State addiction safety-net at risk after abrupt federal grant termination; DAODAS urges state funding

Sarah Goldsby, a representative of the Department of Alcohol and Other Drug Abuse Services, told the Senate Finance Committee Health and Human Services Subcommittee on March 27 that federal supplemental block-grant funds that had been supporting the state’s public addiction service system were abruptly terminated by the federal government this week, leaving DAODAS unable to draw down reimbursements for services already provided.

Goldsby said the federal Substance Use Prevention, Treatment, and Recovery Services block grant and its recent congressional supplements had added more than $42,000,000 to DAODAS between fiscal 2021 and fiscal 2024, and that the sudden action by the federal agency removed about $600,000 from DAODAS’s operating budget and roughly $4,600,000 that had been obligated to service providers for the fiscal year. “We attempted this week to draw down federal reimbursement for the funds that we've already spent … and our reimbursement request to the federal government were denied,” Goldsby said. She described the termination as “early and immediate.”

The department said those one-time federal appropriations had been used primarily to supplement existing programs rather than to create new ones: boosting formula grants to county alcohol and drug authorities, increasing fee-for-service reimbursements for uninsured patients to match Medicaid rates, and supporting transportation and recovery-support services. DAODAS told the committee the supplemental funds helped providers retain staff during a tight behavioral-health labor market and maintain operations for inpatient, outpatient and prevention services.

Committee members asked whether the termination applied to both current-year obligations and pending reimbursements; Goldsby replied that the federal communication tied the grants to an abbreviated closeout timeline and that attempts to access federal reimbursement systems were rejected. She said DAODAS and other state agencies had elevated the issue to the governor’s office and to members of the congressional delegation and that state and national peers were facing similar actions: “We are all very deeply worried about the addiction services safety net,” Goldsby said.

The department outlined priorities from its budget request that it said are now more urgent because of the federal action: increasing formula grants to the 31 county alcohol and drug authorities that serve South Carolina’s 46 counties, supporting residential and withdrawal-management services, sustaining recovery community organizations that provide peer outreach, expanding community-based prevention by funding nine additional prevention specialists (to move toward a dedicated prevention specialist in each county), and funding transportation for patients in rural areas. Goldsby specifically requested $200,000 to cover a transportation gap created by the loss of federal funds.

DAODAS officials said the abrupt loss of the federal supplements could force providers to reduce operating days, delay intakes and assessments, reduce inpatient admissions for withdrawal management and lay off peer-support staff. The department said it is actively assessing the fiscal impact with providers and coordinating with other states through the National Association of State Alcohol and Drug Agency Directors.

The committee did not take a vote. Lawmakers and agency staff discussed the potential scale of service reductions and the limits of the state’s ability to backfill one-time federal funds, with one senator noting the state cannot replace all federally provided dollars.

Ending: DAODAS asked legislators to consider its budget request as a means to stabilize the public addiction service safety-net after the unexpected federal termination. The subcommittee did not adopt any formal action on the request during the March 27 meeting; members scheduled further committee business for the next convening.