Department of Developmental Services requests $19 billion as rate reform and provider directory proceed
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Summary
DDS director told the Senate subcommittee the governor's January budget proposes roughly $19 billion for developmental services in 2025–26, led by $2.6 billion for caseload growth and $410 million to annualize provider rate reform; LAO and senators pressed DDS on quality incentives, the statewide provider directory and IT modernization.
Pete Chervinko, Director of the California Department of Developmental Services, told Senate Budget Subcommittee 3 that the administration's proposed 2025'26 budget for developmental services is "just about $19,000,000,000," an increase of roughly $3.2 billion from the current year. Chervinko said the proposal includes about $2.6 billion to cover an anticipated caseload increase of 40,000 people and about $410 million to annualize the service provider rate reform that took effect Jan. 1.
The Legislative Analyst's Office (LAO) raised oversight questions about rate reform's "quality incentive" (QIP) component and the department's large IT project, known as Lowest, which is intended to integrate regional centers' case management and fiscal systems. LAO analyst Corina Hendren urged the committee to press DDS on how one-time incentive payments already paid to providers will inform permanent quality measures and how DDS will prevent the QIP from unintentionally incentivizing providers to focus on easier-to-serve individuals.
Chervinko described the provider directory as the state's first statewide consolidation of vendor records and said DDS has validated about 65% of providers' information so far. He said the directory will eventually be tied to service codes so the state can identify service "deserts," linguistic workforce gaps and other access issues. The department is considering enforcement steps to compel providers to enroll; Chervinko described a measure that would block a provider's billing login until directory issues are resolved.
Committee members pressed for details on how QIP measures will be developed and whether the legislature will have a review opportunity before measures become binding. Chervinko said measures will be posted publicly and that a full stakeholder work group will meet in July; he also said the statutory "hold harmless" period for providers ends June 30, 2026. Chervinko said DDS audits about 70 to 80 providers annually and, to date, has not identified violations of the requirement that rate increases flow to workers.
LAO reiterated that the legislature should seek IT planning documents for Lowest reflecting the latest stakeholder feedback and asked DDS to clarify how individual-level outcome data will be collected for QIP by the 2026'27 fiscal year deadline in existing statute.
The department emphasized priorities it said it will protect if federal Medicaid funding or state revenues decline: preserving the Lanterman Act entitlement, protecting services to young children, and modernizing case-management and fiscal IT systems.
Chervinko also noted federal Medicaid funding proposed for the department next year is about $6.5 billion, roughly 37% of DDS's total proposed funding, and described federal budget uncertainty as a risk that informs DDS priorities.
The subcommittee heard no formal votes on the DDS proposals during the hearing.
