Senate Budget and Fiscal Review Subcommittee No. 3 on Health and Human Services

Good morning no. Evening? Afternoon? Boy, starting off great. Given that I'm one of the oldest state senators serving, apparently, I have the back of an older state Senator.

So let's see how long I last standing up today. Today, we have the agenda broken up into two parts, part a and part b. We're both hearing health and human services issues today. We're gonna start with the health part of it, then we're gonna break for public comment and then start part b on human services and then do public comment for human services after that. For part eight, we're gonna start with California Health and Human Services Agency.

And then before we get started with any May revised presentations, I know Department of Finance and LAO are gonna give some remarks to kick us off.

Thank you. Good afternoon, Chair Menjivar. My name is Shlena Ralli and I am with the Department of Finance. Ahead of today and tomorrow's Senate subcommittee hearings, the administration is here today to present the various May revision proposals. And before we dive into these, I'd like to provide some opening remarks.

The May revision proposes steps to significantly address what the Department of Finance and the LAO have been identifying as large out year operating deficits, meaning we're spending more than the revenue collected in each of those years. At the Governor's budget, the operating deficits were over $20,000,000,000 each year starting in twenty twenty seven-twenty eight. In the May revision, these have been more than halved in the out years starting in twenty twenty eight-twenty nine.

The May revision takes a balanced approach to addressing deficits by including a combination of proposals that increase revenues and reduce program costs across HHS agencies. Similar to the discussions last year, we acknowledge that these are challenging proposals and difficult decisions are still necessary to finalize a balanced budget that responsibly supports California's core programs.

We understand that the legislature may have other proposals and look forward to further discussions over the next few weeks as we develop the final budget act. Thank you.

Thank you. LAO?

Good afternoon, Madam Chair. Mark Newton with the Legislative Analyst Office. On Monday our office released our initial comments on the, May revision and provided an analysis of the underlying condition of the the general fund. Our analysis did find that as the administration noted the budget does, the administration's proposal does make substantial progress in reducing the size of the operating deficit. The governor also produces a balanced budget in two years.

The constitutional requirement is just a balanced budget for one year. But we think it's very important to provide some context to the May revision and its budget architecture. And the most key point to make is that revenues are booming. Revenues have increased by about 30% over the past three years and are essentially at a nonprecedented level except for the .com era.

But in spite of the booming revenues, the state actually still has a significant operating deficit of about $10,000,000,000 In addition, in order to make the budget balance, the budget architecture does rely on $20,000,000,000 of reserves as well as extra borrowing.

And so the point to make or a key point to make is that when revenues are booming, the usual course of action is to add to reserves and improve the state's fiscal position. But in this case, we are actually drawing down reserves and deficit remains and the fact of having a significant deficit when revenues are at such unprecedented levels is a warning sign in and of itself.

So in terms of guiding budget deliberations of the legislature, our office has a number of key key recommendations which I'll mention just very, very briefly. And the first is to maintain the amount of budget solutions proposed by the administration. I should sort of add add some further details to that is the amount of of solutions proposed by the administration at least.

There may be budget solutions that the legislature is of the view that they do not align with legislative priorities and would have concerns with the budget solutions. There are options to choose a budget solution, a spending reduction elsewhere in the health budget, for instance, or elsewhere in the budget as a whole, as well as revenue solutions as well. But the amount of solution at least should be maintained.

Our office does make the recommendation to add to the reserves, add discretionary reserves deposits as well as generally do not add new spending commitments to the existing commitments except with, you know, a very, very high, high bar and as well as considering solutions elsewhere in order to, to support them. So in the, just turning to the, the health and human services context, we do recognize that the choices before the legislature come with some very, very notable, tradeoffs.

On 1 hand, with the HR 1, impacts on the, on state government, this means that services may be reduced and some Californians may no longer have access to services that they once had. On the other hand, with a situation where the state's expenditures are exceeding sort of revenues at a nearly unprecedented time of revenue growth, Our recommendation is to add more to the reserves.

But the implication of that or the benefit of that is simply that when revenues do change course which they will that by by planning more for the the future and addressing through the deficit in a proactive way can help prevent much much deeper cuts that could be required when when revenues drop.

Our office is is very happy to provide ongoing technical assistance to the legislature as you go through these deliberations as well as coming up with alternative budget solutions and analyzing any sort of new new proposals that and and and and ideas that the legislature have. So we look forward to working with you throughout the the remainder of the the budget process and happy to answer questions.

Thank you. Thank you so much. Department of Finance, I appreciate you, you know, sharing the difficulties, that we are in regarding these cuts and the balanced approach, and yet the California state Senate proposed a plan that also had the same amount of budget solutions. I do agree with LAOs that we do need to maintain the same amount of budget solutions. You know, we are in a structural deficit.

Our architecture is aligned that both were slashing the structural deficit by 50%. So we're aligned with that. We do want to add more to the reserves. But with our Senate plan, we were able to preserve most, if not all, the proposed cuts in January that the administration was looking to do. The Senate plan was able to find budget solutions and bring in revenue that are going to create a scenario where we didn't have to further cut.

I myself am extremely saddened to see that instead of reversing or delaying much, while I did see a a delay for the salies and refugees implementation of six months, I saw more further cuts to our most vulnerable, and here we are again in budget sub three, having our more most vulnerable individuals come and put me in a terrible situation, because I align with each and every single one of you.

And it's a really difficult place to be in to try to to ensure that we get you the services that you need. There are gonna be a lot of BCPs presented in this subcommittee, yet it's a balanced approach of we have to slash services for people, but departments are gonna come to ask for ten, twenty, 55 more positions to build government just to feed into bureaucracy and not actually deliver services.

And so it's hard to also accept that we are doing a balance approach when we cut services, but we have money to continue to build government. And people don't end up with the deliverables that government is intended to deliver.

With that, let's get into it. Issue number one.

Good afternoon, Chair. Brent Houser, Deputy Secretary for Program and Fiscal Affairs at the California Health and Human Services Agency. For issues listed under the California Health and Human Services Agency, I will specifically speak to issue number 1, but we may be playing musical chairs with different team members presenting on various issues. Specific to issue number 1, the California Health and Human Services Agency requests to reappropriate up to 294,000 to support and address, workload associated specifically for legal in response to HR 1.

The 2025 budget act did appropriate 1 time resources, equivalent to an attorney three to help CalHHS respond to HR 1 and coordinate with departments.

However, we were unable to hire for that position due to operational constraints, specifically to to vacancies and onboarding leadership positions. We think the increased legal support continues to be necessary to coordinate, statewide responses, necessary to coordinate, statewide responses, across our departments to based on evolving requirements, as part of HR 1.

These resources will increase our capacity to respond to the federal legal and policy changes, assess legal risk, and develop legally informed plans of action with respect to incoming requests of the Federal Government, as well as assist other CalHHS attorneys in managing the affirmative and defensive litigations that agency and our departments are involved in. That concludes my prepared remarks for issue number one and happy to take any questions.

Hello? Okay. We're gonna hold the item open and move on to issue number two. When you're ready.

Madam Chair, thank you for your time today and, I'd also like to thank your staff for the thorough write up in the agenda. My name is Michael Muth and I'm with the California Health and Human Services Agency's Office of Technology and Solutions Integration or OTSI for short. Given the full agenda you have before you today, I will jump right into the question with your permission. Alright. In short, this proposal is a net zero cost or no new impact to general fund as your agenda points out.

That authorizes the transfer of four state positions from the California Department of Social Services to OTSI. This proposal also moves the project from social services, which remains a sponsor and, a cosponsor of this budget request to OTSI as we believe this functionality will be shared across agency. This proposal continues the previously approved SBH initiative, which will be a centralized data sharing and eligibility verification platform for programs such as CalFresh and CalWORKs. And with that, that's my prepared comments and I'm happy to take any questions.

Great. LAO, any comments? Hold the item open, move on to issue number three.

Issue number three for HHS agency will be heard under the child welfare portion of part b of the agenda.

I I thought we were asked for it to be heard in part a. We were told that they wanted it to be heard in part a. That's why we moved it to part a.

It wasn't No? No. I think it should be heard in, part b. Okay. Yeah.

Just wanna clarify because it was a request of us to move it to part a. Oh. Oh, so no. Sorry.

Okay. We'll move it to We'll put it back in part b then. Then we'll move on to MSSA on issue number four.

No.

Good afternoon, Madam Chair. Actually, hi. Hi. It's Stephanie Welch, Deputy Secretary of Behavioral Health still with California Health and Human Services on issue number four related to the September, Behavioral Health Crisis Service Fund. Real quickly, just a quick overview of the proposal, and then I will answer the specific question that you have for us.

So, the California Health and Human Services Agency is requesting $445,000 in, '26-'27, 04/1939 in '27-'28, and in '28-'29 for us to complete our work related to the implementation of the five year '98 plan. This will allow us to continue to support the coordination of our departments and other state entities such as working with Cal OES in the implementation of the five year plan.

It allows us to convene our ninety eight crisis policy advisory group to provide accountability, transparency and community engagement, as well as to, submit annual updates on the status of the plans implementation through 2029. These are time limited resources specifically to fill these obligations.

We are requesting, to, hire a public health medical administrator as a limited term position to lead our clinical and policy expertise in this area And also very importantly to our agency to connect the work of the five year implementation plan to our other behavioral health transformation initiatives, including CalAIM and the implementation of Prop one in the Behavioral Health Services Act.

I see that my partners from EMSA are here. So I'm going to, skip ahead and answer your questions related to our partnership with the Trevor Project. How is Cal H Cal HSS working with the Trevor Project to address the federal loss of LGBTQ plus support options?

When the Federal Government, in July 2025, eliminated the press three option, to which is an option that is dedicated to serving the needs of LGBTQ youth, through a contract with the Trevor Project, We repurposed some existing funds so that we could contract with the Trevor Project to initiate a pilot training program to provide our crisis centers with additional training and enhanced skills to better serve LGBTQ youth.

We have been working on this for about the last year and in that time, in partnership with the Trevor Project, we've conducted over 80 interact in, excuse me, 80 interactive virtual ninety minute trainings for all 11 of our, 98 crisis centers here in California.

And we have trained over 500, individuals who work in those centers and take those calls. We have also recorded these trainings and they're going to be available to other staff in these centers until June 2027. We continue to seek partnership with the Trevor Trevor project during these federal uncertain times And then specifically you were wondering if these resources would allow us to continue this partnership.

And I just want to, because we are able to convene our policy advisory committee and the Trevor Project is part of our policy advisory committee, There are ongoing conversations in the policy advisory committee about how best to meet the needs of LGBTQ youth. So we look forward to working together on solutions in that space.

And I'm happy to take any questions.

Of the four 500 trainers, do we have any data on like the youth understanding the shift and what's available for them?

Yeah. Actually in post training surveys, there these have been found to be very effective. I grabbed these numbers yesterday, and up to ninety seven percent and ninety eight percent respectively, said that they learned more about working with LGBTQ youth or individuals, young people who identify as LGBTQ plus And so really a a high satisfaction rate as well as a new learning opportunity for our crisis center counselors.

Sorry. I I meant given that the funding was was taken away from the Federal Government on the Trevor Project as a lifeline for LGBTQ plus youth, are we getting any feedback on the youth now call you know, being able to connect with the individuals at the crisis center, like, you know, post training, you know, did we need to do any kind of awareness to ensure that the youth knew that there was still an option for them to call?

Oh, I see. And I apologize if I'm not able to. I can probably follow-up with more specifics on that, but I would imagine that we have done some sort of analysis as to whether or not the youth are continuing to call our 988 centers. The Trevor Project itself as you

know has its own number and we have identified as part of our implementation of our prop $1 under CDPH to target LGBTQ youth and so we definitely want to grow the capacity and make sure that LGBTQ youth understand that reaching out to nine eight eight, not just the Trevor Project could be a viable option for them to find a trained counselor to talk to.

Okay. Thank you. Anything to add, Amsa? I don't know if you're gonna I'll hold the item open and you'll be doing issue five. Great.

Thank you, Madam Chair. Gabrielle Santore with the Emeritus Medical Services Authority. MSER requests 4,300,000 general fund in budget year and 4,400,000 general fund in budget year plus one to support the operationalization of the enterprise services data management system. This system includes three components. One is the POLST electronic registry, the California EMS information system as well as our central registry solution.

That concludes my remarks. Happy to answer any questions.

Will, any comments? I see that it's getting funded for two years. What happens after that?

