Vermont Department of Mental Health seeks $334.8 million in FY26 budget, highlights crisis alternatives and community shifts

The Vermont Department of Mental Health requested $334,818,013 in total funding for fiscal year 2026 and outlined a package of budget moves that would split facility personnel funding into a separate appropriation, expand certified community behavioral health clinic (CCBHC) reimbursement pilots and shore up six community alternatives to emergency departments.

Deputy Commissioner Samantha Sweet and Shannon Thompson, financial director at the Department of Mental Health, told the Senate Appropriations Committee on Feb. 27 that the department’s FY26 request includes a mix of base increases, one‑time federal spending authorities and transfers of programs and funding back to other agencies.

Why it matters: The request bundles operating and program funding with several policy and technical shifts that affect where and how services are paid for — from Medicaid‑funded Global Commitment authority to a proposed conversion of certain general‑fund lines to Medicaid and a required transfer of some shared‑living payments to general fund because of federal HCBS rules. The changes would affect crisis capacity, residential placements for youth, and how designated agencies are funded.

Shannon Thompson summarized the total request: "We are requesting a total of $334,818,013." Thompson told the committee the department proposes several "budget ups" totaling gross increases used to cover salary and benefit adjustments, parent‑rep stipends required under Act 264, internal service fund changes and additional federal and interdepartmental spending authority.

The department described existing statewide capacity: it operates the Vermont Psychiatric Care Hospital (25 beds in Berlin) and River Valley Therapeutic Residence (16 beds in Essex), contracts with six designated hospitals and with 10 designated agencies plus two specialized service agencies. Officials said the system includes 38 adult crisis beds, 18 youth crisis beds (mostly in Chittenden and Washington counties), 42 adult intensive residential beds, 57 Level‑1 involuntary adult beds and 128 non‑Level‑1 adult beds. Children and youth inpatient capacity was described as 30 beds, located at the Rutherford Retreat.

Thompson identified program‑level items included in the request: a $150,000 line for parent representation stipends mandated by Act 264; a request for federal spending authority (BAA) to incorporate received federal grant funding into base spending; an interdepartmental transfer of $594,000 from the Department of Health’s substance‑use division to support CCBHC start‑up; $500,000 in interdepartmental funding to support a responsible gaming program; and a PNMI (private nonmedical institution) request driven by higher youth residential utilization and rate increases.

On CCBHCs, the department said Clara Martin Center and Rutland would be the first two certified CCBHCs under a reimbursement model intended to bundle daytime, non‑24‑hour services into a single daily rate for individuals seen that day.

On alternatives to emergency departments (AEDs), Samantha Sweet said the state is operating six pilots and requested funding to carry those programs to the end of the fiscal year. "We have six now," Sweet said. The department described the current ask as funding to bridge programs through March of FY26 and said it is gathering utilization and outcome data — including whether AEDs reduce local emergency‑department visits — to inform potential future requests. The committee was told the DMH request includes roughly $866,000 to fund about half of the year for four programs under consideration for ongoing support.

Officials described cost pressures for youth residential care. Thompson said PNMI utilization has risen since the COVID‑19 pandemic, driving requests for additional funds to cover increased residential placements and higher PNMI rates. The department also reported some state beds remain closed due to staffing shortages and that placements sometimes must be found out of state.

The department proposed several transfers and conversions to align funding with program oversight or federal match rules: moving certain bundled DCF funds back to the Department for Children and Families, converting some general‑fund support for Pathways to Medicaid Global Commitment when match is available, and moving shared‑living provider payments for eight individuals from Medicaid to general fund to comply with Home‑and‑Community‑Based Services (HCBS) rules. "So services will not change for those individuals. It's just how we have to pay for it," Sweet said.

The budget request also includes reductions: the department proposed not renewing the Howard Center’s community outreach contract (shifting outreach staff into enhanced mobile crisis teams dispatched from 988), and reducing embedded clinician lines in some pediatric practices where statewide data or existing “Blueprint” staffing now cover the service. Officials said the Howard Center street outreach model differs from the enhanced mobile crisis teams envisioned to be dispatched by 988 for regional crisis response.

Committee members pressed the department on sustainability and statewide capacity. Senator Westman and others warned that agencies are in severe fiscal strain: "the state of the delivery of mental health services is nearly in crisis," a senator said during questioning. DMH officials acknowledged the stress and said they are monitoring which AED pilots are effective, considering regional approaches and working to draw down Medicaid or other federal matching dollars where permissible.

Thompson also described a request to add federal spending authority so grant funds already received do not require separate excess‑receipts approvals. "The federal spending authority ... is simply requesting spending authority for federal grants that we receive," Thompson said.

On workforce, the department said vacancy and staffing challenges affect bed availability and program operations. The facilities general‑fund lines include vacancy savings partly offset by travel staff usage. Officials said recruitment efforts and partnerships with travel‑staff providers have brought some hires.

Ending note: DMH asked the committee to consider the mix of one‑time and base changes in this budget — including reclassifying facility personnel funding for transparency, adding federal authority to funding lines, and funding pilots that the department hopes will reduce expensive emergency‑department use for behavioral‑health crises.

Votes at this hearing: no formal votes were taken on the DMH budget during the committee hearing; items discussed were budget proposals and requests for authorization and transfers.