How are Folsom Reservoir water levels determined? What agency determines them?
The U.S. Bureau of Reclamation operates Folsom Reservoir and water releases are coordinated with other large reservoirs in California. 

Why are there flood control releases from Folsom Reservoir? 
The principal purpose of Folsom reservoir is to serve as a flood control facility.  Over 2/3 of the storage space in the reservoir is dedicated to this function, and water levels are lowered in the fall to provide this retention capacity.  As the rainy season wanes in the late winter and spring, water levels are allowed to rise, so that the other purposes of the reservoir – water supply, recreation, hydropower, releases to protect downstream fisheries, etc. – can be met.