Psychiatric “deinstitutionalization” involved the emptying of large, mostly state operated psychiatric hospitals between 1955 and 1990. During this period of deinstitutionalization city and county hospitals provided inpatient care for individuals that either could not access outpatient treatment or required 24-hour acute care. However, since 1990 the capacity for inpatient psychiatric treatment at the city or county level has withered. I call this decline in local inpatient mental health treatment capacity “late stage psychiatric deinstitutionalization.”” Over the past two decades there has been a simultaneous increase in the rate of mental illness among the incarcerated population. Are jails the “new asylums” because of a decline in local hospital acute psychiatric treatment capacity? In this study I assess whether the declining availability of public inpatient psychiatric beds has causally contributed to changes in jail admission rates and the rate of individuals with mental illness detained in jail. I marshal a unique panel of data on California counties spanning from 1990 to 2017 to probe this relationship. My analysis exploits inter-county differences in the pace of declining inpatient psychiatric bed capacity and inter-county differences in the rate of jail usage to identify the relationship.