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Keep California’s safety net!
What’s the Background? Federally Qualified Health Centers (FQHCs) that receive federal funds and FQHC “look-alikes” that receive Medi-Cal/Medicaid reimbursement are operated as non-profits and serve as a safety net to provide primary and preventive care to low-income and underserved populations. Non-profit boards review and approve CEO and CFO compensation for FQHCs, and clinics already file annual IRS Form 990 reports, undergo federal and state audits, and answer to the Attorney General. A handful are genuine outliers on executive pay, but the current average spend ratio is 80% for program services and 20% for administrative and management costs. Proposition 44 would raise that bar to 90% – measured against each clinic’s total annual revenue, not its expenses. A one-time capital grant, a bequest, or the sale of a building inflates revenue for a single year and can push a clinic below the line even though its patient-care spending never changed. The question is not whether executive pay deserves scrutiny, but whether a blunt statewide formula backed by penalties is the right tool – or whether it closes the clinics our most vulnerable neighbors depend on.
What would Proposition 44 do?
- Require non-profit FQHCs and “look-alikes” – roughly 200 organizations statewide – to spend at least 90% of their total annual revenue on program service expenses directly related to their exempt mission.
- Authorize the Attorney General to publish guidance on which expenses count as program services – creating uncertainty about what will and won’t be a covered expense.
- Cap administrative and management costs – including rent, utilities, insurance, and IT – at no more than 10% of revenue.
- Assess monetary penalties equal to the difference between the 90% requirement and the clinic’s actual mission spending that year. Penalties go to a state fund, refunded only if the clinic reaches compliance within five years.
- Allow the Department of Public Health to grant temporary waivers of the 90% requirement for exceptional circumstances or where a clinic’s finances threaten regional access to care.
- Assess criminal penalties for directors, officers, or agents of the clinic who knowingly misreport expenditures or revenues.
- Cost the state in the low tens of millions of dollars to enforce each year – recovered through fees on all affected clinics, not just those out of compliance – per the Legislative Analyst’s Office (LAO).
| Myths | Facts |
| Public funds are being siphoned off for bloated administrative costs and executive pay. | Although the percentage varies wildly from one clinic to the next, the LAO reports that FQHC and FQHC “look-alike” clinics spend an average of about 80% of revenue on health care services. Outliers exist and should be addressed – but Prop 44 imposes one rigid formula on roughly 200 organizations to reach a handful of bad actors. |
| Clinics that simply spend more on patients have nothing to fear. | A clinic can spend every available dollar on care and still fail, because the test measures spending against revenue. An analysis of IRS Form 990 data commissioned by the No campaign projected 183 of 202 FQHC organizations would fall short in one year. |
| The measure will not cut clinic funding or reduce services patients rely on. | Capping management and administrative costs at 10% sweeps in rent, utilities, and IT – operating costs that clinics cannot stop paying. The No campaign’s commissioned study projects $1.7 billion in first-year penalties, pushing 161 of 183 non-compliant organizations into negative margins. The LAO, which takes no side, likewise warns some clinics might close. |
Prop 44 is sponsored by: Service Employees International Union – United Healthcare Workers West (SEIU-UHW) and SEIU 721
Vote No is joined by: the California Democratic Party, Planned Parenthood Affiliates of California, CA Medical Association, and others