How Is It Funded?

Community Safety Departments cost less per response than police handling the same calls, and when downstream savings are included, some programs generate a net fiscal gain. But the funding landscape is more complicated than any single cost comparison suggests. The type of funding matters as much as the amount, because different revenue sources carry different sustainability profiles, different political vulnerabilities, and different gaps in what they actually cover.

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The Cost Comparison

The first question a budget director asks is what it costs. SAMHSA data shows civilian crisis programs cost 23% less per case than police response (compiled from multiple program reports, not a single controlled evaluation).¹ Denver’s Stanford evaluation found the cost differential is larger than that: processing mental health crises through the criminal justice system costs $646 per offense, compared to $151 through the department’s crisis program, a 4.3-to-1 ratio.²

The Durham fiscal evaluation provides the most detailed per-case fiscal data published for a CSD. Each response costs $1,191 but generates $2,093 in fiscal savings through reduced ER visits, fewer hospitalizations, lower criminal justice involvement, and reduced incarceration costs. The net result is $902 in savings per call. The researchers concluded the program “pays for itself through fiscal externalities”.³ When Durham residents were surveyed, 95% expressed willingness to pay, valuing the program at $102.91 per year, more than eight times the program’s per-resident cost.

But per-case cost comparisons can understate the real economics. The larger savings come from what the program prevents: emergency room visits that do not happen because crises are resolved in the community, jail bookings that do not happen because people receive treatment instead of arrest, and repeat 911 calls that do not happen because case managers connect people to ongoing services. SAMHSA data shows civilian crisis programs reduce follow-up hospitalization costs by 79%.¹ Guilford County, North Carolina documented $400,000 in direct savings and 170 staff hours freed through a targeted intervention that reduced one group’s non-emergency 911 calls from 344 to 4 in a 30-day period.⁴

Madison, Wisconsin’s crisis team handled over 3,500 calls in 2024 on a budget of $1.7 million.⁵ Those calls would otherwise have gone to police, each tying up an officer for hours of response, transport, hospital wait times, and paperwork.

What the cost comparison does not tell you. The Durham NBER study is one evaluation of one program. The SAMHSA 23% figure is compiled across program-reported data, not a single rigorous study. The Stanford evaluation measured crime reduction, not full fiscal impact. The cost-effectiveness evidence is directional but concentrated in a small number of well-studied programs, and most CSDs have not published independent fiscal evaluations.

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The Medicaid Breakthrough

Medicaid reimbursement has become a central funding mechanism for Community Safety Departments. As of September 2024, 21 states have opted into the enhanced 85% federal match for mobile crisis services under the American Rescue Plan Act.⁶ The enhanced match rate is available for three years from the date each state’s plan is approved, with the window open through March 2027.

The impact on program sustainability is direct. Denver’s crisis program reports that 96% of its encounters are billable through Medicaid, the highest documented rate.⁷ This rate reflects the team composition: because the team includes a licensed clinician, the encounters meet Medicaid billing requirements. Team compositions without a licensed clinician generally cannot bill Medicaid for the same encounter types.

The Medicaid pathway has three significant limitations that are often underreported. First, the 85% enhanced match rate is temporary. No state has completed the transition to the standard federal match rate. States that use the three-year window to build programs, collect outcomes data, and demonstrate cost savings are positioned to continue at standard rates. States that treat the enhanced match as permanent funding without building a sustainability case are vulnerable when the enhanced rate expires.

Second, Medicaid only covers Medicaid beneficiaries. When a crisis team responds to an uninsured person, there is no federal reimbursement. Cities still need to fund those responses through general revenue, state grants, or other sources.

Third, Medicaid reimburses for billable clinical encounters in the field. It does not cover training, supervision, travel time, community relationship-building, follow-up contacts that do not meet billing thresholds, or staff availability time (clinicians on shift but not currently on a call). Angela Kimball of Inseparable, a national mental health policy organization, articulated this structural mismatch: cities pay police and fire departments for the capacity to be ready, whether or not they respond to a call in a given hour.⁸ Crisis programs are funded only for active response. Eugene’s program collapsed in April 2025 because encounter-based revenue could not sustain the organizational infrastructure.⁹ Medicaid-funded programs face the same gap: Medicaid is the base of the funding stack, not the whole thing.

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How Cities Actually Pay for It

Every established CSD layers multiple funding sources. No single revenue stream covers the full cost, and programs that depend on one source face the greatest exposure when budgets tighten or grants expire.

