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Last Updated: 5/26/2010
Budget Issue: Managed Care Organization (MCO) Tax Revenues Could Offset General Fund Support for Healthy Families Program (HFP)
Program: Healthy Families Program
Finding or Recommendation: Reduce General Fund support for HFP by $11.0 million and increase support from the Childrenā€˜s Health and Human Services (CHHS) special fund by the same amount.
Further Detail

Proposal.  The Governor’s May Revision proposes to use $186.2 million in Children‘s Health and Human Services (CHHS) Special Fund revenue for the Healthy Families Program (HFP) in the budget year (an increase of $48.9 million from the November estimate).  The CHHS fund receives revenues from taxes imposed on Medi-Cal managed care organizations collected pursuant to Chapter 157, Statutes of 2009 (AB 1422, Bass).  

Estimates of revenues collected and deposited in this fund have been increased based on updated projections from the Department of Health Care Services (DHCS).  Based on these updated projections, there will be approximately $11 million more in revenues available to fund the HFP than is budgeted for expenditure by MRMIB in the budget year.  Furthermore, DHCS and Department of Finance state that the reason for the discrepancy between DHCS’s revenue projections and the MRMIB’s proposed expenditures is that DHCS assumed that the enhanced federal medical assistance percentage (FMAP) provided under the American Recovery and Reinvestment Act will be extended through June 2011, and MRMIB assumed that the enhanced FMAP would expire in December 2010. 

Analyst’s Recommendations.  We believe the assumptions regarding enhanced FMAP should be consistent between the DHCS and the MRMIB.  As such, we recommend reducing General Fund support for HFP by $11.0 million and increasing support from the CHHS special fund by the same amount.