DPH to calculate management reserve as 5% of key revenues; commission approves policy change

The Health Commission voted to approve a policy change that sets the Department of Public Health’s revenue-management reserve as 5% of budgeted Medi‑Cal, Medicare and patient revenues over the approved two‑year budget period.

CFO Jenny Louie explained the revision simplifies an earlier approach that attempted to enumerate individual revenue risks. Under the new formula, the controller will deposit 50% of any quarter’s revenue excess up to the 5% cap; withdrawals to cover projected shortfalls require controller approval and should not exceed the projected deficit. Louie said the approach increases transparency and creates clear criteria for deposits and withdrawals.

Louie presented examples of year‑end adjustments that informed the proposal, including the controller’s realignment of $67.6 million of CARES provider-relief funds into operating funds and recognition of a revenue surplus of roughly $84.3 million for fiscal year 2020–21. She said the resulting management-reserve balance would be just over $104 million (about 4.59% of the two‑year budget) after controller deposits.

Commissioner questions focused on reporting cadence and whether the reserve balance would appear in quarterly financials; Louie said the reserve is held as a fund balance by the controller’s office and that DPH will continue to report deposits and withdrawals in quarterly financial reports. The motion to adopt the new calculation passed on roll call.

Next steps: DPH will implement the 5% calculation with controller coordination and continue reporting reserve activity in quarterly financial statements.