Federal sources. Beyond Medicaid, SAMHSA provides grants specifically for crisis response programs.¹ The American Rescue Plan Act gave many cities the startup capital to launch or expand. Additional HHS grants support training, evaluation, and specific program components. Federal grants are essential for startup but create “grant dependency” when used for ongoing operations. Programs that treated ARPA as operational funding without building sustainable sources underneath are now facing fiscal cliffs.

State investment. The scale varies enormously but the direction is consistent. Ohio committed $51 million for statewide youth mobile crisis services across all 88 counties.¹⁰ Montana invested $8 million for statewide expansion, including $500,000 specifically for workforce development.⁹ Indiana created a competitive “Mobile Crisis Accelerator Program” providing up to $1 million per organization.¹⁹ Minnesota mandated statewide crisis response (since 1988 under state statute) and in 2023 appropriated $18 million for mobile mental health crisis grants with a new telecommunications fee generating additional dedicated revenue.²⁰ Virginia found a different path: it was the first state to pass a 988 service fee, joining what by mid-2024 had grown to at least ten states funding crisis services through telecommunications fees.²¹

The bipartisan pattern is worth noting. Ohio Governor Mike DeWine (Republican) signed the $51 million commitment.¹⁰ Virginia Governor Glenn Youngkin (Republican) invested $58 million in crisis stabilization infrastructure. Montana’s investments came under a Republican governor. State-level crisis funding is not a blue-state phenomenon.

Local sources. The general fund remains the backbone of most programs. Philadelphia commits $9 million annually ($6M base plus $3M expansion approved FY2024).²² San Diego County’s expansion is part of a behavioral health budget that has grown from approximately $500 million to over $1.25 billion, one of the fastest-growing areas of county government.²³ Albuquerque’s ACS operates on a $23.3 million proposed FY26 budget, up from roughly $17 million in FY24.¹¹ Denver’s Caring for Denver sales tax (0.25%, approved by 70% of voters) generates $35 million per year in dedicated revenue for behavioral health services, including crisis response programs.¹²

The dedicated tax model has a specific advantage: it is voter-mandated and relatively durable. Eliminating it requires a new vote, not just a budget line item cut. For CSDs, which need multi-year stability to build institutional capacity, dedicated revenue streams offer more protection than annual general fund allocations.

Layered funding. The pattern among durable programs is layering all three levels: Medicaid reimbursement as the base (for insured individuals during billable encounters), state grants or dedicated revenue for expansion and workforce development, and local general fund for the remainder, including services to uninsured individuals. Programs funded solely through expiring grants are facing fiscal cliffs. Programs that stacked sources, like Harris County (which absorbed its program into permanent county operations)¹³ and Denver (Medicaid plus dedicated tax plus city budget), have institutional permanence.

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The ARPA Cliff

Many programs launched on American Rescue Plan Act funds: one-time federal pandemic relief dollars that are now expiring. This is a fiscal risk now facing Community Safety Departments that launched between 2020 and 2023.

Programs that planned for the ARPA expiration used the startup window to build outcomes data, cultivate council support, demonstrate cost savings, and secure Medicaid approval. They used ARPA to prove the concept and then built a permanent funding base underneath it. Programs that treated ARPA as operational funding without a sustainability plan are now in budget crises. The grant gave them enough runway to build a program but not enough to sustain it. And the political cost of shutting down a program people rely on is higher than the cost of funding it would have been.

The consistent pattern from cities with durable programs: use grants for startup costs (hiring, training, vehicles, dispatch technology) and build operational funding from sustainable sources from day one. Programs that relied on expiring federal grants for ongoing operations, including Eugene’s and Montana’s shuttered programs, proved structurally fragile.⁹

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The Liability Offset

Local governments representing 25 of the nation’s largest police and sheriff’s departments paid out over $3.2 billion over a ten-year period to settle civil lawsuit claims related to police encounters.¹⁴ The U.S. Department of Justice’s investigation of the Phoenix Police Department documented a pattern where officers used force during behavioral health encounters, including against people whose disabilities affected their ability to understand commands.¹⁵

The liability argument connects directly: cities should assess the liability risk of sending community responders to low-risk calls not in a vacuum but in comparison to the liability risk of the status quo. Police encounters with people experiencing psychosis carry significant liability risk under both state tort law and federal civil rights statutes. Crisis teams replace armed response with clinical response for behavioral health calls. Their safety records across hundreds of thousands of encounters, with zero or near-zero serious injuries, mean the liability exposure for CSD responses is documented to be lower than the exposure for police responses to the same call types.

This is not a direct dollar-for-dollar offset. Liability settlements are irregular, unpredictable, and not assigned to specific call types in municipal accounting. But the directional argument is strong: routing behavioral health calls to clinical responders reduces the category of encounters that produces the largest liability exposure.

