In another blow to its already financially devastated mental-health department, Santa Barbara County officials acknowledged Monday that the county potentially owes the state of California $10 million due to Medi-Cal billing discrepancies for the mentally ill.

That amount is above and beyond the current $8.4 million shortfall already bedeviling the adult services division of the Department of Alcohol, Drug and Mental Health Services, county officials said. The division currently operates with an annual budget of about $35 million.

On Tuesday, representatives from nonprofit mental-health and homeless organizations are expected to show up in force at the weekly meeting of the Board of Supervisors. In addition to addressing the overarching budget quagmire, the supervisors must decide whether to give the department the last of three $2.3 million bailouts for the current fiscal year.

The potential $8.4 million in budget cuts for the 2008-09 year will be made later this spring, perhaps in May.

As for the $10 million discrepancy, it’s unclear whether it needs to be added to the list of cuts for 2008-09. The discrepancy was noted last week as a line item in the middle of a one-page county budget report produced by county Chief Administrator Mike Brown. But it was called to Noozhawk’s attention Monday by Mike Foley, executive director of Casa Esperanza, Santa Barbara’s largest homeless shelter.

Foley said the potential $10 million repayment is the result of “Medi-Cal billing mistakes.”

By way of example, he offered this hypothetical: A county clinician charges the state $100 for, say, the psychological evaluation of a Medi-Cal client. (Medi-Cal is essentially state-funded insurance for poor people with severe disabilities, mental or otherwise.) The state initially makes the reimbursement, but after auditing the payment, concludes that the visit should have cost only $85.

Later, the state returns to the county and says, in essence, “You owe us $15,” he said.

“There is $10 million of ‘They billed one amount, but they were only entitled to a smaller amount,’” Foley said.

Foley also challenged the official county line last week — delivered through county communications director William Boyer — that the $8.4 million deficit is mostly the result of California’s budget crisis, and not financial mismanagement by the county.

“This whole ‘blame the state’ thing is just really strange,” he said.

Foley added that so far, he has only seen evidence that the state is responsible for about $800,000 of the $8.4 million shortfall.

“I expect that when someone says something, they back it up,” he said. “Show us.”

For his part, Boyer acknowledged the $10 million in Medi-Cal charges, and how the amount is over and above the $8.4 million deficit. However, he stopped short of saying the discrepancy means the department is actually $18.4 million in the hole.

“I don’t think we’re comparing apples to apples,” he said.

For one thing, the $10 million would only be a one-time cost, as opposed to a structural deficit.

Boyer said he is not an expert on the topic of Medi-Cal billing, and pointedly noted that Foley probably isn’t, either. Meanwhile, Brown was out of the office and unavailable for comment Monday afternoon, Boyer said.

As for the $8.4 million in budget cuts, county staff members are recommending that most of it be taken out of the annual county contracts with a host of nonprofit organizations — such as Casa Esperanza — that provide services to the homeless and mentally ill.

All told, the proposed cuts would reduce those contracts by about 60 percent.

For instance, the nonprofit Work Training Programs would see its annual contract reduced to $161,000 from $1.8 million. Among other things, Work Training runs Casa del Mural, a 12-bed center for severely mentally ill patients on Calle Real that is slated for closure under the county proposal.

(With the exception of a 16-bed lock-down facility also located on Calle Real, at the intersection of Camino del Remedio, Casa del Mural works with some of the most severe cases in the county.)

Unlike many of the nonprofit organizations affected, the Casa Esperanza homeless shelter’s $126,000 county contract is a relatively minor percentage of its total $1.8 million budget. (Forty percent of Casa Esperanza’s total budget comes from various government sources, 60 percent comes from various foundations and other fund-raisers.)

Located at 816 Cacique St., Casa Esperanza — the largest homeless shelter between Los Angeles and Oakland — receives county money to provide services to mentally ill homeless clients. County officials are recommending that the Board of Supervisors cut $30,000 from its $126,000 contract.

Boyer and the nonprofit organizations — known in the field as Community Based Organizations, or CBOs — are also butting heads on the widely reported contention that the cuts will leave some 800 clients without adequate care.

On Monday, Boyer stood by his earlier criticism of the claim made by some of the CBOs, saying the number appeared to be “pulled out of the air.”

But CBO representatives Monday provided Noozhawk with a county document showing that the “number of clients impacted” shows an even higher figure — 936.

“We were being conservative,” said Foley, who was not involved in producing the document for Noozhawk.

Boyer, however, pointed out that “clients impacted” is not the same thing as “out on the streets.” Some of the CBOs, he added, agree.

“Even in a meeting today, key representatives of the CBOs were saying they recognized that that number is not accurate,” he said. “We strongly dispute that as any sort of an accurate number.”

Further complicating matters, at Tuesday’s meeting, Rusty Selix, executive director and legislative advocate of the Mental Health Association in California, is to be in Santa Barbara to urge the Board of Supervisors to seek a source of funding that recently bailed Los Angeles County out of a similar situation. Selix said Santa Barbara County has thus far overlooked that source.

Rob Kuznia, Noozhawk Staff Writer

— Noozhawk staff writer Rob Kuznia can be reached at