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Arizona has reached an interim settlement with the plaintiffs in a decades-old lawsuit over how well the state serves the seriously mentally ill.  From Phoenix, KJZZ's Steve Goldstein reports.

STEVE GOLDSTEIN: Arnold v. Sarn has been part of the conversation at the state capitol since the class-action suit was filed in 1981. Eight years later the Arizona Supreme Court upheld a ruling that the state wasn't providing enough funding to care for the seriously mentally ill, including treatment, housing and work programs. But Governor Jan Brewer says a new two-year agreement would provide a significant level of funding -- $39 million next year -- to provide seriously mentally ill Arizonans. It will also implement new standards for care.

JAN BREWER: These models will provide objective standards to regularly assess and measure services and treatments so we can improve the system, making sure individuals with serious mental illness are receiving good care with the goals of a successful outcome.

GOLDSTEIN: Attorney Anne Ronan, who represents the plaintiffs, says the governor has followed through on her commitment to increase the funding, once the state's budget was no longer in crisis mode. But Ronan says a recent two-year stay in the lawsuit,  implemented because of budget problems, leaves the system with a lot of catching up to do.

ANNE RONAN: For people who were not on AHCCCS who didn't have Medicaid coverage, there was a significant loss of services for those folks. So if they needed, let's say, if they ended up in jail for instance, there was no support system, no case management system, nothing to advocate to get them out of jail and into services. Housing was very, very limited for people who were not on Medicaid.

STEVE GOLSTEIN: A judge still needs to approve the interim agreement, but the sides say it sets the stage to potentially settle the lawsuit entirely in 2014.