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In 1954, when Ike was the president, the Republican Party attempted to pass a bill exempting federal funds for care of the mentally ill and emotionally disturbed. Ike fought that bill and it never left committee. Over the next 2 decades, federal revenue sharing for care of inpatient mentally ill and the emotionally disturbed was sliced from the Federal budget as a direct cost, shifted to the Medicaid program, administered by the States. Meaning a patient first had to qualify for Medicaid before being institutionalized in most states. In most states today, only those deemed criminally insane are incarcerated in state owned institutions, those institutions are prisons, not asylums.
The ACLU cases were not for releasing the mentally ill or emotionally disturbed from institutions. They were for the Constitutional requirement for legal representation of adults involuntarily incarcerated in asylums without law representation, resulting from court proceedings. It was the decisions of Attorney Generals in most states and most cases not to proceed with court adjudications for those patients who were released because they had no lawful representation when they were judged insane by courts and incarcerated, after those patients were released from institutions after a Supreme Court decision that representation was required prior to commitment.
It was Governor Nelson Rockefeller of New York who led the charge to remove the State of NY from owning and operating public institutions for long term care of the mentally ill and emotionally disturbed. His motivations were twofold, humane care for the mentally ill and emotionally disturbed because the state owned and operated facilities were hell holes. Look up Willowbrook. And as a fiscal conservative he wanted the state not to be burdened by the costs. He set the precedence and other governors followed in his footsteps.
You can put that myth to rest.
I don't recall Rockefeller Republicans as being fiscal conservatives. Rather they were the last of the moderate/liberal Republicans.