Mental health services fearful of Victorian budget cuts despite levy

Victorian agencies offering mental health treatment fear a horror state budget could force them to cut staff numbers by up to 50 per cent, ­despite a controversial levy.

Victorian Treasurer Tim Pallas. Picture: NCA NewsWire / Luis Enrique Ascui

Victorian agencies offering treatment for a range of mental health conditions fear a horror state budget could force them to cut staff numbers by up to 50 per cent, ­despite a controversial mental health levy on businesses raising $874m last year.

Mental health professionals told The Australian that, while they were trying to remain optimistic, the state government had refused to deny budget cuts to services catering to conditions including alcohol and drug dependency, eating disorders and borderline personality disorder – and they feared the worst.

The anticipated cuts would result in the loss of highly trained senior clinicians, as well as experienced staff members with specialised skills, who have either overcome mental health conditions themselves, or assisted family members battling them.

Then-Premier Daniel Andrews responding to the Mental Health Royal Commission’s interim report in 2019. Picture: Mark Stewart

Treasurer Tim Pallas faces immense pressure ahead of his May 7 budget to rein in escalating debt, which is set to hit $177.8bn by 2026-27. It was revealed this week that Victoria’s Treasury was forced to seek an emergency Treasurer’s advance weeks out from last year’s state budget to meet interest expenses on the state’s debt portfolio.

Last year’s budget called for public service workforce savings of $544m in 2024-25. The state’s financial position has declined further over the past 12 months.

The news comes amid renewed public focus on the issue of mental health treatment in the wake of the Bondi Junction massacre in Sydney by a man diagnosed with schizophrenia during childhood. It also follows the ­Victorian government’s funding of a royal commission into the state’s mental health system, after which Mr Pallas introduced a 0.5 to 1 per cent levy on businesses with a payroll of more than $10m to fund the inquiry’s recommendations. The levy raised $874m in 2022-23 and the government has legislated that 100 per cent of revenue it raises must be spent on mental health services. Victoria spent $2.7bn in the mental health portfolio in 2022-23.

While the government has refused to confirm or deny the anticipated cuts to mental health services, The Australian understands they are expected to be framed as affecting services that received a funding boost in 2020 and 2021 due to an increase in Covid-related cases.

“The difficulty is that we’re not seeing a decline in presentations, and at the same time we’re being told this is going to be a really tough budget and it’s likely we’ll lose that funding,” one mental health worker said.

Patrick McGorry served as chair of the expert advisory committee for the Mental Health Royal Commission. Picture: AAP

The worker said the government would not reveal whether its funding would be cut. “They’re just telling us that we’ll find out on May 7. But normally by now we have an indication of funding arrangements,” the worker said.

“The effect is that 50 per cent of our workforce will go if they don’t continue the uplifted funding.”

Another worker said that even though there was a slight overall decline in some types of cases since Covid, the public system was experiencing increased demand due to cost-of-living pressures putting private services out of reach of many families and individuals, making the situation even more dire than it was during Covid. “The increased funding during Covid came at a time when we’d had at least a decade of underfunding, so yes, it helped us pivot and respond to heightened demand, but it was also needed to address historic under-investment,” the worker said.

“It’s also important to note that over the last couple of years our funding has been maintained at Covid levels.

“There has been no increase with CPI. We’re having to pay higher wages, more super, higher WorkCover premiums. We’re already doing more with less.”

Workers in multiple mental health sectors said a decrease in spending on early intervention would cost the public purse more money in the long run, and ultimately result in more hospital admissions. Sources said there was deep disappointment that a ­government-commissioned eating disorders strategy, completed and presented to the government last August, is now not expected to be made public until after the budget, fuelling fears the government may attempt to postpone having to spend money in response to the recommendations.

“The difficulty is we’ve spent months consulting with people who have had a traumatic experience interacting with services,” a source said.

“They may have had loved ones die. They’ve shared those intimate stories with our department and the government, and the government is now hanging onto and not releasing that work. The government is retraumatising those families.”

Recent analysis completed by Deloitte Access Economics for the Butterfly Foundation found eating disorders cost the national economy $18.1bn in productivity losses each year. There were 1273 deaths attributed to an eating disorder in 2023.

A spokeswoman for the Victorian government did not directly address questions about whether funding would be maintained, saying the government was engaged in the “biggest reform of a mental health system in our nation’s history”.

“Since the final report was handed down by the Royal Commission, we have invested more than $6bn into Victoria’s mental health system — the biggest ever investment by any Australian government into mental health,” she said. “Work is underway on 90 per cent of the Royal Commission’s recommendation and these reforms are already transforming the way we deliver mental health care – all 74 recommendations will be implemented.”