Yep. Appreciate the question. Our plan is to first evaluate. We think this should be these are our needs right now for the next two years, but we wanna evaluate going forward what our licensing costs, what our external management solutions, like what the ongoing need will be. So we plan to evaluate that over the next two years and then come back with with

So are these not to maintain, but to continue to build up the system?

This would just be for maintenance. So these are the maintenance costs that we have over the next two years, but we'll use that time to evaluate. Like, what is our permanent ongoing maintenance needs and then come back to the legislature at that point.

So confirming this is a system that will always require ongoing maintenance Correct. Maintenance fees for it. Just this is what it costs for the next two years.

Correct.

Okay. Thank you. We're gonna hold the item open. And now bring up H Kai.

Good afternoon madam chair, and staff. Elizabeth Landsberg with HCAI Department of Health Care Access and Information and we will, tag team the the items.

Not with that USC folder.

Oh. Oh. Good afternoon. Michael Valle, assistant director. I'll start with item six.

This item is to implement assembly bill 1312 which expands existing hospital fair pricing statutes by requiring hospitals to prescreen patients to determine presumptive eligibility for charity care or discount payments. HCAI requests eight positions and $1,600,000 for the fiscal year 2026-27 through 2028- 2029 from the California Health Data and Planning Fund to implement provisions of this bill.

HCAI developed trailer bill as well in response to the question in the agenda to allow penalties that may be collected from hospitals under this program to be deposited into a special fund for use by the program and HCAI expects that this mechanism could provide some of the ongoing funding needed in the out years and we'll continue to monitor and evaluate that. Happy to answer questions.

Meaning you won't be pulling from this specific fund, you'll be pulling from this fund, this new fund?

That that be the intention.

Okay. Hello? Nothing to add. We're gonna hold the item open, move on to issue number seven.

Alright. I'll also take issue number seven. This item is to implement Senate bill 660 as you're familiar with madam chair, which expands the data exchange framework program in some very important ways by creating more transparency and accountability measures, adding new required participants to sign the framework and reconstituting a stakeholder advisory committee to advise HCAI on the administration of the program and which will also provide recommendations for the legislature in a report due July 2027 for how to further strengthen data exchange in California.

HCAI request $1,500,000 in fiscal year twenty twenty six twenty seven and twenty twenty seven twenty eight from the California Health Data and Planning Fund to support new staffing and to implement provisions of this of this bill. Happy to answer questions.

Hello? Department of Finance, in January, there was a BCP of 8.9 $8,800,000 to fund the efforts of six sixty. This is an additional request, but this is from my fund, a special fund. Why can't the 8,800,000 original request be also funded through this fund?

Victoria Rapley, Department of Finance. The original BCP was just the transfer of existing dollars from agencies. So this is additional funding to cover those new requirements

So 8.8 is re appropriation of dollars?

Not necessarily re appropriation. More of the eight Health and Human Services Agency gets that 8.8 8,800,000 annually to support the data exchange framework. And so this that proposal was the shift of that existing funding annually ongoing to HCAI to support the data exchange framework. This BCP for the 1,500,000 is new dollars for the

Sure. Yeah. Why can't it all be pulled from the fund?

So the the original fund was general fund.

Sure. I know. So This would be a budget solution to have it all be pulled from the fund. If part of it is being pulled from the fund, why can't all of it and free up $8,800,000?

Joseph Donaldson, Department of Finance. So the May revise doesn't include that proposal, but to the extent

Recognize that. But it's possible if you're pulling some of it from the special fund, then it's eligible to fund all $6.60.

We would have to determine that, we'd have to make sure that there is available resources within the data fund, determine if that absorption could be possible, but we can continue that conversation.

I'd love TA from Department of Finance on this. I was gonna ask because there's a couple of BCPs that are asking to fund things with this fund, so it seems to be a healthy fund. I'd love to see how much money is in the fund. And then if part of it is getting funded, say fund one more time, if part of it is getting funded under this fund, I don't see why not fund the 8.8 as well.

We would note the the data fund is funded by hospital, an assessment on hospitals and skilled nursing facilities. The data exchange framework as you know applies to a much broader group of healthcare entities and stakeholders. And so as noted the data exchange framework initially was funded by general fund and so we would in addition to the health of the fund which is being drawn on more and more.

So we do have we we would wanna agree with the point that we wanna look at the health of the fund as well as the uses and permissible uses.

Yes. As long as I'm more concerned about if there's money in it in terms of the usage of the fund, Department of Finance has a lot of BCPs here that are pulling from special funds to backfill the general fund. So I don't think that second reason would be an impediment for Department of Finance to use these funds to create general fund savings. I'd like to add.

Jason Constantouros. This is a very reasonable line of questioning. I just also my memory is that this particular fund also has there's been some budgetary borrowing from it too and so that also could affect how much resources are in the fund. But that would need to be looked at.

But this

is a a reasonable line

Because if its a one or Two year budget solution, you know, until we can no longer I think, department of finance has utilized funds in that way where it takes a loan or so from a couple years and then it stops doing it. Just Okay. We're gonna hold the item open, move on to issue number eight.

Alright. Issue number eight, this item is requesting to provide annual ongoing funding for the healthcare payments database, California's all payer claims database, which is a research database made up of healthcare claims and encounters that are submitted by California health plans and insurers to HCAI. Health care claims data is regularly used in health services research and policy analysis. The intent of the legislature in creating this program was to increase transparency about health care costs, inform policy decisions, and provide a public benefit to California.

And since the database's development was authorized, HCAIS met all statutory milestones for implementing the program and the data is now being used by researchers, state agencies and the public.

In 2018, the legislature authorized $60,000,000 in one time funding for planning implementation and operation of the database. Those funds expired in June 2025. For fiscal year twenty twenty five-twenty six the legislature authorized one year of additional funding for the HPD program which expires June of this year and so this request is for ongoing authority. HCAI submitted a report to the legislature in 2023 that provides several options for how to fund the program without using general fund and HCAI's budget request is consistent with those recommendations.

The department requests $ 22,500,000 in fiscal year 2026-27, $23,600,000 in fiscal year 2027-28, and ongoing.

The increase in fiscal year twenty twenty seven-twenty eight is reflective of the addition of new pharmacy benefit manager pricing data to the database which was authorized under AB 116 of 2025 and which is underway. Again the funding sources include no general fund but rely on a mix of the California Health Data and Planning Fund, the Health Plan Improvement Trust Fund, the Pharmacy Benefit Manager Fund, Federal reimbursement, and a small portion of fees from data use.

And then in response to the the question that was included in the agenda about the impact of those fund sources being used for this proposal, we've coordinated with the Department of Managed Healthcare that oversees some of those funds, the health plan improvement trust fund, pharmacy benefit manager fund and they expressed no concerns with fiscal sustainability. Same thing with California health data and planning function.

Well, there's your answer on the fund.

No. That was for DMHC's fund.

Oh, okay. Because it's I mean, this is one of the funds too.

Okay. Jason? Okay. I'm gonna hold the item open. Move on to issue number nine.

Yes. The May revision would reappropriate up to 18,400,000 from the 2022 budget act until 06/30/2029 to continue the development of low cost biosimilar insulin under the CalRx program. Our insulin development partner, CivicaRx has experienced delays that are unfortunate but are not surprising given the complexity of biosimilar drug development. So developing a new biosimilar insulin involves multiple phases of manufacturing, analytical methods development, quality oversight and a series of necessary studies.

This technical adjustment to the funding's liquidation date is necessary to ensure the state's investment continues on an appropriate time line to offer three long term low cost biosimilar insulin options. The agenda asked us about whether CivicaRx has provided a time line. So our CivicaRx, Civica partnership continues to make progress in developing affordable biosimilar insulin products and the only thing I can say about the timeframe sort of where we are in the process is the clinical trials are underway right now.

So we can't share a timeframe for FDA approval but our internal and external experts all believe that while we're behind the initial schedule the delays Silica has been experiencing are not outside of industry norms. We did work with Civica to launch a white labeled biosimilar insulin glargine pen at $11 for one pen, dollars 55 for a five pack that started January 1 and this white labeled product serves as a bridge under Civica's own develop until Civica's own developed products are available.

Jason?

I just wanted to note that a couple of items here you're going to be hearing about some general fund spending items. This is one general fund spending item. It's a reappropriation. So it reappropriates $50,000,000 that was from a previous year, but it sort of remains unspent.

It's part of this contract, but these are the sorts of areas given the sort of major fiscal decisions you're sort of weighing, it's sort of this would be a reasonable area to sort of look at your priorities, consider whether this remains a high priority, and sort of act accordingly. So just wanted to flag that.

Thank you. I don't have any questions on this. We're going to move on to issue number 10 and hold that item open.

Regarding the diaper access initiative, this adjustment is a technical correction to add identical language that was included in the '25 budget act and was inadvertently left out during the when the Governor's budget was released in January. The May Revision Finance Letter corrects this oversight. Regarding the initial proposal, almost half of families report difficulty affording diapers and reducing and reduce other expenditures to afford diapers with a quarter of families saying they skip meals to afford diapers.

So beginning this summer, newborns delivering in a participating California hospital will receive 400 diapers at no cost to the family. Hospitals will provide diapers to families at the time of discharge ensuring parents leave the hospital with an immediate supply of high quality diapers tailored to newborn needs.

So a very much an affordability program. We have a question about whether this exemption covers the announced contract with Baby to Baby and whether we anticipate additional contracting needs. So the proposed budget language reference was already in effect for the first year of the program, including it again in this year's budget with support program continuity in year two as proposed funding expands free diapers to more families.

It would also support contracting for Phase two of the diaper access initiative, which involves a direct to consumer option, in addition to the hospital based distribution. So we're looking to engage with an additional partner to develop an online direct to consumer e commerce marketplace for high quality affordable diapers which would complement Phase one by offering an ongoing option for families to directly purchase lower cost diapers.

Anything to add Jason?

Yes. On the specific proposed language, we don't have any comments. But I did want to also note that there is an additional 12 and a half million dollars, in the May revision for this program in 2026-27. It's not a new proposal. It was part of last year's budget agreement.

But, again, given the sort of fiscal situation facing the state right now, it's another area where if you're looking for areas to sort of think about your priorities, this is sort of another general fund spending area.

Director, can you explain to us what a public contract code exemption is?

Yeah. I'm going to actually turn to my Chief Deputy Director to talk about the contracting exemption and also if it's of interest the process we went through here.

Yeah. Scott Christman at HCAI. It allows you to essentially engage in negotiated contracting outside of state rules, which typically the public contract code requires, you know, use of leverage procurement of vehicles that are that are outlined by Department of General Services, typically works through Department of General Services for reviews and oversight and and and and things like that. And again, the the the the formal request for a proposal RFP, you know, can be cumbersome and and and time consuming.

So the the exemption from PCC allows for sort of more flexibility, more timeliness.

And again, the key piece is really having a negotiated contract. We go through kind of a series of interviews, work out sort of details and then finalize, the agreement. The way we've used it, and again, it looks similar to a series of procurements we've done for the CivicaRx program for insulin, for naloxone, for albuterol more recently where we use a request for information as opposed to a request for proposals. The RFI allows us to solicit proposals from from lots of interested parties and things like that.

And then those proposals are evaluated and scored, and then we usually narrow it down to a handful of of sort of potential partners or vendors that most closely align to the goals of the program.

And then you go through a set of interviews. And you'll interview each one of those and sort of narrow it until you finally get to a selection, and then you can move to the negotiation around the contract. So it's a different way of going than sort of having sort of, you know, fully baked proposals upfront and you just sort of do openings and go through it that way. So it's a more high touch process. That's how we've used it in the past.

Baby to Baby last year, did they go through a public contract exemption or go through the original the regular RFI program process?

It's a PCC exemption under which we use the RFI process. So we did release an RFI to interested parties. We got 15 proposals back, including baby to baby, and those 15 were from, I have notes, from vendors, non profits, things like that.

So when we put in, we put in RFI last year or two years ago, and there was no public contract exemption during the first phase of this process.

No. There there there was. Was. So this is the the technical aspect of this was that we had the exemption from the PCC in the 2025 budget act. It was inadvertently left out in in in year two. The reason it's necessary is is simply that if

Sorry. I guess, I couldn't remember BCP on this. I was trying to okay.

Yeah. If we were to, if we're to make an amendment, like, in year two to do the sort of the second round of diapers, we'll need that to happen under the exemption.

