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AHS proposes $3.7 billion budget; Medicaid funding shifts, FMAP drop and caseloads drive requests
Summary
Agency of Human Services leaders told the Appropriations Committee their $3.7 billion FY27 budget request rises about 6.1% ($86.1 million), driven largely by Medicaid cost pressures, a 0.73 percentage-point FMAP decline (about $13 million), SNAP admin match reductions and caseload/utilization shifts; AHS proposed $41 million in general fund reductions and targeted supports for providers.
The Agency of Human Services presented its fiscal 2027 budget to the Appropriations Committee, saying the agency's total request is about $3,700,000,000 and that the Medicaid/global commitment program accounts for the largest share.
For the fiscal year, AHS requested a general fund increase of 6.1, or roughly $86.1 million, the agency said. "The agency of human services has a budget of $3,700,000,000," the secretary said during the briefing. Most of the requested increase is for current-services costs; AHS estimated about $74.9 million of the request is to maintain existing programs and operations, with roughly $11.2 million directed to base initiatives.
Why the increase matters: small percentage changes in the federal Medicaid match create large dollar impacts because the Medicaid program is about $2.2 billion. AHS told the committee that a 0.73 percentage-point decline in the Federal Medical Assistance Percentage (FMAP) from SFY26 produces an estimated $13 million general-fund shortfall that must be backfilled. "The federal share right now, is 58.07%," the secretary said when explaining how FMAP affects the budget.
A second revenue pressure is changes in federal matching for SNAP administration; AHS said the federal match will fall from 50% to 25% beginning in October 2026, a roughly $4.5 million impact for the current budget cycle. The childcare special fund also showed a revenue downgrade, prompting an $8.7 million general-fund backfill while economists assess payroll-tax revenue impacts.
AHS outlined roughly $41 million in general-fund reductions and efficiencies to balance the request. That package includes drawing enhanced federal match where possible (AHS estimates roughly $3 million from drawing 90% FMAP for some populations), billing adjustments for short eligible stays at the Vermont Psychiatric Care Hospital to capture Medicaid reimbursements, expansion of enhanced FMAP for Certified Community Behavioral Health Clinics (CCBHCs) that frees about $6.6 million in general fund, and modest revenue from proposed prescription co-pay increases (single-dollar ranges) expected to reduce global commitment by about $461,000.
AHS said it reworked its budget process this year to identify core priorities'housing and homelessness, substance-use and mental-health integration (including prevention, treatment, recovery and harm reduction), health-care affordability and agency workforce resiliency'and to align resources with programs that demonstrably meet those goals.
The secretary, CFO Tracy O'Connell and department commissioners also described program-specific adjustments: annualization of multi-year initiatives, backfilling exhausted HCBS funds, shelter and cold-weather investments, and a mix of administrative efficiencies (travel, equipment and software allocations) and caseload recalibrations.
What happens next: AHS said it will pursue renewal of its Section 1115 Medicaid waiver by the end of calendar year 2026 and will negotiate terms with CMS through 2027. The agency cautioned the waiver negotiation carries risks to Vermont-specific investments included under the waiver and said it will brief committees on required Medicaid services versus investments the state has historically supported.
The committee recessed for a break after AHS posted supplemental materials online; staff and commissioners said they would return for more detailed departmental testimony this afternoon.
