Agency of Human Services proposes $3.5 billion FY2026 budget emphasizing substance-use treatment, shelters and Medicaid match

The Agency of Human Services on Feb. 4 presented a proposed $3,500,000,000 budget for fiscal year 2026, a 5.81% increase that agency leaders said is mostly “current services” required to maintain existing programs and staffing.

The proposal, delivered to the House Appropriations Committee, moves several one‑time investments into the base budget and targets new, limited enhancements to fill gaps in Vermont’s substance‑use system of care, expand permanent shelter capacity and add pretrial supervision in one additional county. Agency leaders also highlighted a favorable federal medical assistance percentage (FMAP) change that reduces the state general fund need for some Medicaid costs.

Jenny Samuels, secretary of the Agency of Human Services, said the bulk of the requested increase—about 5.34 percentage points of the 5.81% total—covers ongoing caseload, utilization and staffing pressures. "This really is a current services budget," Samuels told the committee, adding that the agency has about 3,835 employees, a 0.2% net increase (about 27 positions) over the prior year.

Samuels and Richard (Rich) Donahue, the agency’s chief financial officer, said the budget keeps previously funded pilot programs in place by moving them to base funding where evaluations showed positive results. Donahue described the global commitment or Medicaid matching appropriation (B301) as the central “mixing bowl” that contains the state share for Medicaid and the federal match. "The lion share of general fund for the agency is with the secretary's office as matching funds for global commitment," Donahue said, noting roughly $700 million of general fund is appropriated there for matching purposes.

Substance‑use system investments

Samuels said the administration prioritized filling gaps in the state’s substance‑use treatment system after a year of analysis and community input. Key proposed items include $1,300,000 in general fund to expand residential treatment capacity so providers can offer a full continuum of care without repeated transitions, and $1,500,000 in general fund for a recovery campus that pairs housing with on‑site intensive outpatient services. The package also includes $300,000 in one‑time funds to design and begin a residential treatment conversion within a Department of Corrections (DOC) facility and plans to use a consultant to design a quarter‑year ramp up for in‑custody residential care.

Samuels said the state already offers medication‑assisted treatment (MAT) in correctional facilities. She described MAT as stabilizing medication analogous to insulin for diabetes and said the goal of residential services is not necessarily to discontinue MAT but to provide counseling and other supports that often are absent in correctional settings. "We were one of the first states to offer medication assisted treatment in our correctional facilities," Samuels said.

Samuels also told lawmakers that the agency will evaluate the episode‑based payment methodology used for residential treatment, which historically used an initial 15‑day payment framework that some providers said creates barriers to longer stays when clinically appropriate.

Shelter capacity and homelessness

The budget moves previously one‑time funding for expanded shelter capacity and alternatives to congregate shelters into the base, with continued one‑time funds to address remaining ramp‑up needs. Samuels said most newly expanded shelter capacity is year‑round and non‑congregate (for example, family shelters), and that detailed counts and locations would be provided by the Department for Children and Families (DCF) when that department appears before the committee. She listed Bennington, Brattleboro, Barre, Rutland and Burlington as areas with higher counts of people experiencing homelessness.

Primary care, SASH and other initiatives

The proposal includes a $10,800,000 commitment to primary care supports as Vermont transitions from the all‑payer model, including continued funding for a mental‑health‑in‑primary‑care pilot and steps to backfill Medicare‑funded SASH (Support and Services at Home) payments that will not continue under the new model. There is also $2,000,000 for emergency (seasonal or cold‑weather) shelter operations and ongoing PCB testing funded through the Department of Health.

Provider stabilization and Medicaid pressures

Samuels described a long discussion during budget construction about emergency financial relief (EFR) for struggling providers. The agency has provided about $212,000,000 in rate increases over the past three years; this year, instead of proposing another large EFR appropriation (the BAA previously included a request of $10,000,000 for EFR), the administration said it will focus on diagnosing and fixing structural issues that make some providers financially unstable while others remain healthy. "Rather than continuing to put money towards it, we really try to focus this year on identifying and fixing structural changes," Samuels said.

Nursing home utilization is returning toward pre‑pandemic levels, which drove a required nursing home rate increase and utilization adjustments in the budget. Samuels noted that recent budget adjustments incorporated previously observed shortfalls in bed days and that this budget moves those adjustments into the base.

Other items and next steps

The budget also annualizes costs associated with the current collective bargaining agreement, addresses DOC personal‑services and vacancy savings (Samuels said DOC vacancy rates have fallen from over 30% to roughly 17% after operational changes), and funds expansion of pretrial supervision by one county after a pilot. Donahue said internal service fund changes and interdepartmental MOUs account for routine operating changes in the secretary’s office appropriation.

Committee members asked follow‑up questions about the length of residential stays under Medicaid, whether settlement proceeds from recent litigation could be used for some of the substance‑use investments and the specifics of shelter capacity. Samuels and Donahue repeatedly directed detailed operational questions (specific bed counts, site lists and program certification questions) to DCF and the Department of Health, which the committee expected to hear from later in the hearing.

The committee paused after the presentation to take DCF and other departments’ questions on specific program details.