It is is it gonna be because Baby to Baby is not gonna be the vendor for the second part?

So there'll be two so actually, no. We're gonna move with a different vendor likely on the on the direct to consumer. And that'll happen sort of that's what's considered phase two. But as far as the the the straight distribution, there will be a year two, not to to mix those up. There will be a year two that would, operate against the, appropriation that that Jason mentioned, the the 12.5, in budget year, to basically double up on the diapers.

So the first year contract was 6,200,000, 40,000,000 diapers. Year two was proposed, to be eight Seven point four? Diapers.

First year seven point four?

7.4 was the was the budget allocation and the contract 2007. ...

So what would you say then, director? Or You know, the the the reason the reason we're the not excuse. The we defend the contract with Baby to Baby by saying that we went through the regular pro public process. However, we went through a more streamlined one, and to your point, a process that does not have oversight and full transparency.

What would you say to California and some consumers that are feeling a little type of way that Baby to Baby was selected given the closeness to the first partner and who co founded this this vendor, Baby to Baby, and is now being handled by the 1% elite Hollywood actors to give diapers to everybody, regardless of income threshold.

So if we're trying to defend that we went through the process, we went through a more shortened process.

As Scott indicated, we use the same process for diapers that we've used for insulin, for Naloxone and part of the agility of the Calyrex program and now this is not Calyrex, this is the Golden State start is we want to emphasize that it is a meaningful engagement process where we do put out a request for information. We do get different proposals. We are absolutely looking at cost. We're looking at distribution capacity.

So all of the goals of the program we evaluated all of those who came forward.

We had non profits, we had diaper manufacturers, we had diaper banks and as Scott indicated we did an interview process and so we believe it was a robust meaningful process.

Director can you, from my knowledge and understanding with car CalRx and so forth, we obtain a vendor who's gonna manufacture and then we sell it at a wholesale price discounted for the consumers. That's a direct consumer approach. Right? For like insulin and so forth.

We don't sell it. Naloxone? We don't sell it. So for Naloxone, we work with Department of Healthcare Services that has the NDP, the Naloxone distribution program and they were previously spending $42 for a twin pack of the naloxone and we brought the cost down. So they were ordering it.

Insulin, so we have our first insulin product that's available. So we have the cost guaranteed with our vendor with our partner, CivicaRx and then it goes through the normal process with pharmacies and health plans needing to carry the

Is it the same approach where a vendor is distributing it or we're distributing the product?

With the insulin each one's a little bit different with the insulin we're making it available on the market. We still have had to reach out to the wholesalers, to the pharmacies, to the health plans and the PBMs to get it covered and then it's available to consumers. The diaper is different because we're giving it to we're offering it to all families in participating hospitals.

Is does HCAI anticipate doing another round with the vendor versus the second phase where we're looking to do a direct to consumer purchasing approach?

The so as Scott indicated, so there's Phase one is the is giving the.to the diapers at the hospital. Sure. And at this point, we we anticipate using the working with the same vendor unless for some reason not to and then phase two will have a different vendor.

Is the 7.4 and the 12.4 12,500,000 only for phase one?

No. 7.4 covers year one of Phase one and then also will cover a couple of years of Phase two and then the 12,400,000 expands to half of all births as opposed to starting with a quarter of births.

Okay. So but I guess let me rephrase. Under Baby to Baby's contract

They're gonna use they have the entire but they got $6.2 of that. And then 12.5 is also some of that's going to go to them to continue giving out at hospitals?

Yes.

Yeah. We think the second year would be between 11 and 12,000,000 for the for the for the diaper, and then the remainder would be used for for other other other operations.

The remainder half 1,000,000 of the 12.5?

Well, the 12.5, we think between 11. Yeah. Yeah. We think 1,000,000 or so. So we're we're not we're not we're not through with the the the

And the public contract code exemption is so that you can continue to partner with them?

It'll be necessary to amend the contract for a year or two.

Because right now, the contract is only for a year?

Yeah. And so what will happen is the the the exemption is attached to the fund source. And so to be able to essentially amend the contract for more money the exemption will have to be with it. If the exemption is removed then then it's essentially, defunct.

Okay. And do we have any metrics that we're gonna be collecting on the Q share a little bit more about that director on?

Yeah. I'm happy to follow-up but what I do know is we've asked for monthly reporting about number of hospitals. The hospital reach out has begun and diapers distributed so we do have a series of metrics and data that we will be receiving from the vendor.

I'd like to hear again why we continue to not put an income threshold on this?

Yeah. I think the decision was made the proposal was a universal proposal just like we're providing free lunches to all kids and we're not you know doing an income threshold anytime you have an income eligible or other type of eligibility consideration there is additional administrative complexity that's involved. We are however when we decide which hospitals to start with we're focusing on hospitals. Highest Medi Cal.

Highest Medi Cal and also lowest quartile in the Healthy Places index to try to focus on hospitals that are serving the most vulnerable Californians.

Is it going to be cheaper for us to do, what is more cost effective to continue to deliver the diapers through a middle person or to have us like in Phase two deliver it directly to consumer?

Well the direct to consumer is for the consumers to purchase it. HCAI doesn't have the capability of distributing the diapers ourselves.

I don't know.

Okay. So phase two, it's not gonna be free diapers. It's just gonna be at a more affordable price.

Correct.

Okay. So that's I get the cost of Correct. Okay. So HCAI does not have the ability to purchase the diapers and distribute them to hospitals?

We do not employ state staff who could take diapers to hospitals. Okay.

But we do have diaper banks that have the ability to give out diapers to those in need, and they're usually people that are within an income threshold category. And we're not we're not funding that this year. I worry that we're not getting to the I worry that without the income threshold, that we're not tailored to the people that really need it. I recognize we're gonna start with hospitals that have a high medical threshold, which is really, really good.

I will say the optics of this vendor is not good at all. The administration and the governor is gonna be gone, and we're gonna continue to get hit on this. I, you do not choose. None of you in front of me got to choose who this vendor is. I recognize that. I'm just letting you know, we are here gonna continue to get hit on this.

And optically speaking, it was not a smart move to choose the vendor that we chose. Given that negotiations are gonna continue to happen, I'm not inclined to fight to continue to do another public contract exemption. I don't think that's to the benefit of Californians. I thought you were you were gonna say something. If not, I'll move on. I kept looking at you.

Well, I thought I thought maybe we're ahead sort of concluding remarks there. I wanted to note there are we in our analysis last year, we did offer a few alternative options that we thought could be more, sort of income based and and targeted and the diaper the diaper bank approach was one. The other approach is there's a subsidy in CalWORKs that also could be expanded.

And then the other thing I wanted to really emphasize is that, you with with regard to phase one, the original proposal was was really just a two year proposal to to eventually get to a certain percent of the state. But, you know, it's not really you know, the the overall effectiveness would really depend on how ongoing it would be and sort of the long term impacts.

And that's just another factor you could weigh as you're weighing your priorities here in the budget.

Thank you so much. We're going to hold the item open, move on to session number 11.

Thank you, Madam Chair. Issue 11, distressed hospital grant program. The May revision proposes up to $50,000,000 for another round of state grants to hospitals in immediate and significant financial distress to help prevent the closure of those hospitals. At this time, I wanted to give an update on the recently passed AB 108 from this month authorizing $25,000,000 for a distressed hospital small grant program. As of Monday evening this week, HCAI has received 10 grant applications from hospitals indicating immediate and significant financial distress.

Seven of these hospitals, actually also hold a a distressed hospital loan from the distressed hospital loan program. And all the 10 hospitals are requesting 118,500,000 grant funding oversubscribed, similar to the distressed hospital loan program several years ago. HCAI is currently evaluating and scoring, these applications based on financial, information provided at the hospitals. We'll be doing that this week. We'll be scoring based on severity of financial distress and we'll follow on quickly with grant awards for near term financial support.

Those dollars actually will will expire in June 30. So we're moving as quickly as we can. Question two, so in terms of our ability to sort of monitor regularly, hospitals at risk of having ten days cash on hand, we're we're not able to do that in in in near real time, based on the timeliness of the data, that we collect, in terms of having insight into to that level of cash.

I can I can sort of level set for for the for the committee on on hospital financial data that HCAI receives? So, we have two primary data sets.

We receive an annual financial disclosure report from all licensed hospitals, which has a lots of detail. And then we have less detailed quarterly financial reports, more timely. Both sets of data do include utilization, information by payer, balance sheets. I would actually note that balance sheets was recently added to the quarterly collection under AB 112, along with the distressed hospital loan program. So we have, improved our timeliness, with that addition, actually.

It's it's it's, some of the most timely in the nation. Also includes information on changes in equity position, income statements, statements of cash flow, revenues by payer, etcetera. There is a data lag. Hospitals are required to submit their quarterly financial data forty five days after the end of the quarter, and they can have a thirty day extension, if requested so far, this year. For example, quarter 01/2026 was due last Friday, May 15.

More than half the hospitals have asked for the thirty day extension until June 14. So the most recent financial data we have right now is as of 12/31/2025. We'll be processing this first quarter into the summer. We then take those data, summarize them for financial reports on our websites, data visualizations, specific topics, as well as longitudinal trend data in hospital annual financial information. So again, this is used for, you know, looking back year over year changes for a multi year period.

You can help uncover macroeconomic trends in the industry. It's helpful to review data for regions, for facility characteristics, consider for future planning changes, policy making and practice. However, we just don't have the kind of point in time data that would be sort of having insight into an immediate, financial distress of a of a hospital. The next question is around limitations that exist, and additional reporting that could help mitigate those limitations. Again, timing, as we've discussed is the primary limitation.

The lags about six months, generally before we get data. And obviously within that six months period, given the fluidity of of financial conditions, things can change quickly at a hospital. You know, cyber attack, natural disaster, other other issues with cash flow can emerge quickly and those would be undetected, you know, given the lag in in the data.

So it's a tough thing to improve just given the nature of the industry fragmented, decentralized, hospital billing is complicated, financial information fluctuates, fiscal years fluctuate within the hospitals, other factors. So, you know, improving that would be a heavy lift for both hospitals and and and the state for your consideration.

Another limitation I would mention before before stopping here is the levels of accounting, and we've found this most recently in terms of health system structures and licensing. So we collect data based on licensure within the financial reporting. But as an example, some hospitals will actually show no cash in the quarterly because the cash is managed at the corporate level in a health system. So at the at the site level, it's not showing.

So I think, you know, there's likely value if we could explore considering how we might modify financial data reporting to account for these levels at the system level, and then the site level where care is being provided.

So this would obviously require statutory consideration. So happy to answer any questions on

Thank you.

So as my colleague, Mark Newton, and and, you know, noted earlier, we have our our office has a general recommendation about, rejecting new spending, focusing on more budget solutions, and it's a general recommendation. This is a sort of area that sort of falls under that as new spending. However, if this does remain an area of high priority for the legislature, the administration notes that, this proposal was really intended to be a starting point to kinda work with the legislature.

And we think there are some improvements the legislature could consider. We identified some of those and in communications with staff.

But, generally, we think that the proposal as written could have more parameters connected to it. So right now, there really are two specified parameters under the program, days cash on hand and payer mix. But something like the distressed hospital loan program considered a wider array of measures. They included more detailed measures on financial distress, but also considered other factors like community need and other areas like that.

The loan program also required a turnaround plan, and the turnaround plan is helpful because, given that this is one time funding, the the legislature needs some assurance that the that the funds are helping to sort of have a long term impact on hospitals financial situation.

So these are some some modifications we think the legislature could consider. We did also look at the issue of whether the need exceed, you know, is is is about equal to what's being proposed here. And we came across many of the similar limitations that, the department mentioned, and particularly that we we observed many hospitals reporting, very little cash, but that's not that's not really the reality of it.

It's it's there's some who who may be distressed and some who are not, but, the cash is sort of managed elsewhere. And so data improvements like that potentially could help moving forward.

Again, you're still going to have that sort of timing issue with with when things are reported, but possible improvements like that might be able to help a little more with sort of long term tracking.

Thank you so much. I I had a very similar question, chief well, along the lines of I feel like well, first I should preface, the Senate is very interested in supporting our distressed hospitals. You know, the Senate plan did allocate proposed $200,000,000 for this topic. So to your point, there is, interest from the legislator, at least on the Senate side, to do something in this space. But to the point of, like, how sustainable is this?

