Feds suddenly terminate funding for NY addiction recovery programs

Addiction recovery service providers were left in the lurch on Tuesday after two state agencies informed them that the federal government had terminated grant funding meant to last through September. Now, they’re asking the state to include funding in the state budget that will fill that gap, as New York suffers one of the first of what will likely be many potential cuts in federal funding.

Both the state Office of Mental Health and Office of Addiction Services and Support, known as OASAS, have had access to pots of money from the federal government to help respond to the COVID-19 pandemic. Those revenue streams were approved as part of the COVID Response and Relief American Rescue Plan Act of 2020 and the American Rescue Plan Act of 2021, with access to the dollars extended until September 2025 under the Biden administration. The feds provided the Office of Mental Health $129 million and OASAS $198 million to work with, when all the available grant allocations to agencies and partner providers were put together, according to advocates.

But on Monday, both state agencies received notice from the federal government that it had prematurely terminated access to those funds. In turn, the agencies alerted providers on Tuesday that they will not get reimbursed for any further spending. “New York State OMH cannot reimburse or recognize any expenses incurred after March 24, 2025, for these grants as a result of termination,” reads a letter sent to providers on Tuesday. OASAS held a virtual town hall with service providers on Tuesday as well. In presentation slides from that meeting shared with City & State, the agency blamed the federal Department of Government Efficiency for the cuts, which it called “unexpected and concerning,” and said its staff was looking at ways to “mitigate the damage caused by this action.”

Chris Assini, policy director for Friends of Recovery New York, called the virtual town hall “somber” and warned that the surprise termination of funds could cause devastating disruptions in the continuity of care for those recovering from addiction. He is bracing himself for even further cuts. “This is just the first step,” Assini said. “It is ultimately going to get worse.”

Addiction services organizations working with OASAS and the Office of Mental Health expected to rely on these federal grant dollars for several more months and had budgeted accordingly. The state had already begun taking steps to continue to fund services when the federal money ran out later this year, but the surprise early termination – which providers contend is illegal – has officials scrambling to figure out how to ensure that care doesn’t get disrupted. “You're effectively cutting off six months of planning that agencies and providers have been doing right,” said Jihoon Kim, president and CEO of InUnity Alliance. “They have staff that literally are paid through those funds.”

With the situation very much in flux, advocates and lawmakers are calling on state leaders to include money in the budget to backfill the unexpected cuts, even as they take steps to fight the federal government’s abrupt termination of the grant funds. “In moments like this, we’re reminded that government has a responsibility to protect its people, not abandon them,” said state Sen. Nathalia Fernandez, chair of the state Senate Alcoholism and Substance Use Disorders Committee. “We will not stand by while vital services are ripped away from those who need them most.” She’s calling for at least 60 days of emergency funding, but neither lawmakers nor advocates have a specific dollar amount yet of necessary funds. 

After this story was published, Gov. Kathy Hochul said in a statement that the federal government had cut a total of $300 million to OASAS, the Office of Mental Health and the state Department of Health. She condemned the move but gave no indication that she would support backfilling the grant funding with state money. “Make no mistake: there is no State in this country that has the financial resources to backfill the massive federal funding cuts proposed by DOGE and Congressional Republicans,” Hochul said. However, she said she would “fight them tooth and nail” over the funding.

State leaders have so far been cagey about including remedies to potential federal cuts in the budget, though the addiction services funding cut is not “potential” and the funds were previously appropriated before the sudden termination. Asked about the cuts on Wednesday, state Senate Majority Leader Andrea Stewart-Cousins said she had conversations about the federal move, but wouldn’t commit to the idea of addressing the cuts in the budget. “We have to look at the priorities, and we've got to figure out what's the best use of the finite resources that we have,” Stewart-Cousins told reporters.

Spokespeople for Gov. Kathy Hochul and the Office of Mental Health referred back to comments the governor made to reporters about potential cuts last week. “I've said all along, I can't fix what they're doing to us,” the governor said at the time. “I don't have the resources.” She added, however, that “when they withhold money, we see you in court.” A spokesperson for OASAS did not provide a comment before publication.

A spokesperson for Assembly Speaker Carl Heastie did not return a request for comment, but Heastie told reporters on Tuesday that he would not discuss backfilling potential federal cuts. “We've gotten nothing direct from the feds or the Republicans as to what they would cut,” he said – which is no longer true thanks to the grant funding termination.

While substance abuse disorder service providers are ringing the alarm bell first, the COVID-related grant funding termination could have far-reaching implications for other agencies and organizations around the state and country.

NBC News first reported on Tuesday that the U.S. Department of Health and Human Services had pulled back over $11 billion in COVID-related funding to state and community health departments.