AB 327

This bill makes certain changes with respect to the retention and disposition

of surpluses generated by a provider of rate-based client services purchased by the

Department of Children and Families, the Department of Corrections, the

Department of Health Services, or a county department of human services, social

services, community programs, or developmental disabilities services (county

department).

Current law permits a nonprofit, nonstock corporation that contracts with DCF,

DOC, DHS, or a county department to provide rate-based client services (provider)

to retain up to 5 percent of the contract amount from any surplus revenues received

under the contract. Current law permits a provider to use those retained funds only

to cover a deficit between revenue and allowable costs incurred in any preceding or

future contract period for the same rate-based service that generated the surplus or

to address the programmatic needs of clients served by that service.

This bill provides that a contract for a rate-based service must allow a provider

to retain from a surplus up to 5 percent of the revenue received under the contract

until a different percentage is determined by DCF, DOC, or DHS by rule. Any total

annual surplus exceeding the amount the provider is allowed to retain under the bill

must be refunded upon written request of the purchasers of the rate-based service.

The bill also eliminates the restrictions on the expenditure of the surplus funds

retained by the provider.

Under current law, if the provider accumulates funds from more than one

contract period in an amount greater than 10 percent of all current contracts, the

provider must, at the request of a purchaser, refund the purchaser's proportional

share of that excess. The provider must then use any of that excess that is not

refunded to a purchaser to reduce the provider's unit rate per client service in the

next contract period. In addition, current law provides that if a provider has held an

accumulated reserve of 10 percent or more of the amount of all current contracts for

that rate-based service for four consecutive contract periods, the provider must

apply 50 percent of those accumulated funds to reducing its unit rate per client

service in the next contract period. This bill eliminates those 10 percent accumulated

surplus retention limits.