As states confront budget shortfalls, investment in mental health services faces the chopping block. Almost every state has instituted cost containment strategies in its Medicaid programs and state policymakers have begun to cut services for people with mental health treatment needs. The first part of this report presents research on state cuts to mental health funding and state Medicaid agency reports on mental health spending. Part two of the assessment allowed policymakers, advocates, and the media to evaluate state choices around mental health policy. In particular, this section evaluates whether state policymakers have taken the opportunity to reduce discrimination against people with mental health problems and promote access to community-based mental health services and newer, more effective medications. Part three identifies additional key issues advocates, consumers, family members, and other stakeholders can use to guide strategy sessions with policymakers about mental health services in their states and discussions with other mental health stakeholders and the media. (GCP)