DMH INFORMATION NOTICE NO.: 10-01

January 19, 2010 – Page 10

E. Local Prudent Reserve

DMH Information Notice No.: 09-16 requires Counties to fund the Local Prudent Reserve at 50 percent (50%) of the most recent approved funding level for the CSS component and the PEI component. The 50 percent (50%) funding level is calculated based on the amount requested in the current annual update/update. DMH Information Notice No.: 09-16 also indicated that during periods when access to the Local Prudent Reserve is allowed, the 50 percent (50%) funding level requirement will be suspended. Welfare and Institutions Code section 5847, subdivision (b)(7), requires that funds set aside in the Local Prudent Reserve be made available during years in which “revenues for the Mental Health Services Fund are below recent averages adjusted by changes in the state population and the California Consumer Price Index.” Based on current revenue projections and adjustment factors, DMH has determined that the threshold has been met. Counties will be allowed to access their Local Prudent Reserves effective FY 2010/11. Therefore, the 50 percent (50%) Local Prudent Reserve level requirement is being suspended in FY 2010/11.

For FY 2010/11, DMH will also suspend the requirement that Counties return to FY 2007/08 funding levels and dedicate future funding to the Local Prudent Reserve until they meet the required level. Once access to the Local Prudent Reserve is no longer allowed, Counties will be expected to replenish the Local Prudent Reserve to the required levels.

Funding the Local Prudent Reserve:

Although the 50 percent (50%) Local Prudent Reserve level requirement is being suspended in FY 2010/11, Counties choosing to continue funding their Local Prudent Reserves may do so by submitting an Exhibit G. Consistent with Welfare and Institutions Code section 5892, subdivision (b), an amount equal to 20 percent (20%) of the average amount of funds allocated to each County for the previous five years may be irrevocably redirected from the CSS Planning Estimate to fund the County’s Local Prudent Reserve, CFTN and WET.