And this is outside of HCAI's purview. So I know the HCS is gonna be here tomorrow. I'm just wondering, we continue to meal piece and put a band aid on these hospitals and the bigger issue is the medical reimbursement rate. The bigger issue is that we don't create pathways for people to get out of acute hospitals and we treat acute hospitals as long term care. And we pay we pay so much in there.

I would love the administration to propose a more structural fix to help hospitals versus continuing to give loans and distress hospital funding over and over again because these hospitals, to Jason's point, I don't think I don't see the return in investment while we need to keep them afloat and alive. We have to. I know we have to do it. Is this sustainable? Are we gonna continue to just been doing this year after year?

Yeah. We would note, the chair is probably aware that DHCS is is looking at at how they pay medic, how Medi Cal pays hospitals and as part of the rural health transformation program that we'll talk about shortly we also will be looking at there are some states for example who do global budgets for hospitals and particularly for the small and rural hospitals.

It is difficult to have a baseline of support that they can rely on and so we are the the administration is looking at more holistic approaches.

I appreciate that. And chief deputy, you of the 10 hospitals that applied for the 25,000,000 that we're we approved in early budget action, are those 10 hospitals do we know if all of them are eligible or these are 10 hospitals totals that apply? We don't know if they all qualify with the 10 the cash on hand within ten days.

It is a good question. We're evaluating now, so it's it is possible that some will not meet all of the criteria laid out in the statute or the application.

Something to add to that?

Yeah. Joseph... Department of Finance. I think it's also important to note that the the intention of this program really is addressing kind of hospitals are really are kind of an imminent risk of closures. Obviously, I know there's some desire to adding more parameters to this program, which I would note that within the included provisional language for this program has that flexibility to have that discussion.

That?

But kinda comparing this program to the existing distressed hospital loan program, you know, the intention is this to be a short term bridge, support for these, hospitals.

And as noted, by H. K. The some of the hospitals have already, applied for the AB 108 funding, that 25,000,000, where the hospital is included in that DHLP program. So, you just really kinda wanna contextualize that that while it is kinda within the realm of helping distressed hospitals that are kind of, you know, different intended goals in a sense that, you know, distressed hospital loan program had those turnaround plans and this funding was much more of that short term bridge adjustment.

I've been chair for three years of this committee. Been on this committee for four years. Every single year, we're doing a distressed hospital, fund. It that's no longer a short term, funding gap. We are now This is a structural program we've created to continue to fund distressed hospitals.

We have to do it. I agree. But it's no It can no longer be considered as a short gap, funding gap to keep them afloat. So while we continue to do this because we have to maintain them open, we need a more, systemic approach to addressing, like you mentioned director, of the payments and so forth. You know, it's no surprise that the Senator is interested in the PDN reforms and and adult day sea basses and everything.

Just getting or or cliffs, getting people out of hospitals into places that are more cost efficient for us and they get long term care, that is not acute hospital. So I think I would disagree in saying this is a short term if we continue to do it time year and year after each year.

Chief chief deputy, this is matching exactly the the early action of ten days given that there's hospitals that perhaps have twenty, thirty days, have you looked at increasing the threshold from ten days cash on hand to a higher threshold?

Yeah. I think as you have mentioned, the proposal is starting place. Okay. And it's it's likely. Again, this this 25,000,000 in the AB 108 was was, again, to your point, I mean, immediate at risk of closure.

I think we should probably take a little bit

Would the hospitals that get funding in the the 25,000,000, would they be eligible to apply for this as well?

I I would assume so. I mean, we haven't thought through the criteria. I think that's sort of open.

Because it could potentially then just fund the same hospitals that we did in the 25,000,000 and then fund again the same exact hospitals here.

I would expect that we would take into consideration any prior sort of intervention or or or, you know, financial supports, you know, like we certainly took into account participation in DHLP. It doesn't exclude them, but it is sort of an understanding of what are the financial supports that the hospitals benefit from and this would this would play into that. So it's not exclusive, but it could be considered.

And we hope to have some lessons learned from this 25,000,000 that we're evaluating this week to hopefully inform additional funds included in the final budget. Jason?

I might be just picking more at the proposal and not getting at the bigger structural point you're really emphasizing here. But I did just want to respond there. So it was noted that the proposal allows flexibility to consider more parameters. That flexibility would would be for the department to determine that with in consultation with the Department of Finance. It's typically best practice from our office's view that the legislature also weigh in on the parameters. And so that's a core part of our recommendation here.

Definitely. So we can all be held accountable together.

Yes. And and we did request data on, you know, some of the same ratios that we used in the distressed hospital loan program and certainly we're happy to share those criteria.

Thank you. We're gonna hold the item open, move on to session number 12.

Thank you. I'll say 12, opioid settlement fund reversion. So this proposal asked to revert 19,600,000 in the 2023 budget act to the Department of Healthcare Services. For details on that, there's an issue three fifty six in the DHCS finance letter. What I can share with you from HCAI's perspective is there was 25,000,000 in opioid settlement funds originally allocated to HCAI for the Calyrex Naloxone access initiative.

HCAI was able to negotiate a favorable contract for Naloxone with Amneal Pharmaceuticals. As a result, did not need the full funding amount for this program. We've secured the discount that's being used by the naloxone distribution program. So in order to ensure that these excess funds from the oipolet settlements don't expire, we're facing an expiration date. HCAI is reverting 19,600,000 to DHCS.

So we've already encumbered and spent or intend to spend the remaining funds on staffing support operations for the program, purchasing naloxone, implementing a direct to consumer website for naloxone, and distributing training devices to naloxone distribution program recipients. So that was our portion of expenses, but again, to avoid expiration or reverting back.

When did the the department become aware that they had this excess?

I I think in the in the last year, I think it was a conversation with the department finance and department healthcare services and and we realized that

From almost three years ago. And I'm just, you know, as we've continued to do budget solutions, $19,600,000 was unspent for three years. It was never proposed as a reversion to.

The intention certainly was to use it in the naloxone program, but once we had actually gotten through all of the contract, renegotiations, established the contract with Amneal, kind of ran the partnership with the naloxone distribution program at at at DHCS and got into it, you know, two years, two plus years. We realized that, you know, we weren't gonna need to purchase more outright because DHCS is making the purchase through the NDP. So that's that's kinda how it unfolded. It didn't unfold quickly.

We realized it sort of, you know, well into the, implementation of the program.

Yeah. And just to add to that, that this funding is being reverted on the HCAI side. However, the funding will be used as a general fund offset for programs being administered by Department of Healthcare Services, which they'll be covering in tomorrow's agenda. So the funding, while it is being reverted, is being used to offset other costs.

I I recognize that. It it wasn't offered as a cost shift last year or, you know, the department comes in here and says we're gonna use all the money that we're gonna need, don't call this back and it's it went three years without being used.

If if that were to have happened to a contract, a sub vendor vendor, the department's stance has always been to claw it back immediately and I would appreciate a sense of equity or just keeping the same approach that we do with the vendors as we clog money back from them that they don't use. And I think knowing or taking three years to find out that we don't need $19,600,000 is not is not appropriate to hear.

We're gonna hold the item open and move on to issue number 13.

I'll also address, issue 13, rural health transformation program implementation. The budget requests increased spending authority for federal funds awarded to California to administer the rural health transformation program. This budget year request follows a current year request approved by the joint legislative budget committee. So the May revision request is to increase HCAI spending authority by $126,400,000 one time, which in total will cover the authority for all 233,600,000 of the award received by the state from CMS.

Also included is provisional language for an exemption from public contract code and authority for use of a third party administrator in order to meet the highly condensed timelines required by CMS for program implementation.

In response to the first question, so yes, I think we received approval of $107,000,000 from the GBLC. And then with the 126, that would cover the $233,600,000 award for rural health transformation.

Sorry, chief deputy. I got distracted so I was trying to get the rundown. It's But Okay. If you can repeat that part again of where the rest of it Yeah.

Sure. So Okay. For current year authority, we we ran a request and and was approved by the the the joint budget legislative committee, January. This proposal for budget year adds a 126,400,000 in authority. So that should cover the 233,600,000 award.

So we've begun spending, in current year, and this will just carry us through and also provides, some of the support for resources and

So you've probably already gotten the 107. This is for the remainder that brings up to the 230 there was

We're implementing now. ... the grant programs and getting ready to roll those out, here late spring summer.

Perfect. Yep. Nothing on? Okay. We're gonna hold the item open.

Thank you.

Thank you so much, HCAI. Department of Managed Healthcare is up.

Alright. What's going on with issue number 14?

They were good. We're on. Good afternoon, Madam Chair. My name is Dan Southard.

I'm the Chief Deputy Director at the California Department of Managed Health Care, or DMHC. I'll first start with our pharmacy benefit manager licensing requirements and data review. AB 1116 from last year replaced the current pharmacy benefit manager registration requirement with a licensure mandate for all PBMs that contract with either a licensed DMHC health plan or a California Department of Insurance licensed insurer.

The current PBM registration requirement sunsets on 12/31/2026, and PBMs are required to obtain a license with the DMHC on or after 01/01/2027 or the date on which the department has established the licensure process, whichever is later. AB 1116 requires licensed PBMs to submit quarterly financial documents and other information to the DMHC and gives the DMHC the authority to audit licensed PBMs and ensure compliance with the law.

The six positions received last year for AB 1116 were the minimal positions the DMHC needed to set up the licensing structure for PBMs and to provide legal guidance. This proposal is requesting the resources needed to review the ongoing PBM licensing documents and financial documents and to take enforcement action against non-compliant health plans and/or PBMs. Due to the timing with SB 41, the DMHC requested the resources in this BCP to review financial documents.

You will note that DMHC is not requesting additional resources in our SB 41 BCP to review the financial documents required in SB 41. To implement the ongoing review of licensure and financial documents and take enforcement action against non-compliant health plans and PBMs, the DMHC is requesting eight positions and $5,600,000 in 2026-2027, increasing to 10 positions ongoing in 2029-30 and $4,418,000. That concludes my overview.

I'm more than happy to answer any questions.

Okay. No questions from me. I'm going to hold on and move on to issue number 15.

Second issue is the California Managed Care Complaint System Resources and Project Implementation. During the fiscal year 2025-2026 budget process, the DMHC requested and received approval for $1,157,000 in 2025-2026 from the Managed Care Fund to initiate the planning phase to modernize the current consumer and provider complaint customer relationship management system. The DMHC is currently requesting resources for the initial implementation of the system platform replacement, and that would provide solutions to the following business, technical, and risk issues.

It will remediate information security risk inherent to operating the existing legacy system, provide robust workflow automation that will allow existing case workers to process more complaints and reduce manual processes, enable rapid low-code workflow automation that currently requires months or years of software development. This will decrease to days or weeks, foster more efficient complaint resolution, and enhance communication and transparency in the resolution process, centralized system tracking for managing and resolving complaints.

And to address this, the DMHC is requesting $3,360,000 in fiscal year 2026-2027 from the Managed Care Fund to support the initial implementation of health plan member and provider complaint system replacement. Resources requested in this proposal will allow the DMHC to meet required standards and timeframes for reviewing consumer and provider complaints and to support the DMHC's customer service and assistance to Californians.

No questions from me either. Going to hold the item open, move on to issue 16.

All right. The last one is electronic filing and analysis of claims settlement data project implementation related to AB 3275. During the fiscal year 2025-2026 budget process, similar to the consumer complaint system replacement, the DMHC requested and received approval for $191,000 in consulting funding to initiate the planning phase to implement electronic filing and analysis of claims settlement IT project and to assist with IT project approval lifecycle development to implement the requirements of AB 3275.

The DMHC anticipates a 24-month IT modernization project to implement the necessary system updates and to support compliance with AB 3275. This solution will also enhance the DMHC's risk-bearing organization oversight, financial reporting systems grading criteria, corrective action plan process, and claims timeliness reports to support full compliance with AB 3275.

This proposal requests project funding for two fiscal years in the amount of $2,420,000 in fiscal year 2026-2027 and $2,026,000 in fiscal year 2027-2028 from the Managed Care Fund to implement this data solution and meet the requirements of AB 3275.

Can you remind me how we fund this fund?

This is a special fund through assessments on health plans.

Great. Thank you so much. Hold the item open. Move on to the next. That's it.

Yep. That's it for you. We are now on the Commission for Behavioral Health on issue 17. Testing? Oh, great.

