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Commission adopts behavioral health reserve policy to formalize use of Medicaid‑flowing funds
Summary
The board approved a policy formalizing the county’s behavioral health reserve (Fund 270), setting a target reserve of about 90 days (roughly 25% of operating budget), clarifying allowable uses and how interest will be treated; staff discussed capital priorities and uses for the $29 million balance.
The Deschutes County Board of Commissioners approved a proposed reserve fund policy for Fund 270, which houses Medicaid‑related behavioral health dollars including CCBHC (Certified Community Behavioral Health Clinic) prospective payments.
Cheryl Smallman, business officer for health services, and Janice Gersow, director of Health Services, told the board the policy formalizes prior practice and sets a target cash reserve of at least 90 days (about 25% of operating budget). Smallman said the policy clarifies that Fund 270 and operating fund 274 are appropriated together, and that the county must maintain an 8.3% contingency as a combination of those funds.
Gersow and Smallman explained that the behavioral health reserve consists of Medicaid dollars flowing through coordinated care organizations and CCBHC prospective payments and that interest earned on the reserve is applied to the same programmatic uses. Smallman said the fund balance as of the meeting was roughly $29 million and projected to reach about $34 million by fiscal year end; she estimated annual interest at about $750,000.
The board and staff discussed possible capital uses of the reserve balance, including purchasing adult foster homes for people with chronic mental illness or developmental disabilities and partnering on a 16‑bed secure residential treatment facility that would double regional capacity for people who need locked residential treatment. Commissioners and staff also discussed maintaining funding to cover recurring program gaps and supporting local clinic needs such as a behavioral health clinic in La Pine.
The policy makes explicit that the reserve is intended for one‑time expenditures, unexpected revenue shortfalls, capital improvements outside the capital improvement plan and infrastructure purchases, and that major expenditures would still return to the board for approval during the budget process. The board approved the policy by motion and second on a unanimous vote.
Why this matters: County staff said the reserve provides operational stability for services to vulnerable people, helps fill reimbursement gaps and could be used to support capital investments that expand local capacity, including secured and youth facilities under active planning.
