Mental illness – which includes a wide range of conditions that affect mood, thinking, and behavior, such as anxiety disorders, depression, and schizophrenia – affects 1 in 5 adults in the U.S. annually. Serious mental illness (SMI), a subset of mental illness that substantially interferes with daily living, impacts approximately 1 in 20 adults annually. Financial stability, including job security, is closely linked to mental well-being for both individuals and their families. When stable employment and income are jeopardized, the consequences can have serious implications for mental health. Governors have a role in protecting the mental well-being of their constituents, especially during financial downturns. In recent years, states have made significant investments in mental health, aided by flexible COVID-19 relief funding, such as the American Rescue Plan Act (ARPA), which has allowed states flexibility to invest in infrastructure that can be sustained over time.
Economic instability can be felt through an entire family. The impact of economic uncertainty on children’s well-being has been demonstrated through several studies. A 2021 article in the Children and Youth Services Review analyzed more than 40 studies and revealed that the Great Recession of 2008 had a demonstrable negative impact on children’s mental well-being. While rising state unemployment rates were associated with worse mental health for every population, impacts have been documented to be harder on families with a lower socioeconomic status, adolescents, and on girls and Black youth.
The initial burden of economic uncertainty may be borne by adults facing job loss or financial turmoil. Still, there can be a downstream impact on the emotional well-being of children and youth. More than 13 million non-elderly individuals obtain health insurance through their employer; accordingly, for many, job loss represents a potential loss of healthcare coverage as well. This poses a specific risk to children, as a majority of children access health insurance through parental plans; when a parent loses their employer-based healthcare coverage, their children can, too.
This liability could compound an existing crisis, as children and youth already struggle to access mental health treatment. According to a 2019 paper from the University of Michigan, one in seven youth aged six to eighteen reported at least one mental health disorder, but about half of the youth who needed professional mental health services did not receive them. To achieve their full physical and emotional potential, children and their families don’t just need access to available providers; they need insurance to afford necessary care. Healthcare coverage is associated with positive impacts on a child’s well-being given an increased utilization of preventative or treatment services, including critical primary care well-child visits. Health coverage for low-income children can improve high school and postsecondary success and have positive impacts on long-term outcomes. Job loss can mean disruptions in children’s healthcare coverage, as even continuity coverage through COBRA is notoriously expensive. For youth experiencing mental health disorders, this disruption could be catastrophic.
Even in families where parents don’t lose their jobs, children and youth can feel the repercussions of economic turmoil. Parents can experience extreme stress during financial duress even if they still have a job, as they worry about potential layoffs, company closures, retirement account balances or future financial security. This is especially worrying as financial strain is alreadyone of the most common drivers of parental stress, even outside of uncertain economic times. Stress can harm parental mental health or exacerbate existing disorders, which can in turn influence their ability to provide a consistently nurturing and safe environment for children. In a 2023 Public Advisory titled Parents Under Pressure, former Surgeon General Vivek Murthy called out the importance of supporting parental well-being, as parental mental health, especially poor maternal mental health, is tied to adverse mental health outcomes for their children.
With the expiration of ARPA funds and other potential federal funding cuts, states face difficult decisions on how to invest public resources to support their constituents. Ongoing investment in mental health policy and infrastructure is essential, not only for adults at risk of job loss but also for their family members who may experience the ripple effects of job insecurity.
State Investments for Fiscal Year 2026
Investment in Mental Health Services
In Pennsylvania, Governor Josh Shapiro has highlighted the importance of making healthcare accessible and affordable for all Pennsylvanians. Alongside these overarching priorities, the Governor has made significant investments in behavioral and mental health care in his proposed 2026 budget. Pennsylvania continues to prioritize postpartum screening, provider education to identify maternal mental health challenges, expedited referrals for mental health services after a diagnosis of postpartum depression, and the establishment of resource hubs and local support networks for individuals with this mental health challenge. Additionally, Governor Shapiro proposed allocating more than $200 million toward mental health services for students. This flexible funding supports resources for school safety and security. It also enables schools to hire mental health counselors and offer additional mental health resources tailored to the specific needs of each school community.
Regarding youth mental health, Wisconsin Governor Tony Evers declared 2025 the “Year of the Kid” and plans to invest $300 million toward improving the mental well-being of young people in the state. In the Governor’s budget, Wisconsin will invest in children through four proven and effective strategies. The first strategy is prevention, which includes tax relief for families, access to healthy meals, firearm safety initiatives and support for family foundations. The second strategy emphasizes school mental health and psychological safety. This involves enhancing mental health treatment in schools, hiring mental health professionals, implementing student-led suicide prevention programs and establishing school safety offices. The third focus is on treatment, ensuring qualified professionals are available in psychiatric residential treatment programs and children’s behavioral health programs. The fourth strategy promotes fairness by permitting school districts to keep 100% of the federal funding they receive for Medicaid school-based services. Additionally, it mandates that health insurance plans must cover services provided by qualified treatment trainees if those services are already included in the plans through other providers. This approach aims to increase access to treatment for insured youth.
Workforce and Infrastructure
In his 2025 State of the State address, Ohio Governor Mike DeWine emphasized that supporting the workforce presents both an opportunity and a significant challenge, which has led to the launch of a new initiative to create “Ohio’s Workforce Playbook.” The playbook will work to remove roadblocks for Ohioans with disabilities, formerly incarcerated individuals, youth in state custody, seniors, individuals with mental health challenges, and children in foster care to gain employment. Additionally, Ohio plans to continue strengthening its mental and behavioral healthcare workforce through the Great Minds Fellowship, an incentive program that offers loan repayments for new graduates who commit to working at one of Ohio’s Community Behavioral Health Centers for at least one year. Since 2022, the fellowship program has brought more than 2,100 new behavioral health professionals to the field.
Recently, investments in behavioral health infrastructure have led Ohio to open its first new state behavioral health hospital in nearly a decade. Other related investments resulted in the building and expansion of 11 pediatric behavioral health facilities, which have served over 100,000 youth in the last year.
Streamlining State Government Systems
In South Carolina, Governor Henry McMaster identified that the state had the “most fragmented and siloed health and human services delivery system in the nation.” He cited that “77% of our state’s young people with major depressive episodes do not receive mental health treatment.” In a message of urgency that stressed the need for state reform, the governor explained plans to move the Department of Mental Health and the Department of Disabilities and Special Needs to become cabinet agencies i to be directly accountable to the governor. The goal of these reforms is to simplify the complex landscape of offices, agencies and officials to facilitate access to mental health care.
This move signals a broader recognition of the need to improve state agency coordination, which can reduce barriers to care. By consolidating these departments and making them directly accountable to the governor, the state can implement new policies more quickly and collaborate more effectively across agencies to address gaps in care.
Conclusion
Governors have a critical role to play in ensuring that mental and behavioral health services are available to individuals and families, including those addressing mental health and substance use. Additional state investments in mental health include ensuring individuals have access to and are enrolled in health insurance to obtain the services they need, as well as committing state financial support for community-based programs and policies that directly and indirectly address mental health and substance use. These programs can include school-based mental health services, screening and referral in primary care settings, as well as those that indirectly impact behavioral health, like employment support. Governors continue to propose new ways to address these challenges, and the NGA Center for Best Practices will continue to monitor these developments, ensuring that states can share lessons learned with one another.
