Department of Mental Health seeks $334.8 million in FY26 budget; splits central office and facilities appropriations for transparency

The Vermont Department of Mental Health on Tuesday presented its proposed FY26 budget of $334,818,318, driven largely by Medicaid funding and several programmatic reclassifications.

Commissioner Emily Haas and Shannon Thompson, the department’s financial director, told the House Committee on Health Care that about $235 million — roughly 70% — of the request is funded through Medicaid Global Commitment, with an additional roughly $52 million described as Medicaid investment funds. Thompson said the department is also requesting about $31.5 million in general fund and $12.9 million in federal funds.

The budget overhaul includes a request to split the department’s single appropriation into two line items: one for the Department of Mental Health central office and programs and a second for the two state-run facilities — Vermont Psychiatric Care Hospital in Berlin and River Valley Therapeutic Residence in Essex. Thompson said the split is “for transparency purposes” so the legislature can see facility-specific spending more clearly.

The presentation listed major expense categories and program lines, including adult services, mobile crisis response, inpatient care, and children’s community services. Thompson said the largest program slice is adult services (peer supports and emergency services), shown at roughly $109.5 million. The Vermont Psychiatric Care Hospital was listed at about $34.5 million and River Valley Therapeutic Residence at about $9.7 million.

Committee members pressed the department on several budget “ups and downs,” including salary and fringe increases tied to steps and cost-of-living adjustments, internal service fund changes, and an item to convert several grant-funded programs to billing streams that draw Medicaid revenue. Thompson said some previously grant-funded positions have become eligible for billing and should be integrated into payment models rather than continue as separate grant positions.

The budget also reflects program transfers back to the Department for Children and Families (DCF) for portions of the Integrating Family Services (IFS) work that previously lived at DMH. Thompson described those changes as transfers of authority and funding rather than changes to direct service availability.

On children’s residential care, the department requested increases for private nonmedical institutions (PNMI) to reflect rising utilization and rate adjustments. Deputy Commissioner Samantha Sweet said youth residential demand has grown since the pandemic and PNMI rates have increased accordingly.

Thompson said the department is tracking vacancies and traveler usage at its facilities and has prioritized hiring permanent staff; several new hires began the week of the hearing. She said River Valley was serving 12 of its 16 beds and that one unit at the Vermont Psychiatric Care Hospital remained temporarily closed for staffing reasons but was on track to reopen.

The committee also heard that several small programmatic shifts are intended to move services from grant or general-fund support into billable Medicaid structures where allowable, and that some lines (for example, shared living providers for a small number of individuals) must move from Medicaid to general fund because of federal waiver and state-plan distinctions.

The hearing included multiple follow-up requests from legislators for more detail on caseload breakdowns (for example, administrative versus clinical vacancies, and the number of in-state vs. out-of-state residential placements for children). Thompson said the department has additional metrics and would provide them to the committee.

As the committee moved to other items, members repeatedly asked about the department’s contingency planning if federal funding streams were reduced. Department leaders said they are monitoring federal grant authority and would return to the committee with recommendations if required.

The department did not present any formal committee motions or votes during the session; the hearing was a departmental budget briefing and Q&A.