The hospital closure and infusion of funds into community services produced desired growth of those services. The project reduced reliance on state psychiatric hospitalization and demonstrated that persons with serious mental illness can be effectively treated and maintained in the community.

This paper documents expenditure and revenue patterns of state mental health agencies from 1981 to 1987. Expenditure data show an overall decline of mental health expenditures of 4.9% over this period. States with declining overall expenditures were more likely to make deep cuts in hospital expenditures and little or no increases in community programs, while the few states with increasing expenditures showed substantial increases in community programs and contant funding for hospitals. A relatively more dramatic shift was noted across states of shifting expenditures from inpatient to ambulatory care. Revenue data reveal that federal support for state mental health agencies increased slightly during this period, but solely as a function of the introduction of the Block Grant in 1982. However, once introduced, both the Block Grant and other federal sources show steady losses against inflation. State sources also show a decline of 4% during this period, most of which was felt between 1981 and 1983, after which there has been no further decreases. Interstate variability in percapita spending on mental health is described and found to significant even beyond adjustments for costs of services. Expenditures on mental health also show relatively greater declines compared to overall state budgets and state health and welfare budgets during this period, suggesting an increasingly lower priority for mental health services in the state budget alloction process.