Agency of Human Services presents $3.75 billion budget, proposes program cuts and shelter investments

Secretary Jenny Samuelson and Agency of Human Services Chief Financial Officer Tracy O’Connell laid out the agency’s proposed budget and a set of program changes at a House of Corporations Committee meeting. The agency’s total budget is roughly $3,750,000,000 and the governor’s package proposes an $86,100,000 increase, or 6.1 percent, to keep current services operating and fund targeted investments.

Why it matters: AHS is one of the state’s largest agencies and its budget affects Medicaid services, mental-health capacity, homelessness response and multiple workforce programs. Committee members pressed staff on the drivers of the increase, proposed program eliminations and how changes in federal matching rates will affect state funding needs.

What the agency proposed: Samuelson said the increase includes roughly $74,000,000 in base funding to maintain existing programs and $11,200,000 in general fund for new initiatives. O’Connell detailed several specific pressures: about $13,000,000 to backfill a decline in the federal medical assistance percentage (FMAP); roughly $4,500,000 tied to a reduced federal match for SNAP administration under HR1; and an $8,700,000 shortfall tied to lower-than-expected receipts from the new 0.44 percent childcare payroll tax forecast.

"Our overall budget is $3,750,000,000 and it is spread out across those departments," Samuelson said. O’Connell added that the FMAP change "means that we will receive $13,000,000 less from the federal government," which the state must backfill under current-service assumptions.

Program reductions and offsets: To close a roughly $74–75 million gap between current-service pressures and the governor’s 3% target, the agency identified about $9,900,000 in program and service reductions across roughly 38 programs. Examples include consolidating certain loan-repayment activities; a proposed elimination of a Vermont Legal Aid Medicare-assistance contract that the agency said statute allows to be removed if it does not produce equivalent revenue savings; and reductions to refugee transitional-housing funding because arrivals have fallen about 75 percent.

Savings and efficiency moves include $5,100,000 in caseload/utilization savings (for underused beds and services), $7,300,000 in administrative efficiencies (operating and contracts), vacancy-savings adjustments across departments, and drawing additional federal match where eligible. O’Connell said revenue offsets include $3,000,000 from increased utilization in the new adult Medicaid group and an estimated $6,600,000 in savings from the enhanced match for Certified Community Behavioral Health Clinics (CCBHCs).

Investments and base shifts: The agency proposed folding shelter spending into the base—about $7,500,000 total, including $1.3 million for statewide cold-weather shelters and $6.2 million for shelter expansion—along with a multiyear annualization of programs that began midyear ($10,600,000). The agency also proposed $21,300,000 for salary and fringe increases, including funding for roughly a dozen additional staff to support Medicaid redeterminations.

Mental-health capacity and workforce: Officials described a high but improving vacancy rate at Vermont Psychiatric Hospital that drove a department-level vacancy figure near 30 percent; the agency said that rate was closer to 60 percent coming out of the pandemic and has fallen toward about 35 percent as positions are refilled. AHS also proposed reducing Vermont Psychiatric Center bed capacity from 25 to 21 based on historic utilization and system feasibility, a change staff said would not necessarily be permanent but would inform vacancy and service planning.

Refugee services and other changes: O’Connell said refugee transitional-housing funding was reduced because federal arrivals dropped from historical ranges of 400–600 per year to roughly 100, leaving the agency to preserve core wraparound services while moving some transitional housing funds out of the base.

Waiver renewal and federal negotiations: The agency flagged an upcoming Global Commitment waiver renewal (application due Nov. 15) and a following year of negotiation with CMS. Samuelson said the renewal raises questions about which services are federally required versus state-funded innovations (for example, some housing-related health-related social needs) and offered to brief the committee on that distinction before negotiations proceed.

What’s next: Committee members requested more detailed departmental follow-ups and data (for example, on shelter counts and use of stabilization funds). Samuelson and leadership said they would return with additional detail and that commissioners could appear jointly for deeper line-item review.

The committee ended the session with the agency slated to provide supplemental materials and to appear for follow-up questions in subsequent hearings.