it also requires strong accountability coupled with financial resources to make lasting progress for our state.”

To be eligible for homelessness funding under this budget, cities and counties must submit homeless action plans — in coordination with other jurisdictions in their region — that detail the progress they’ve made.

Short-term homeless services

There was some momentum this year to move away from one-time spending on homelessness. More than two dozen state legislators signed a letter in May supporting the League of California Cities’ demand for $3 billion a year. A coalition led by the California State Association of Counties also called for ongoing funds and drafted bill language it urged legislators to adopt. 

But that proved to be a tough ask with Newsom’s office projecting a $30 billion-plus budget deficit.

For years, city and county leaders, legislators and homelessness nonprofits have been clamoring for a source of ongoing funding to tackle the homelessness crisis. Assemblymember Luz Rivas, a Democrat from Arleta, pushed a bill in 2021 that would have established ongoing homelessness funding by raising taxes on large businesses, but the bill died without making it out of the Assembly. Last year, California voters rejected a ballot measure to legalize sports betting, which would have directed fees and taxes from those wages into a fund for homelessness.

Baglietto, of Hospitality House, says that type of permanent funding could have helped save her organization’s Grass Valley outreach program. 

“We don’t know each year where the funding is going to come from. It’s kind of a nail-biting scenario.”

Nancy Baglietto, executive director of Hospitality House

Hospitality House and the Grass Valley Police Department received $575,000 in 2020 through a state violence intervention program. The city put the money toward homeless outreach as a way to prevent unhoused people from experiencing violence in encampments, and to reduce confrontations between police and unhoused people. By the time the grant ran out this year, Grass Valley’s crime rate had improved and the city was no longer eligible for the money, Baglietto said. 

It wasn’t the first time the nonprofit was forced to scramble because of unreliable state funding. Hospitality House’s 65-bed homeless shelter once largely was funded by the state grants. Several years ago, the state changed how that money was allocated — focusing on permanent housing instead of shelter — and Hospitality House’s portion dried up. So the nonprofit cobbled together funding from a dozen different sources to fill the hole left by the state money, Baglietto said. 

Now, Hospitality House keeps its shelter open through money from CalAIM, Newsom’s recent Medi-Cal expansion. The nonprofit still has a “massive” gap, which it is temporarily filling with federal COVID funds designed to help businesses retain employees. That money runs out next year. 

“We don’t know each year where the funding is going to come from,” Baglietto said. “It’s kind of a nail-biting scenario.”

‘Havoc’ for California nonprofits

Union Station Homeless Services, which coordinates programs throughout the San Gabriel Valley in Los Angeles County, faces the same issues, said CEO Anne Miskey. Every budget cycle, her team has to spend two or three months piecing together their financing as the funding they get from the state changes or ends. Sometimes, the parameters for a state grant shift, and clients Union Station has been working with for years suddenly are no longer eligible.

“This is just creating havoc in our sector,” Miskey said. “And this is why people are leaving. It’s not the clients. It’s not the work. It’s this piece.”

The new state budget has some new language around homelessness funding. It requires that anyone applying for a grant be part of a regional plan that lays out the specific roles and responsibilities of each participant. That was something the California State Association of Counties pushed for, arguing that currently cities, counties and other groups too often fight over who should be building shelters, offering mental health help or providing other homeless services.

The budget also promises that it is the Legislature’s “intent” to provide additional funding in the 2024-25 fiscal year. 

That’s not enough, said Graham Knaus, CEO of the California State Association of Counties. 

“Counties cannot budget based on legislative intent,” he said. “Nobody can. We certainly can’t make multi-year commitments based upon intent where there’s no clarity about what’s going to happen next year.”