New York State Health Budget Explainers Social Services

Trump’s Federal Cuts Push New York Mental Health Programs to Brink of Collapse

Mental health providers are scrambling to prevent mass layoffs and program closures, leaving advocates urging state leaders to step in before it’s too late.

Jie Jenny Zou · March 31, 2025

The Trump Administration unexpectedly cut tens of millions in grants to addiction and mental health services in New York in late March. | Images: NY State Senate and Gage Skidmore / Flickr; Illustration by New York Focus

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Advocates are urging the governor and legislature to take immediate action during the final weeks of the state’s annual budget negotiations.

Layoffs, program reductions, and closures are on the table for New York’s mental health providers after millions in federal funds were unexpectedly cut last week, jeopardizing an array of services for residents battling addiction and mental illness. The cancellations are part of drastic federal cuts by the Trump Administration’s Department of Government Efficiency, whose headline-making tactics are being challenged in several pending lawsuits.

“You’re going to start to see organizations making the hard decisions, even today, of laying people off,” said Jihoon Kim, the chief executive officer of InUnity Alliance, which represents over 200 substance use disorder and mental health care providers statewide. “People are going to fall through the cracks.”

Kim said the cuts undermine an already “fragile” sector that has been hobbled by years of delayed payments, insufficient reimbursement rates, staffing challenges and rising costs. The reductions are expected to impact a wide range of New Yorkers, from those seeking outpatient therapy to individuals trying to manage complex mental health conditions.

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One impacted provider, who asked to remain anonymous as they deliberate over staffing cuts, said they will likely have to end their participation in a state program aimed at helping teens and young adults experiencing psychosis stay in school or continue working.

On March 25, providers got word that federal grants — originally set to expire at the end of September — had suddenly been terminated the day before, impacting programs by the state’s Office of Mental Health and the state’s Office of Addiction Services and Supports.

The state anticipates losing $40 million for addiction services and substance abuse treatment as well as $27 million for mental health services, according to a press release by Governor Kathy Hochul. The governor’s office is also tracking the impacts of $300 million in cuts to the state’s Department of Health, which covers a broad array of programs such as virus surveillance and outbreak response to infection prevention in hospitals and nursing homes.

“Having been at budget negotiation tables myself, I do know there are opportunities for there to be an agreement.”

—Jihoon Kim, InUnity Alliance

While Hochul called the cuts “plain cruel” and “devastating,” she also seemed to shut down discussions about whether the state would be stepping in to offset the losses. “Here’s the sad truth: there is no state in the nation that has the resources to backfill these sweeping cuts. It’s up to New York’s elected officials who serve in the House majority to stand up and fight back,” she said.

Kim said that while the cuts are at the federal level, the state is in a position to take action as it continues ongoing annual budget negotiations in Albany. Contingency funding could help prevent disruptions to critical life-saving services, especially for providers that operate on razor-thin margins and may already be owed millions in delayed payments, he said.

“The state government has a responsibility here,” said Kim. “Having been at budget negotiation tables myself, I do know there are opportunities for there to be an agreement.”

Kim previously served as deputy secretary for Human Services and Mental Hygiene under Hochul, who announced an ambitious $1 billion plan to revamp mental health services statewide back in 2023.

Elements of that nascent plan will likely be impacted by those cuts, too, Kim said, pointing to the signature crisis stabilization centers planned for across the state. Kim likened the 24/7 facilities to urgent care centers for mental health and substance use that could radically change the state’s approach to handling these crises. Cuts could also threaten the state’s efforts to expand 988, the national crisis hotline launched in 2022.

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“There’s this entire infrastructure the state has been trying to build, and has been doing a good job building, that is now at risk,” said Kim.

Seep Varma, head of New York Therapeutic Communities, Inc., called the federal government’s sudden decision to cancel funding “ridiculous” and likely “illegal.” He is among many providers questioning the legality of abruptly terminating grants earmarked by Congress.

Varma’s organization receives $600,000 annually from the state’s share of federal funding to operate its mobile outreach program in Brooklyn which currently serves 300 clients in various stages of addiction recovery. The program supports case workers, medication management, and housing assistance.

“We’ve continued to operate the program and we hope we don’t end up bankrupt and out of business,” said Varma, who estimated the program costs about $55,000 a month to run. A majority of the clients in the program face housing insecurity and rely on public benefits like Medicaid and food stamps.

“These are folks that are on the street, these are folks that use in public,” Varma said. “There’s a public health and public safety issue that would emerge as a result of discontinuing services to this population.”

Varma said the abrupt decision to cut these programs stands in stark contrast with the Trump administration’s recent decision to extend the opioid crisis emergency declaration earlier this month.

The same day that providers got notice of the cancelled funding, Trump officials declared fentanyl as a top threat to US national security during a congressional hearing, flagging the street drug as the cause of thousands of deaths. “It’s totally hypocritical and should be called out on its face,” Varma said.

For Kim, the sense of irony extends to the state’s current unwillingness to bridge the funding gap providers face even as legislators push forward on a controversial mental health policy.

During this year’s budget negotiations, Hochul has pushed to expand the state’s power to force individuals into mental health treatment, a measure that has been panned by advocates and civil liberty groups alike. The governor’s renewed interest in the policy comes after a string of high-profile violent incidents last year often involving homeless individuals or those with a history of mental illness.

Kim noted that one of the programs in danger of being pared back aims to serve the same population of individuals struggling with serious mental illness who are homeless or at high risk of becoming homeless and who have histories of involvement with the criminal justice system.

“I find it ironic or even hypocritical that while you’re saying we need to help these people and pass laws to do that, you’re actually saying, ‘Well, we’re sorry you lost money to help those people,’” Kim said. “We hope in the next two weeks or so they will heed our call.”