Announcements, Sustainability Services

The recent federal funding freeze has sent ripples through the healthcare system, and behavioral health agencies find themselves at the center of the storm. With bidder conferences canceled, funding forecasts shelved, and no confirmed funding beyond March 14th, agencies must grapple with a complex landscape of uncertainty.

This post will break down the current situation, explore what this means for behavioral health organizations, and provide actionable steps to help agencies stay prepared and resilient.

The Current State of the Federal Funding Freeze

Bidder Conferences Canceled, Forecasts Suspended

One of the first significant outcomes of the federal funding freeze has been the cancellation of bidder conferences and the suspension of all program forecasts. Agencies currently counting on federal grants are left with no clear guidance on upcoming opportunities. The Office of Management and Budget (OMB) is tasked with reviewing each program, with recommendations due by February 10th. Some programs may see funding reductions, while others could face complete cancellation.

The uncertainty underscores the need for behavioral health organizations to carefully evaluate their current funding sources and prepare for potential disruptions.

No Committed Funding Beyond March 14

The most pressing issue is that there is no committed federal funding for any agency beyond March 14, 2025. The fight over current funding is ongoing, and until Congress passes a new funding bill, future budgets remain unpredictable. (All funding forecasts have been rescinded.)

The reconciliation bill, which could allow the administration to reshape long-term funding priorities, will be critical in this process. However, any long-term funding beyond 2025—including new grant opportunities—remains uncertain.

Agencies searching for clarity on “Budget Reconciliation” should follow developments closely, as this legislation will likely determine what funding initiatives survive post-March.

Legal Challenges and Court Pushback

The situation is further complicated by a legal battle over the funding freeze. Even after the OMB published a memo signaling the freeze might not require additional court action, the administration’s executive orders remain in place, and most recently, the administration’s press secretary Karoline Leavitt tweeted “This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo. Why? To end any confusion created by the court’s injunction. The President’s EO’s on federal funding remain in full force and effect, and will be rigorously implemented.”

The same federal judge who blocked the freeze then emphasized that given the tweet, the case is not moot, and they are committed to shepherding the case as it makes its way through the courts.

The Impoundment Control Act is likely to play a significant role, as the time required for litigation may delay critical funding decisions well into the future.

Temporary Restraining Orders (TROs) could be issued to block funding reductions or cancellations, but these are stopgap measures rather than permanent solutions.

Challenges for Behavioral Health Agencies

Staff Instability and Budget Gaps

Adding to the uncertainty, behavioral health professionals face challenges stemming from the federal-level staffing crisis. Executive orders incentivizing federal employee buyouts have been compared to strategies previously employed by private-sector entities like Twitter, currently X.

Here’s the problem:

• The incentivizing of federal staff buyout are not supported by any budget line item.
• Given the budget reconciliation coming in March, there’s been no confirmation as to what the set-aside will need to be to pay these staff members past March of this year.
• In light of this, federal staff are being advised not to resign.
• If Congress fails to act, behavioral health agencies may face delays in payments later in 2025, further compounding the pile up of unfilled positions already straining services.

For behavioral health organizations already struggling with staff shortages prior to these changes, further instability may significantly impact service delivery.

Start preparing for staffing contingencies now. What is your capacity for cross-training existing teams to ensure roles are covered even in the face of workforce disruptions?

Potential for Service Gaps

Without a clear funding trajectory, many behavioral health programs face the risk of cuts or cancellations. Vital services for vulnerable populations—such as substance use programs, mental health initiatives, and community support networks—are particularly at risk. Humanizing the reality further, people, millions of human beings in need, will carry the heaviest burden. There is a critical need now to analyze current budgets and consider diversification strategies so that agencies caring for these human beings can position themselves to withstand potential cuts.

Recommended actions:

• Read and follow the OMB’s review carefully.
• Scan through all your current funding for the keywords that the administration has already designated as “not in alignment with” their priorities.
• Identify non-federal funding sources to diversify your agency’s funding streams and review the source and language for any block grants carefully.
• Look for private grants, local funding opportunities, and partnerships with community organizations.
• Advocate with policymakers to highlight the essential role behavioral health services play in overall public health.
• Do a detailed organizational assessment that includes sustainability needs, staffing needs, technology shifts, and all possible sources of funding.

What Behavioral Health Agencies Can Do Right Now

Amid uncertainty, preparation is our strongest tool. While the federal funding freeze has created significant challenges, there are steps behavioral health officials, advocates, leaders and teams can take to mitigate impact.

1. Stay Updated on Budget Reconciliation Developments

The upcoming budget reconciliation process (slated to occur March of 2025) will shape not just the remainder of 2025 but also how 2026 funding is allocated. Behavioral health agencies should closely monitor updates to ensure they’re prepared for any funding allocations—or shifts.

How to prepare:

• Regularly check reliable sources, such as government websites or trade associations for news on reconciliation developments.
• Engage with professional networks to gain insights on how peers are navigating the funding landscape.
• Confirm your contingency planning and support it with real-time synopses across three frameworks: restrictive, actual, and aspirational.

2. Conduct Scenario Planning

Leaders in behavioral health should run best- and worst-case funding scenarios for their 2025 operating budgets. By planning ahead, you’ll gain a clearer understanding of where potential shortfalls may occur and develop contingency plans.

• How is your data currently aggregated?
• How up to date is it?
• What are your priorities in order of most urgent to necessary?
• What are your due by dates for each of these?
• Are your decision-makers aware and in agreement?

3. Strengthen Advocacy Efforts

This is a crucial time to advocate for behavioral health funding. We all have the opportunity to reach across our professional affiliations to collectively amplify the voice of our priority populations and purpose. We can continue to highlight the impact of mental health services in improving public wellness, and frame it out by proving the reduction of long-term costs to the healthcare system.

4. Lean on Industry Experts

The intricacies of funding freezes, executive orders, and federal budgets can be overwhelming. The bombardment of change will cause most entities to become immobile, “waiting to see.” During this period, “waiting” will obscure current opportunities to shore up morale and demonstrate resilience internally and externally.

• Who are your healthcare consultants or partner experts who specialize in navigating these challenges?

• Who is setting up your project management plan and cohering your decision making teams?

• How are you sourcing current changes weekly to ground decision making in knowledge?

Looking Ahead

The changes proposed and the obstacles inherent in meeting current population needs present a significant challenge – and also an opportunity. By adapting into this new reality and proactively planning for uncertainties, organizations can position themselves not just to survive, but to thrive.

Stay focused and active on what matters most—providing essential behavioral health services, community by community. While federal funding remains uncertain, our missions remain critical.

For expert advice on navigating federal funding challenges via an up to date organizational assessment, reach out to our Sustainability Services consulting team today.

We will support and help you to adapt to current complexities and continue to deliver impactful services.

Compiled by: Zillah Langsjoen, Dr. Rhonda Bohs