Good afternoon, Chair Menjivar. Thanks for the opportunity to present today. I'm Brenda Grealish, Executive Director for the Commission for Behavioral Health, which is short for the Behavioral Health Services Oversight and Accountability Commission. I'm joined today with Kieran Sanguin, or Savage Sanguin, the Executive Director for the California Pan-Ethnic Network, and is also a CBH contractor for our immigrants and refugees contracts as well as the diversion racial ethnic minorities community advocacy grants, which will be issue 18. So, just a little background on the commission.

We're an independent state agency led by 27 commissioners whose membership reflects the public behavioral health system, including consumers, family members, providers, community members, counties, and state partners. Our role is to bring public transparency, evaluation, and data-informed policy recommendations, grant making, and technical assistance to strengthen counties to strengthen outcomes for Californians most affected by the public behavioral health system, especially those who are most underserved and those who have the highest behavioral health needs.

Given our independent voice, the commission is sometimes treated as a threat because accountability, transparency, and community voice are uncomfortable when systems are under strain. And we've seen this repeatedly. During the development of Proposition 1, there were serious concerns about whether the commission would lose its independence.

Last year, the commission faced a $20,000,000 Mental Health Wellness Act cut, which is our longest and largest, excuse me, largest ongoing local assistance grant program. And this year the May Revise proposal proposes to cut two core BHSA tools that voters approved in Proposition 1, which are our Innovation Partnership Fund grants and our community advocacy grants.

Essentially, the May Revise proposal this year seems to have the same goal as last year, which is to weaken the commission and limit our ability to administer grants as per one of our statutory duties. Specifically, this year's proposals would not just reduce programs, they'd weaken two of the BHSA's foundational how we change the system mechanisms: innovation that scales and community voice that holds implementation accountable.

Starting with the proposal to permanently reduce the commission's five-year Innovation Partnership Fund from $20,000,000 to $10,000,000, essentially Proposition 1 fundamentally changed innovation funding in California.

Under the Mental Health Services Act, 5% of county MHSA funds went to innovation. That roughly equated to about $90 to $200,000,000 per year statewide across the counties. And under BHSA, innovation is now centralized into a statewide strategy through the Innovation Partnership Fund at only $20,000,000 a year for five years. So in other words, Prop 1 already shrank innovation dramatically.

And the state's dedicated innovation capacity is now far smaller, so cutting it again would essentially cut or change the core of what BHSA envisioned as the statewide pathway to learn what works and scale it. At the same time, it made sense to move innovation to the state level to take that burden off of counties.

So our, the commission, through our work to plan for the Innovation Partnership Fund, intends to be the state's dedicated statewide innovation engine to build, to test, evaluate, and scale solutions across regions so that counties can adopt what works. It also allows us to bring forward scalable approaches from community-based organizations, tribal partners, universities, non-profits, and the private sector, creating a funnel of innovation that does not rely solely on government to generate solutions.

So the immediate impact of this proposed cut would affect our current procurement, which is currently underway. We've received an extraordinary amount of volume of applications for the Innovation Partnership Fund, and we're currently scoring those proposals. So a midstream reduction would directly reduce the number of high-quality implementation-ready projects that can be funded.

Demand and readiness has been clear. So since we published the RFA for the Innovation Partnership Fund on March 20, we've received over 400 questions and inquiries. We held two bidders' conferences that included over a thousand participants, and we received over 300 applications. Because we're in the middle of an active procurement, I can't tell too many details about that procurement. However, I can say that the responses that we've received reflect the kind of broad innovation ecosystem that the legislature intended this fund to support.

Our applicants have included non-profits, counties, public health departments, county offices of education, hospitals, businesses, other private sector entities, universities, research organizations, consulting firms, small community-based organizations, faith-based organizations, and tribal organizations. And many of these applications are explicit public-private partnerships. So these proposals reflect a wide range of strategies to improve California's behavioral health system. Some are focused specifically on BHSA priorities, while others are aimed at broader system improvement, implementation support, and innovation adoption.

Notably, when the commission conducted an earlier concept development process to help shape the RFA, we received a diverse set of ideas showing both demand and the potential for this funding.

And those concepts range from AI-enabled tools to reduce administrative burden and improve service delivery efficiency to technical assistance and infrastructure support to help community-defined evidence practices become integrated into the behavioral health system. In fact, several departments within the administration have submitted concepts for the commission to consider, which is significant because it demonstrates the need for this funding was recognized not just by outside stakeholders but by the administration itself.

So in other words, state departments identified ideas and priorities they believed were worth advancing through this fund. So it's therefore difficult to reconcile the early recognition of the fund's value with the proposal now to substantially reduce it just as the committee is getting prepared to make awards. So, essentially a 50% cut at this stage would mean that for our small grants category we would reduce from eight grants to four grants, cutting funding in half from $4,000,000 to $2,000,000, and that would impact the small grantee potential applicants, which included community-based organizations, non-profits, and tribal organizations. And then it would cut the large grant category from a minimum of three awards to one to two awards and going from $16,000,000 to $8,000,000. And this would have real consequences.

It would reduce access to funding for smaller and community-based applicants, narrow the range of ideas the state can support, and diminish the state's ability to refine and scale innovation that could improve behavioral health outcomes. It's also troubling given that this process was shaped in part from input across the field, including hundreds of community stakeholders and departments within the administration, all of whom submitted a concept for what this fund should support.

Throughout this process, the administration provided important and constructive input and distributed the RFA announcement to help promote this funding opportunity broadly.

And so to invite that level of engagement, build a funding opportunity around those ideas, solicit applications, and then cut the program in half immediately before awards are announced would send a deeply discouraging message to our applicants and our community partners. Applicants have invested extensive time and resources in good faith relying on the funding structure the commission published. For smaller organizations especially, that investment is significant.

Cutting the program at the last moment would not just make the competition tougher, it would pull back the opportunity after the state itself encouraged innovation and partner participation. Excuse me.

Put simply, we are the only state entity in state government looking at innovation for a broken system. Cutting this funding sends the message that California's behavioral health system doesn't need dedicated innovation support, despite the clear demand, the ongoing implementation pressures on counties, and the realities families and communities are facing every day. For these reasons, I respectfully request you reject the May Revise proposal and maintain the $20,000,000 for the Innovation Partnership Fund. Department of Finance.

Victoria Rapley, Department of Finance. So the May Revision includes $55,000,000 for the commission in 2026-2027, of which $10,000,000 is included for the Innovation Partnership Grant Program. Proposition 1 requires up to $20,000,000 be allocated to the commission annually for five years. The amount included in May Revision is in alignment with the requirements of Proposition 1.

As part of the broader Proposition 1 state investments proposal, which is part of tomorrow's agenda, the administration took a statewide view of behavioral health programs to determine what could be funded with the Behavioral Health Services Fund in lieu of General Fund.

These fund shifts impacted several departments, including the commission. When considering Behavioral Health Services Fund investments proposed in the May Revision, the administration considered several factors, including available unspent funding from previous years, prioritization of Proposition 1 funds, and whether any programs were duplicative. In the commission's budget, we estimate that in addition to the $55,000,000 proposed in the May Revision, there is over $100,000,000 in unspent funding from prior years, including $20,000,000 appropriated in the 2025 Budget Act for the Mental Health Wellness Grant Program.

In addition, in the past, the administration received feedback that there is desire for Proposition 1 funding to prioritize core direct services as much as possible. Given the historical data on the commission's funding, as well as a significant level of unspent funds, the administration proposed $10,000,000 in new funding in the May Revision.

The $10,000,000 not allocated to the commission allows for additional investments for direct services within the 3% state-directed cap. Pursuant to Proposition 1, up to $20,000,000 may be allocated to the commission for the Innovation Partnership Grant Program. The May Revise proposes an allocation of $10,000,000 for this program. While we acknowledge the commission's work to implement this grant program, the 10% of revenue for state-directed purposes is subject to the annual budget process, and funds are not authorized until the signing of the Budget Act.

Similar to other grant programs, grants are ultimately contingent upon availability of funding. And then in addition, the May Revise proposes a reduction of $6,700,000.

Will?

Oh, Gulen's with the Legislative Analyst's Office. So nothing to add on these items. We have some prepared remarks for tomorrow's hearing regarding the behavioral health service fund offsets in general, but we're available for questions, on this item.

Okay. Thank you so much. And so we'll come back to issue 18. On issue 17, executive executive director, what would you say Department of Finance and the language of the proposition says that innovation fund can get up to 20,000,000? Their stance is that this is aligned to that because it it doesn't take away, it's within the parameters.

Could you can I hear a little bit more on that?

Absolutely. I mean, I think that's accurate, in terms of it is a maximum of. I think there were a lot of expectations out there even as I've been in the executive director that this would be $20,000,000 We've gone ahead and planned accordingly and especially seeing that there is funding that it can be used for this and seeing what ideas are being proposed for other ways to spend that funding. These are going to be launch ready projects.

We're going to be ready to go in a matter of weeks and so, and these projects would have that same kind of direct impact to improve services for, for our state citizens for Bay.

Can you share because I know you're gonna be announcing the wordies June 15, the same day we're supposed to be signing or the same day the ballot the budget's supposed to be passed. Can you share back in March when you started, accepting applications, conversations that you had with the administration or Department of Finance, any inclination that gave you the the ability to go up to $20,000,000?

Sorry. I in terms of.

So when you put out the The application for individuals who could potentially be awarded, the intent was for the full $20,000,000 to be utilized for the intervention fund. Did that dollar amount, the full amount come from the administration? Did Department of Finance say, hey, you have 20,000,000 to play with?

No, they didn't say that. I think it was just a matter of, you know, we that's what the allocation was up to. We know that's how the budget works and so we were planning for exactly what it could be and so we went move forward with planning for being able to fully launch with the full dollar amount.

Department of Finance, how do we how do we what do we anticipate recognizing that the awardees have already haven't been selected yet? They're supposed to be selected in less than a month. How do we anticipate this impacting a quick change in, how much money can go out and given the fact that the applications already were accepted?

Yes. I think as noted earlier by my colleague that, you know, understanding that work has been done by the commission, but ultimately, you know, this funding is subject to the budget process. You know, through the May revision, as noted, there is a you know, looking at funding for Prop one, there is a party placed on, you know, sending these funds to core direct services. As noted, we flagged that in this analysis.

The commission has available funding from previous years as well as, that we are including the May revise, from our perspective, is in alignment with Proposition one.

So we understand, you know, the concerns. Would note though that this funding was ultimately subject to the budget process.

Brenda, can you share a little bit more about they spoke on a couple of unused unspent funds. Has there been unspent funds in this? And of the 55,000,000 that the administration is proposing to give, 10 of that is for the innovation fund. The rest of, oh my god, $45,000,000. Can some of that be used to

I'm I'm I'm kinda clear what the unspent funds are. Sorry, you guys. What's the unspent funds that we're talking about?

There are a couple examples that were given during the presentation on unspent funds.

Yeah. So, you know, in our analysis, it was determined that appropriations from previous years, you know, the information is made through this analysis that there was available funding from previous appropriations. You know, in terms of kind of evaluating prop one allocations, that was taken into consideration of available funding as well as how certain programs would align with other existing programs. You know, if it would the trip would be interested, we can share that. We could work with your staff of providing information.

I'd love because I don't think you're aware that you've had unspent.

Well, I wonder if these you're talking about the counties unspent innovation funds because this is the first time we're implementing this project. Right.

This is the very first time. New. Yes. Yeah.

So I'm not quite sure what that Sure. I'm trying I'm having a hard time making the connection between the two because I know counties may have had unspent innovation dollars but this is a like a different program like and we're actually approaching it in a very different way.

Big dog is coming, she'll explain this. Oh. Okay.

Thank you.

Thank you, Chairman Menjivar, Sanal Patel with the Department of Finance. So just to clear it up, these are not county dollars, so they're not in the they would not impact local funding. These are previous investments. So as you're aware when Proposition one passed the state directed component increased from 5% to 10%. Originally the 5% a portion of that every year often went to the OAC.

So these are to the commission, I apologize. So these are investments that over the years have been awarded through the budget act for various purposes. So it could be the mental health and wellness act, it could be other investments. As correctly noted this is the first year that there is specific innovation dollars in Proposition one which is not a formal requirement.

But to my colleague's point, there is over $100,000,000 in old unspent dollars for various programming that could be potentially spent if this is something that the commission wishes to continue to prioritize and spend the full 20,000,000 on the rent program.

Where where are those approximately 100,000,000? Who who has those?

