Secretary of Health and Human Resources Kelly told the Senate Finance Committee subcommittee that the governor’s proposed budget emphasizes Medicaid and other mandatory program costs while adding targeted policy investments across health and human services.

“The big story in the budget this year…is Medicaid and the children’s health insurance program,” Secretary Kelly said, adding that she was “not sure that the current Medicaid spending is sustainable for our Commonwealth.”

The secretary framed six cross-cutting priorities for the 12 HHR agencies and noted the subcommittee has fewer than three weeks before reporting out the senate budget. Most new general‑fund spending in the governor’s plan is intended to cover mandatory Medicaid and CHIP cost increases arising from the federal unwinding and post‑pandemic provider-cost adjustments.

Why it matters: Medicaid and CHIP together drive a large share of state spending and the administration’s fiscal outlook; decisions the subcommittee makes this month influence how much of the governor’s proposed increases are adopted and where one‑time funds are directed.

Major items highlighted

- Behavioral health: Kelly said Virginia has invested roughly $1.4 billion in the “Right Help Right Now” initiative and that the governor proposes an additional $70 million, including a $35 million proposal to expand special conservators of the peace (SCOP) programs statewide. The secretary linked those investments to expanded mobile crisis teams and crisis receiving capacity.

- Kinship care: The secretary and agency presenters reported more than 1,000 children are living with extended family or friends in lieu of foster care as a result of prior legislative changes; the administration credited the change with better outcomes and potential taxpayer savings but noted no dollar figure for savings was provided.

- Maternal health: The budget includes $4 million to expand perinatal hubs and $17.8 million targeted to children’s mental health and school‑based services. Kelly cited maternal mortality counts (64 in 2021; 67 in 2022) and racial disparities in rates, saying the administration will pursue upstream interventions.

- Long‑term care and nursing homes: The secretary said Virginia’s nursing homes rank below the national average, with complaints up 64% from 2019 to 2023, and signaled support for legislation and budget language to allow intermediate sanctions and increase licensing fees to fund VDH oversight.

- Drinking water: After recent local incidents, the governor proposes $2 million for the Office of Drinking Water and the secretary said the Commonwealth must “do more” to safeguard water systems.

Context and next steps: Kelly closed by reminding members that the HHR secretariat accounts for about 35% of the state operating budget and asked the subcommittee to weigh one‑time versus ongoing funding carefully given limited ongoing resources. Agency commissioners present later in the meeting promised detailed briefings on their specific budget amendments.