Governorns, like presidents, don't control budgets. They can merely sign them into law or veto them.
The legislature controls purse-strings, not only at the federal level, but at the state level as well.
The real culpret was the "patients' rights" movement of the 1960s, in which the ACLU among others said that mentally ill persons should NOT be institutionalized against their will. It's a very nice sentiment and well intended and on part, I agree with them. However, like all paths leading to hell, it's paved with these good intentions, and often the unintended consequences are worse than the original "problem."
Further enabling the situation was the
Community Mental Health Act of 1963 (CMHA), signed into law by President Kennedy. The law provided federal funding to establish a network of "locally based" community mental health facilities. The idea was that this was to be a local alternative to institutionalization.
In fact, it led to massive deinstitutionalization. The law did not require formerly institutionalized patients to be institutionalized at the local level. As a result, many people left the state mental hospitals as "free men" and just began roaming the streets. Most did not get treatment locally. ...meaning they did not get their meds.
The timing of all of this is interesting because the subsequent massive deinstitutionalization of the mentally ill over the next 15 years or so coincides with the massive increase in homelessness over the same period.
The Wikipedia entry is a pretty decent summation of the events.
http://en.wikipedia.org/wiki/Communi...tal_Health_Act
So to summarize, no, the eeeeeevil Ronald Reagan didn't shove the mentally ill out on the street. You can thank well-intentioned do-gooders for that.