They are with the commission. They are with In previous budget act appropriations that at this point have not been liquidated.

And those dollars were allocated when it was MHSA? Correct. Okay. And those it's the two part of finance stands that those have not been touched and the commission has the ability to use some of those funds to add to the innovation fund to get to the 20,000,000.

I we think they could if this is something that they would prefer to reprioritize. We could move those funds into the new innovation fund if that is something.

And those 100,000,000 are on top of the $55,000,000 that is being allocated in the in the budget for the commission?

Correct. The 55,000,000 is a new appropriation in the 2026 or what would be the 2026 budget act whereas the older investments are from previous fiscal years. Some of them have been reappropriated some overtime, some and we don't know there'll be additional reappropriations in the out years. These are old dollars. I can't speak to what specifically the commission had planned for those dollars. I don't have those insights but these are funds

that we know still exist in terms of how much of the fund is already accounted.

Do you know how far back those funds go in terms of

Not at much time but that's something we could follow-up with if that's of interest. Please.

So I mean we have all of our funds for there, we have different allocations for different purposes and so like we have our Behavioral Health Student Services Act fund, that's for a specific purpose. Those are all funds tied up with the county behavioral health for that purpose and then we have our Mental Health and Wellness Act dollars.

I don't know if that's what you're talking about but those are also already tied up in projects that we have underway in contracts that are already either done and they've they're underway or that we're about ready to launch our peer respite RFA pretty soon. So and that's already spoken for. So I don't know Yeah.

I think we'd have to have more offline conversations. I'm happy to

do that. I'd be interested Yeah. In seeing how these numbers they seem very different stories. I'm hearing here, I'd love to see if you are of the mindset that every single dollar that you have, it's already accounted for for projects, vendor, contract already. I think I need a little bit more information on that.

And then Department of Finance in your explanation for this, it was like it's contingent on available funds. The funds are there. It's just it's being reallocated to offset general fund. And I'm just wondering, the January proposal had a balanced budget without these shifts, budget solution shifts in them, and these are new even though we have one time increased revenues.

I'm just I'm trying to understand why the additional need for these budget solutions, given that January budget was a balanced budget, we didn't come under in the projection of revenues.

We came a bit over, recognizing it's one time it could fall off but because of that I'm I'm I'm struggling to understand why they need to cut more or find more solutions.

So I think I would just note a couple of things have shifted since the May revisions. So it is correct to say that at the governor's budget, the budget year was balanced. I think you are tracking that since in the May revision, not only is budget year balanced but budget year one is also balanced and that was where we have the biggest deficit in the out years. And starting in 2027-2028, the May revision, budget, results in more than the deficit excuse me.

Out years, the deficit has also been reduced by more than half.

So a combination of the one time revenue increases plus the new revenue proposals have put us in a more prudent state for the future and address the budget for budget year and budget year one and also set us up for greater success in the out years as well. But hearing your comments, so I think the situation has changed in terms of our readiness for the future as well

as sort of our addressing of the budget deficit. It was balanced for the first year given that we are now looking to or the proposal to balance for the second year as well. Additional budget solutions were required to do a budget plus one balance. For prop for for prop one, it you know, I went to a couple of the rallies for it and so forth. It was being advertised, measured as brand new investments, for behavioral health and we're changing the world with this.

And it's difficult to then say we're gonna supplement, we're gonna supplant versus supplement, you know. We've talked about this in a couple of times in this subcommittee that we're supplanting current programs versus bringing new programs to it, which Prop one was supposed to do especially with this fund. I'd be more interested. I haven't I think I'm struggling to understand if there's money or not and if there's ability to add to that.

I do recognize that it's within the language of Prop one, that it's up to 20,000,000.

We are within the language of Prop one, recognizing that. I am concerned that we're using this fund as a general fund supplant versus its intention of new programs and so forth. So that's the balance I'm trying to find right now. Look forward to continuing those negotiations with the three party to finding a way. The I think I think the sticking point is the fact that applications or awardees are supposed to be announced the same day we're doing this budget.

Doesn't seem aligned to do it. I think this conversation would have been a better conversation in January to give a little bit more time. We could have potentially halted any applications, but the fact that they already come in makes it a little bit more difficult with this. Appreciate the clarity on your point, and nothing further on this issue. We're gonna move on to issue 18.

Okay. So moving to the proposed permanent 6,700,000 ongoing cut to our community advocacy program. Essentially this is shrinking the voices of those that the public behavioral health system exists to serve. You know since the mantra, since the beginning of the Mental Health Services Act and now continuing on with the Behavioral Health Services Act.

It's always been at the core of the foundation of this work of nothing about us without us. And that Proposition One added a new statewide expectation for community planning and integrated county plans and really not just having that be paper work but really making sure that the right people are showing up, that they're understanding the system and that they can advocate effectively so that, the integrated plans can reflect what communities actually need.

And the administration's been appropriately emphasizing that proposition one requires a stronger, more inclusive community planning process that counties must meaningfully engage these stakeholders in developing integrated plans. If the state's raising expectations for county engagement it should not simultaneously eliminate the only statewide funding source that helps underserved communities understand the system, participate effectively and bring their perspectives forward.

The commissions community advocacy contracts are the state's practical mechanism to reach and engage underserved communities, reduce barriers, teach people how the system works and ensure that participation is real and not performative so that county plans and state implementation can reflect the lived experiences of those who use the services.

The program funds trusted organizations to provide advocacy, training, and education as well as outreach and engagement on behalf of communities who face the greatest barriers to care. In fact, it is required in statute that the BHSA provides funds to assist communities and family members so that agencies fully consider concerns about quality, service delivery structure and access.

So eliminating this program would abruptly remove capacity delivered through 16 contracts serving nine underserved populations including LGBTQIA plus, diverse racial ethnic communities, veterans, K through 12, clients and consumers, families, parents, transition age youth, and immigrants and refugees. And just to give an example of the type of work that's done under these grants, the California Association of Veterans Services Agencies which is one of our grantees did a review. This was under MHSA but the same kind of work that could be done under BHSA.

They did a review of plans from 13 counties in different regions across the state and found that although veterans were discussed, they only five had actually included veterans focused programs in in their in their three year plans from last round. So they could take that information to those integrated planning types of meetings and be able to advocate for those types of programs.

And so again, there's no other dedicated statewide funding source that supports this type of activity for advocacy, outreach, education and engagement for these underserved populations. These contractors are community based infrastructure. There are trusted messengers who can convene community led events, connect people to services and provide direct feedback to improve implementation of behavioral health services.

Many of our contractors are midway through multiyear contracts and so elimination would halt all the work underway and destabilize community partners at the exact moment VHSA depends on credible community engagement. And direct services alone does not fill this gap because many people can't benefit from services that they don't know about, that they can't access or that they don't trust. These contractors are the bridge between vulnerable communities and the system they rely on for essential care.

So for these reasons, I again respectfully request that the legislature reject the May revision proposal and maintain the $6,700,000 of community advocacy. And now I'm going to turn it over to, Kiran Savage-Sangwan so that she can provide she's one of our advocacy grantees and can talk a little bit about the work that they do.

Thanks, Kiran.

Thank you.

So I want to in addition to the things that you raised, Madam Chair, about what we expected from Proposition one, I think one of the really big promises of proposition one, the changes from the MHSA to the BHSA, was that we would really focus our behavioral health services on populations with the most needs, significant need, and that we would ensure statewide accountability for these dollars, for these voter approved dollars. And so the community advocacy program really has those two specific purposes.

One is to lift up the voices and perspectives of communities that are historically underserved, particularly those at the intersection of the priority populations called out in the act and other underserved communities. For example, people who are justice involved who are also people of color, people who are experiencing homelessness who are veterans. That those are the populations that this work focuses on.

And then the second part of the program is really to ensure accountable to the communities they serve both by actively partnering with counties and by advocating, because we cannot accomplish the transparency, accountability and impact that we want with proposition one if we do not have a mechanism to assess and align county spending with community priorities. And although the community engagement is required by law of the counties, this program is how that mandate really gets fulfilled at a statewide level.

And many of the organizations that are funded through this and there are dozens as the Executive D9+irector mentioned, but many of them would not be able to meaningfully engage in these local planning processes without the support that they get from this program. I just want to give you a couple of specific examples. One is in Kern County, the Bakersfield American Indian Health Project.

They are facing, the impacts of our really devastating federal Medicaid cuts. They're able to come to the table now with Kern County Behavioral Health and figure out how to, meet some of that need with the Behavioral Health Dollars that we have in their clinic. In Riverside County, they're leveraging community health workers to direct people to services who are justice involved but also to engage them in public processes.

In Orange County, survivors of the Cambodian genocide, who are some of the people who have the highest rates of serious mental illness, are being supported, in turning sort of their experience of struggle into power and voice. They've had dozens of Cambodian elders go to the board of supervisors and for the first time, that county funded a behavioral health services program that met their needs.

And similarly, final example, on the Central Coast, our Mexican indigenous communities, people who speak languages other than English or Spanish languages like Mixteco, Zapoteco, they are now, because of their advocacy that they've been able to train these individuals to speak to the county, they are finally getting the language support that they need in in accessing behavioral health services from the county. So there's really tangible impacts here, at the local level of what the commission has been able to support for many years.

And I just finally wanna quickly address. I think there's been some confusion between this program and what the Department of Public Health is doing with their population wide prevention plan. These are very different programs.

That is where we're talking about, suicide prevention, stigma reduction, big public education campaigns. They might involve working with local communities but they're they're distinct complimentary but very distinct goals and programs. This program, the community advocacy program, is really the only proposition one BHSA funding that is there to make sure that the rest of the funding does what we want it to do.

And so that's why, you know, we really think it's cutting it particularly while we're at this sort of launch point of proposition one, trying to get it right, trying to do things better than we did with the MHSA, eliminating this would really have a significant harmful impact on communities.

Department of Finance.

Yes. So I would note that with the implementation of the Department of Public Health's population based prevention activities. The Administration has assessed that many of the activities of this grant program are duplicative of CDPH's state and local activities. It's important to note that the administration values the voice and engagement of the populations that were historically supported by the Commission's advocacy contracts. New funding for population based prevention activities provides new opportunity for the state to support these populations.

It's important to note that CDPH has identified populations of focus for population based investments which align with those populations targeted by this grant program, including black, indigenous, Latino, Asian Pacific Islander, and Middle Eastern populations, children, youth, and families immigrant and refugee populations LGBTQIA plus populations tribes and veterans. As part of CDPH's community engagement and coalition building, CDPH will work with state and local organizations to engage people where they are where they're impacted and in the communities in which they live.

They will also work with communities impacted by systemic racism and discrimination and communities that have been impacted by behavioral health conditions to develop a deeper understanding of the challenges and experiences to inform system wide approaches and strategies. Jurisdiction, community health assessment, and community health improvement plan processes.

Local health jurisdictions will be required to integrate convening and coalition processes into the community health assessment and community health improvement plan processes, and LHJ's are expected to include representatives of the priority populations, those with lived experience, and individuals who represent communities that have been impacted by behavioral health conditions.

This will support the engagement of these populations in behavioral health systems. Finally, CDPH will provide funding to local health jurisdictions, CBOs, and tribes to support these efforts, implement locally led activities, as well as training and technical assistance grants.

So Department of Finance, so it's, I think you teed it up. I think you thought that you hit it on the nail what they were gonna say. Can you share, so you're saying the funding that the, what was it, 3%, 10%, I was gonna mix up, that CDPH is getting.

I believe it's 4%.

There we go, neither wrong. The 4% they're getting, it's gonna create or bring in the groups that you mentioned, same groups that are being tapped in for this advocacy group that's been in inception since 2004 since we first funded this. And they're gonna be utilized to ensure that the funding that is being used under Prop one is gonna be used for the actual needs. People with lived experiences are gonna have a say in the oversight and so forth.

I think if I just add to my colleague's remarks. So the intent is that, so CDPH is, under the May revision, the Department of Public Health would receive about $120,000,000 Of that amount, about half would go to local entities. So that would include local health jurisdictions, tribes, CBOs, nonprofits, as well as a portion of funding for training and technical assistance that would also flow through CBOs.

Part of proposition one is that local health jurisdictions reconvene and bring together coalitions and rebuild their community health assessment and community health improvement plans. And the expectation is that they will also through these funds, build out the necessary convening and partner and coalitions so that these conversations can be informed by those voices, the voices of people who have been underserved by behavioral health systems with lived experiences, family members.

So So CDPH won't be the one, you know, at the state level doing that convening. They have their own, convening process but part of the funding would support these efforts at the local, level.

So it would be at the each local level, their own respective convenings on how their specific funding in their specific counties are going to be utilized?

Through so there's a couple of pieces and so there's the yes the community health improvement plan, the community health assessment. There's also a component with the medical manage care plans as well and the county behavioral. So there is a lot of moving pieces. But all of these really live on this notion that the people who are most impacted by the behavioral health system should be part of the discussion. And I think that very closely aligns with the grant program.

And that's what's when CDPH is funding all these investments with the local level, the expectation is that those conversations are happening with the members who are most or the consumers who

are most impacted by these decisions. And it's approximately $120,000,000 About half of that would go to

the local That's 62,000,000.

Across statewide. Correct.

And just for the first year.

Just for the first year. Correct. 10 times more than this fund and this is a brand new funding opportunity. Correct. If either of you can share and I'd love to hear more from you because you said this is complimentary, but you feel that it doesn't do the exact same thing that this advocacy group does?

Yeah, absolutely. So what CDPH is charged to do is population prevention, right, which is a different goal than having communities advocate for how their needs are met throughout the continuum and the spectrum of services that counties provide. Counties are not providing only prevention services and at this point they're providing very few prevention services. They are providing, the full the full service partnerships.

They are providing services all the way along a continuum and we are giving them, millions and millions of dollars every year to do that, right, because of proposition one.

What CDPH is doing is funding organizations to provide prevention type services and funding local health jurisdictions to provide prevention type services. And it's great that they are engaging people in how they do those services, really support that. That's great. That's an entirely different thing than making sure that we have community voices involved in the program process for everything that counties are doing. Right?

We put dollars into making sure that counties have resources to make their plans. We have dollars. All the BCPs you've seen making sure the state departments have resources to do planning and make sure they get things right. This is one teeny tiny program that puts resources into the community to be actively engaged in a planning process to get the services right.

Anything to add to that?

I would just echo that. Yeah. It's kind of an apples and oranges type thing. I think it's there's I don't know if there's a misunderstanding of what these community advocacy grants do but they do far more broader work to advocate for these populations on a variety of different needs and it's really to make sure that folks who are highest in need are able to get the services that they both need and want. So

Have, has the the group that's getting funded with the 6,000,000 on CDPH, have they started doing their work already? Yes. I'm seeing the audience saying yes.

I don't I have.

We haven't released any have been allocated for that already?

No. Because as my colleague mentioned earlier, this would be the first year of this new investment.

This is the first year.

So July 1 through this budget.

Is when you're gonna get $60,000,000

Correct. But there was funding included in the 2025 budget act for planning purposes. Just planning. So a lot of this information just for your awareness is available on the online in terms of CDPH's implementation plan,

their targeted property, activities and things like that. So, I'm I'm wondering, you know, to your remarks, you're you analyze, Department of Finance analyze these and felt that they were duplicative and what the work of the advocacy but the work hasn't started yet. Wouldn't we have better Intel and better data once the work actually begins to actually adequately compare to see if it is in fact duplicative or not?

I'm worried if we're cutting a group that has been doing the work now for over twenty years who are now at this point I think pretty good experts in this space and then starting a brand new program. It's gonna take a long time to tee up that advocacy group that I anticipate potential gaps in advocacy of these groups being at the table as this new brand new program gets its feet going and gets to understand the new funding sources of Prop one.

I would love data to help the case that this is in fact duplicative or not. It's 6,700,000. So it seems like a little jab is just $6,700,000 and the Senate budget plan also balanced for two years without having to do these cuts. So we also were were were of the mindset that we should balance one plus budget plus one year without making all these cuts. So it is possible.

Our plan shows that it's possible. So that's that's my concern on on that. And also, I think I've had a 100,000 young people message me on on this, and they don't get involved often. So when the youth get involved, I think we gotta pay attention and listen. So I think that for me, if you have data that you can show, you can email my office.

That really shows that it's duplicative. I would be interested in seeing that. If not, I think it'd behoove us just to wait a little bit just to see once that funding actually goes out and see if it actually does what we thought or intend for it to do. Know if you have thoughts

on that. Just two thoughts. So I think it's that's a fair statement. I don't want to disregard sort of this as a new program but I would also just acknowledge CDPH's role as sort of the public health convener and they have a history of this. I know this leadership is aware of the California Reducing Disparities Project.

This came up in last year's budget. All children thrive. These are programs that CDPH has had a lot of success in and I'm sure many stakeholders can speak to that too. I know how passionate they are about those programs. So CDPH does have a long history of this engagement.

So while it is new in the proposition one space, I don't I feel fairly confident to say, at least speaking for myself, that they can take a lot of those lessons learned, those relationships built and bring them into this new work. So again, yes, it is fair to say we are in the implementation phase, but I don't think we want to also disregard that they have a long history of this consensus building, community building collaboration.

And during Covid, we saw even so much more of that where where they really had to step up and do that work and get deep into communities to ensure that everyone had access to what they needed. So I do think they have a lot of history of doing this. I don't think this is a new activity

for them. Do you believe their jurisdiction goes beyond to the restriction that the stakeholders believe that the CDPH program or or group is only gonna be focused on prevention services while this current advocacy group does the whole assembly line or do you believe the CDPH coalition, that group, has the ability to get involved from point A to Z?

Well, the intent of the CDPH scholars is prevention. So I don't want to necessarily take away from that. You know, we agree with that. But I would also acknowledge, CDPH is working in collaboration with DHCS on the early intervention component. So that's where the Medi Cal managed care plans, behavioral health plans come into play.

And the expectations of community voice in all of these conversations is always there. That's never gone away from proposition one. So while I can't say CDPH would be lead on that, I think it is all very fluid and it's a spectrum because as we transition from prevention, early intervention to intervention, all of these different bodies are working together in the behavioral health continuum. So I think it's a little bit of a yes and of CDPH wouldn't necessarily lead the way but those expectations still exist.

Right. I think that's the worrisome, right? They wouldn't lead the way. This group seems to be in front and center of those conversations while the intent is for that group to do all of it. They're they might fall short in some of them but I hear your point on they've been doing this for a long time.

But I actually, it's the most engagement I've gotten from Department of Finance so I appreciate the back and forth here with you. You should stay here the rest of the hearing. We're gonna hold the item open and that'll be on your commission. Thank you.

I wanna know, last time you were here, you're so excited with your presentation and just very I also was very confused because usually the person that's six months to department of finance is always aligned with them and I was like what is happening here?

She's gonna get fired. She's like against department of finance right now. So I bet I got it. You're your own. Yeah.

Covered California. We're on issue 19.

Good afternoon, Madam Chair. My name is Angel Alonso Coronel with the Department of Finance. Today, I'll be first beginning with the first issue on presenting an overview of the state premium subsidy program proposal included in the May revision. We're also joined in today by my colleagues at Covered California to speak more on the expected level of premium support at various income levels.

So the Merry Vision proposes augmenting the state premium subsidy program by 110,000,000 from the health care affordability reserve fund, in 2026, 'twenty seven and ongoing, bringing total program funding to $300,000,000 compared to the governor's budget, which included $190,000,000 This augmentation would expand eligibility from 165% of the federal poverty level to now 200% of the federal poverty level beginning in the 2027 coverage year.

The projected impacts include the following: Over 200,000 additional Californians, will become newly eligible for a state, premium subsidy. Total enrollees receiving a state subsidy grows to over 500,000 in plan year 2027, compared to over 300,000 in plan year 2026. What this augmentation would do for enrollees is the following. Enrollees up to 150% of the federal pilot level will continue to have access to $0 premium plans under using the silver plan.

Enrollees between one hundred and fifty and one hundred sixty five percent of the federal pilot level will receive a

65?

Oh, sorry.

150 to 850.

Between 150 and 165. Okay. Yeah. Percent of the federal pilot level will receive a more generous subsidy in plan year 2027 compared to plan year 2026. The and then, enrollees between 165, 200% of the federal pilot level will become newly eligible for the state premium subsidies.

And that concludes the first issue and we're happy to answer any questions you may have.

LAO, any comments on this? Okay. I think I might need those numbers one more time. So for the silver you're gonna increase the amount of people who are paying $00 right now on premiums?

Yeah. The amount paying the number paying $0 will stay the same. Okay. So that's flat.

Okay. So no more people are gonna go into that level.

That's correct.

Yeah. The one that is from 150 to 165, they're gonna get an increase or deduction I should say. How much?

About $10 per member per month. Okay.

And then when does the 165 to 200,000 federal poverty level become eligible?

That will happen for 2027. So when people start to renew in October, they'll start to see those new prices and

that new eligibility. Starting 2027. Okay. And then how many people are covered right now?

Right now? And I'm sorry. I didn't introduce myself. Katie Ravel, Covered California, director of policy eligibility and research. We have about 300,000 receiving subsidies today.

But then with all these new ones, it's gonna bring us up to 500,000. That's right. Ending on a great note on part eight of this agenda. This is agenda, this is phenomenal to to to hear. There was also always concern from Department of Finance on the solvency of this fund.

Are we just more healthy now? Because we've kicked people off in health insurance in state of California and they have to pay. Sorry to throw that in there.

Oh, no worries. So.

Why do we have all this yeah. Where does Yeah.

So with the health care affordability reserve fund, the reason why we have, you know, right now, the projected ending fund balance for budget year twenty twenty six, twenty seven is approximately 230,900,000, and this is this includes the repayments of the general funds. For budget year, we're including repayments of 200,000,000. And then for budget year, I don't know, plus one, it's the 262,000,000 repayment. And then the year after that, it would be 309,000,000. So in total, 771,000,000 coming from the general fund repayments.

So it appears that there is this is sustainable to continue these subsidies Correct. For the foreseeable future?

So correct. In developing this program, we wanted to kind of balance both providing, you know, more affordability access, and that's the various kind of changes in the health health care sphere, but also trying to balance that sustainability that, you know, if we're building a program, we wanna make sure it has that longevity to it like you

Min Li, LAO. Just to to clarify a little bit, the current level of penalty revenues on an annual basis is about 290,000,000. The new level of expenditure with the augmentation proposed would be about $350,000,000 on an ongoing basis. So there is a $60,000,000 gap, but as the administration has mentioned, there are these loan repayments that are expected in the next two years which will

Cover that gap?

Yes. Okay.

Thank you for that clarification. I had a question. Yes. Is this only for the silver plan? Anyone who's on the silver plan is eligible for this?

We benchmark the calculation of your credit to the silver plan, but you can use it for any plan you want to enroll in.

Okay. We I think what we saw what we've seen and if you have any updated numbers, I know we're now six months into the new eliminations of the subsidies that in the beginning of the year we didn't see a lot of people leave it. We just saw them choosing a lower level plan. Is that still the trend you're seeing right now?

It is. We're still seeing we still have the most enrollment in silver but we're seeing more shift to bronze to take advantage of

a lower premium. And how will people become aware or how do you make people aware that this is coming in maybe they have now because of the savings so bump back up to a silver?

We do that as they we do that directly through our agents, our navigator partners and then anybody who uses the system online will see those new savings and then we do a lot of education for people if they can receive a more affordable plan. And in some cases, if someone can receive a free silver instead of bronze, we'll move them out of bronze into silver automatically so that they don't have to do any extra work.

I'm really glad that California is in a position that is able to attempt. I know we can't backfill everything but we were in a better position than others to be able to offset what happened in the Federal Government. So I appreciate this proposal in finding a way to do that. Hold the item open, move on to issue 20.

Alright. So issue 20, so this would be first the gender freemium care augmentation. The Medicare vision includes 26,800,000 from the Healthcare Affordability Reserve Fund in 2026-27, and 13,400,000 from the Healthcare Affordability Reserve Fund in twenty twenty seven-twenty eight and ongoing to augment the gender affirming care program. This reflects an increase of $13,400,000 compared to the governor's budget, which included 15,000,000 The augmentation aligns available program funding with updated costs reported by health plans. Therefore, it is a workload adjustment.

The twenty twenty six, twenty seven amount is higher than the ongoing amount because it provides an increase in funding for two coverage years, coverage years 2026 and 2027. Ongoing years augment a single coverage year.

I think I'm gonna need that in a different way. I didn't understand. So we've allocated $50,000,000 for that. The 13.4 is because the cost came in higher than anticipated. The 15 plus the 13.4, a little shy of 20 that covers two years?

So to clarify, so in budget year we're including additional 26,800,000. So that is going to, address both the the need to augment both coverage year 2026 and coverage year 2027. Because, with the coverage years, it doesn't nicely align

with our fiscal years, because it's January, December. So we have kind of those

January, December. So we have kind of those overlaps, if you will. And then the additional 13,400,000 in 27-28 is specific to ongoing coverage years.

So addingall those numbers.

If it's easier just, ongoing, the Jenner Firming Care program will, receive an appropriation of 28,400,000. So we start at a base of 15. We're adding 13.4 to meet the needs of the cost. Okay.

And then is it only for two years? So but you said it's ongoing?

This would be an ongoing.

To cover Jenner Firming for me. Okay. I remember I had a question earlier on if, like, all the funding has been utilized, but the fact that we're asking for more is it's that it's being utilized.

So I will start. I might need my current California colleague to help. I think when the there is initial estimates made when the program was developed, but now that, you know, we're halfway through, I think that we're getting more updated information from health plans to understand the cost of the program.

That's exactly right. Since this is the first year we have to pay for this as a state, our health plans did their best to estimate last year. We asked them for new data early this year and they said they gave us the updated cost that it will cost more to make sure that we can cover these services for all of our enrollees.

Okay. So that it will cost more. It's not that it's costing more. So we don't know if the enrollees are actually utilizing the services yet?

They should be. The same way they always have been. I think we would we just sharpen the pencil on what it's actually gonna cost to provide this as a stand alone funding.

And is it that we give this these dollars as the claims come in or it's just.

No we pay, them we pay them separately to our health plans and we do that on a process where we can reconcile and make sure we're paying for all the enrollees that we have.

How do we know though? I guess, how do we know that that are we just giving out the dollars regardless of people the enrollees are utilizing gender affirming care services? Or how do we know that that's that all of it is being used for that?

The health plan gives us an estimate and then we're able to look at our claims data to make sure that that estimate matches what we're actually seeing in the in the care costs.

Got it. When will we have a good review of this to see the enrollees? How much how many enrollees?

Yeah. For any program like this, I think six months after the benefit year closes is when we have all the claims in and that's a great time for us to align on the estimate.

January next year?

So that would be June 2027 to start the first year Okay. The 2026 year.

Okay. Thank you. Helpful. We're gonna hold the item open and that concludes Part A. We're gonna move into public comment.

Go ahead.

Good morning or good afternoon, Madam Chair. My name is Doctor Luke Valencia. I'm here today speaking on the behalf of my students. In AB 1144, licensure for laboratory staff and professionals increased nearly 300%.

I've had numerous students come to me, distressed that this increase would make it, difficult for them to pursue an education and a career in the laboratory field. Currently, the MLT licensure is at $0 and clinical laboratory science is at about $179 And it was increased to, dollars $330 not every other year but every year. And we are worried with the shortage of laboratory staff and healthcare professionals in California that this would further reduce the trained staff available to help the shortage.

Thank you.

Thank you.

Good afternoon. I'm also speaking on the same topic. My name is Anne Ho Chhotzky and I'm a clinical laboratory scientist at Stanford Healthcare Cancer Center in South Bay in San Jose, California. Today, I'm speaking on behalf of a coalition of 21 organizations, including California based organizations, national organizations, and globally recognized organizations in laboratory medicine and pathology. We respectfully urge the committee to adjust AB 144 to restore public input and oversight that allows the CDPH to implement further exorbitant massive increases in licensure fees.

So this 335% licensure fee increase places a major financial burden on laboratory professionals already facing workforce shortages and rising costs. We are already hearing from lab professionals near the border of Oregon, Nevada, and Hawaii based professionals that they will forego their California licenses and not return to work in the state. International professionals are also no longer willing to enter the state of California to work because of these increases in licensure fees. For context, New York's renewal fees are $170 every three years.

California's fees are now the equivalent of $900 every three years.

Thank you.

Thank you.

Thank you.

I'm speaking on the same topic. My name is Valerie Turenev. Thank you for letting me speak, Madam Chair. I'm a clinical laboratory scientist. I work in a hospital laboratory on the Central Coast.

I have five years of college, more than that of an RN. I provide doctors and other providers with lab results so they can accurately diagnose and treat patients. When you're in the hospital, you're gonna see people in red. Red means blood, and this stands for the laboratory. We, provide the doctors and providers with lab results so they can accurately diagnose and treat patients.

I'm here to alert the Senate of the negative outcome that will occur due to the more than tripling of my license fee. This increase in my license fee is part of AB 144. Funding for lab field services was removed from the general fund by the governor and it's expected that we run our own agency with our fees. In other words, we have to be self funded. Other healthcare professions are not subjected to this mandate.

My work is extremely important to doctors and other providers. If you ever have had fluid taken from your knee, I would look at it. If you needed a blood transfusion, I would make sure that it is safe.

Thank you.

Please help us help you stay healthy.

Thank you.

Good afternoon. Darby Kernan. On behalf of the EMS Administrators Association of California in support of issue 4 for 988 and behavioral health crisis, Continuum, we are working with EMSA right now on getting all of the stakeholders together. And so, continuing this process is, good, so we support that. And on behalf of the First five Association, we oppose the May revised proposal to eliminate the $10,000,000 for innovation partnership funds.

As discussed today, eliminating half of this grant program would result in the loss of critical funding that is needed to be awarded in July. Thank you.

Thank you.

Good afternoon, Madam Chair. Connie Delgado on behalf of the District Hospital Leadership Forum, the 33 district of municipal hospitals in support of the $50,000,000 for distressed hospitals. Our district hospitals continue to struggle financially, and these funds can provide a lifeline so that the services can remain in the community. We are also here in support of HCAI's rural transformation and the implementation as they work with district hospitals. Thank you very much.

Thank you.

Madam Chair Menjivar, nice to meet you. Yamilette Rodriguez. I work for Youth Leadership Institute. I'm also a Board of Trustee for the California State University System. Addressing item 4560 issue 18, Youth Leadership Institute, is a statewide youth development organization that builds up young people to create positive change in their communities through youth led research campaigns.

We're in year one of three, leading the K-12mental health coalition that includes the Bay Area, Marin, Eastern Coachella Valley, Merced, Long Beach, also, Ventura County Office of Ed, Pro Youth Families in Sacramento, and Two Feathers in Humboldt County. Please reject the May revised budget proposal that eliminates 6,700,000 in behavioral health services fund allocated to have young people be the mental health advocates researchers in their communities.

Thank you.

Good evening. My name's Andrea Gill and I'm also a program manager from Youth Leadership Institute and I'll be speaking on the same issue. During a youth mental health epidemic, there are serious cuts to empower youth and community voices. We actually partner with CDPH and they look to us to how to engage young people in advocacy.

And so with that, under this work that we've been doing, we young people are able to analyze policy, educate their peers, and take us space in places where they don't feel like they belong.

And so with that, they actually probably emailed you all last night. And then there's please reject the May revised budget proposal to make sure that 6,700,000 is included to protect and enhance community voices in California and to ensure we're enacting the act for what its purpose was.

It was through LinkedIn. Oh, LinkedIn.

Hello. My name is Anu and I am with the Youth Leadership Institute opposing issue 18. We urge you to reject cuts to the BHC BHC's community advocacy program. As a previous youth member, now adult ally from, who also benefited from youth mental health programs, it is important to remember that youth are the future voices and leaders of California. Without these programs, there wouldn't be hope for youth voices to shape behavior health policies.

Thank you.

Thank you.

Hi. My name is Natasha Dosco. I'm also with Youth Leadership Institute from our San Francisco office, also opposing issue 18. I support our juvenile justice program concrete rows implemented within SF Juvenile Hall and data consistently shows the value of behavioral health programs during adolescent brain development and its success in averting the school to prison pipeline. Not only is this a fund is this funding ethical, but it's also financially responsible.

It costs half $1,000,000 annually to hold just one young person in custody. Martin Luther King once said budgets are moral documents. Please do not ignore youth voices at this pivotal moment. Thank you.

Thank you.

Hi. My name is Carolyn Flores and I'm with Youth Leadership Institute representing the Central Valley and talking about issue 18. In the May revise, the proposed budget cuts is unacceptable that we are trying to solve budget problems by taking away $6,700,000 from this work that young people are doing to advocate for their communities. This advocacy contracts are guardrails to help make sure that the impact to community, that they have a say in the policies that impact their daily lives.

We have 40 young people who are coming to the state capital next week, and they are those individuals that are in their first year of a three year grant.

And thank you so much for your time. I appreciate it, and please advocate for our young people.

Thank you.

Good afternoon, Chair Menjivar. Evan Fern with Disability Rights California. We're strongly opposed to the proposed elimination of the community advocacy program and the 50% cut to the Innovation Partnership Fund. These investments are critical for ensuring that consumers, families, veterans, and other impacted populations have a voice in shaping our behavioral health system and that the state can test and expand behavioral health solutions that actually work. Eliminating these funds would silence community input and limit service innovation.

We appreciate the committee for your important questions and attention to this critical issue. We urge you to reject these cuts. Thank you.

Thanks.

Good afternoon, Chair. George Cruz on behalf of the California Behavioral Health Association. We just want to voice our our opposition to the reduction of the Innovation Partnership Fund and the reductions of resources for behavioral health advocacy contracts. But we would also like to note our support for the population based prevention funding and ask that the focus beyond existing programs like the California Reducing Disparities Project that has well documented ROI for the state's investments.

We also would like to note our support for the gender affirming care augmentation and the $1 premium subsidy program.

Thank you.

Thank you.

Good afternoon. Michelle Johnston with the National Multiple Sclerosis Society. I'm here today in support of the $110,000,000 increase for the, Healthcare Affordability Reserve Fund. Most people with MS are diagnosed in their 20s, 30s, and 40s when they're just starting their career. And without access to healthcare, we are not able to get our disease modifying therapies and it can lead to disease progression, which prevents us from being a great part of society.

Thank you.

Thank you.

Good afternoon. Linda Wei with Western Center on Law and Poverty. Firstly, we want to appreciate the Senate's leadership and fully support your employer fair share proposal, which is expected to bring billions in, and will, be critical in saving off devastating Medi Cal cuts. In addition, we support expanded funding for subsidies as this will benefit low income Californians in helping them to afford and maintain their health coverage.

And finally, we support gender affirming care augmentation, noting though that additional investments are needed to protect access to transgender care, particularly for youth. Thank you.

Thank you.

Good afternoon. Diana Douglas with Health Access California on issues 19 and 20 related to Covered California. Health Access supports the augmentation for gender affirming care and the continued support for the $1 premiums. Health access has long advocated for state funds to support lowered costs for covered California enrollees. And to that purpose, we are deeply appreciative of the governor's May revise proposal to augment the current 190,000,000 with the additional 110.

This will stretch our current affordability efforts, which are currently only for the lowest incomes. We urge the Senate to support this proposal, particularly as we're right now seeing the significant effects that lowered premiums have. Thank you.

Thank you.

Good afternoon, Madam Chair. Trey Murphy with the California Association of Alcohol and Drug Program Executives, or CADP for short. We support the augmentation to Covered California for the Premium Subsidy. We are in opposition to three items on the agenda today, including, the proposed cut to the CBH's Innovation Partnership Fund, the elimination of the $6,700,000 behavioral health advocacy grants and the $19,600,000 opioid fund reversion, which redirects critical and limited dollars intended for state harm reduction projects.

Opioid settlement funds should be going towards their intended use of innovative programs that tackle the overdose crisis and not used for backfilling the general fund.

Thank you.

Thanks.

Michael Henning, California Alliance of Child and Family Services. We represent nonprofit community based organizations serving children, youth, and families across California, including providers of 988 call centers and behavioral health crisis services. We continue to support increased funding for nine eight eight call centers. California has made major investments to build out the 988 crisis response system and call centers are continuing to experience growing demand statewide. Sustained funding is necessary to maintain response capacity and ensure Californians in crisis can access timely behavioral health support.

We're also appreciative of the work happening with CHHS and OES on the press three option for LGBTQ plus youth. In issue 17, the California Alliance thanks the Senate budget committee for questioning why the administration has reduced funding for the Commission on Behavioral Health Innovation Partnership Fund and the Statewide Advocacy Contracts. We strongly oppose this proposal and then may revise. Thank you.

Thank you.