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In-House vs. Contractor Economics

The decision between city employees and nonprofit contractors carries immediate fiscal consequences (Q10 covers the operational implications in detail).

In-house staff cost more per employee: government benefits packages, pension contributions, civil service protections, and higher HR overhead. Denver’s crisis program clinicians earn $65,000 to $78,200; Durham’s CSD crisis response clinicians earn $65,749 to $78,899, with peer support specialists at $49,737 to $59,613.⁷ ¹⁶ Both include full government benefits.

Contractors cost less per employee but carry higher indirect costs: contract management overhead, quality control challenges, turnover-driven recruitment costs, and the risk of catastrophic contractor failure. Harris County learned this directly when the contractor failed and the county had to absorb the full transition cost.¹³ After bringing the program in-house, service linkages increased 228%.

The documented cost tradeoff: in-house is more expensive per employee but produces better retention, lower turnover costs, and stronger institutional integration. Many cities start with contractors for launch speed and plan a transition to in-house operations within a defined timeline. The Eugene and Harris County contractor collapses have made this transition planning more urgent than it was before those failures.

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What Each Funding Source Does Not Cover

The Kimball structural funding insight applies to every source in the stack.⁸ No single revenue stream covers the full operational cost of a Community Safety Department. Understanding what each source leaves unfunded is as important as understanding what it funds.

Medicaid covers billable clinical encounters for enrolled individuals. It does not cover: training, clinical supervision, travel time between calls, community relationship-building, follow-up contacts below billing thresholds, staff availability time, services to uninsured individuals, and organizational infrastructure (facilities, fleet, administration, dispatch integration).

Federal grants (SAMHSA, HHS, ARPA) cover startup costs and program components for defined periods. They do not cover: permanent operations, ongoing workforce costs after the grant period, or the institutional infrastructure that a department needs to survive beyond the grant cycle.

State appropriations cover specific program functions (workforce development, crisis services, expansion). They do not cover: comprehensive local operations, and they are vulnerable to shifting state budget priorities (Montana’s defunding demonstrated this).⁹

Local general fund covers whatever the city council appropriates. It is flexible but politically vulnerable: it can be cut in any budget year without voter approval and competes with every other municipal priority.

Dedicated tax revenue (Denver’s model) covers the designated purpose with voter-mandated durability.¹² It does not cover: cost increases above the revenue the tax generates, and it requires a successful ballot initiative to establish.

The durable programs braid all available streams and accept that no single source solves the sustainability question. A CSD budget director who can map each cost category to a specific revenue source, name the gap, and present a plan for closing it, has the fiscal note that survives committee review.

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What a Budget Director Wants to See

When a Community Safety Department reaches the budget committee, fiscal staff ask specific questions, and they ask them whether the program’s sponsors are prepared or not.

Startup costs separated from operating costs. Combining them makes the program look more expensive than its ongoing annual cost. Budget directors know the difference and expect the program to present it clearly.

Revenue offsets. How much comes from Medicaid reimbursement (which requires state approval), how much from state grant programs, and how much from any dedicated revenue streams. The question behind the question: how much hits the general fund, and how much is covered by other sources.

Cost-avoidance projections. These are harder to calculate in advance, but cities with established programs have published their numbers. Durham’s 10,000-plus officer hours freed,¹⁷ Oklahoma City’s 57% reduction in mental health dispatches,¹⁸ and Guilford County’s $400,000 in documented savings⁴ make cost-avoidance projections credible rather than speculative. The Durham NBER finding of $902 in net savings per call provides an anchor for this section of a fiscal note.³

The sustainability path. What happens after year one? After the grant expires? What is the Medicaid timeline in the state? What is the ask from the general fund, and how does it compare to the cost-avoidance projections? A program that cannot answer this question clearly gets deferred, not because the budget director opposes it, but because fiscal staff cannot responsibly recommend funding something with no plan for year two.

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The Bottom Line

The fiscal case for Community Safety Departments rests on multiple data points. The cost comparison favors CSD response over police response for behavioral health calls.¹ ² The Durham NBER study, the only independent fiscal evaluation of a CSD, shows a net gain of $902 per call.³ Medicaid reimbursement at the 85% match rate provides a federal funding pathway, with 21 states now opted in.⁶ The liability offset is documented but not precisely quantified.¹⁴

But fiscal sustainability depends on funding type, not just funding amount. Medicaid covers encounters but not capacity.⁸ Grants cover startup but not permanence. General fund covers flexibility but not durability. The programs that survive budget cycles are those that braid multiple streams, plan for the gaps between them, and present a fiscal note that answers every question the budget committee will ask. The programs that collapse are those funded by a single source that expires, shrinks, or fails to cover the full cost of operations.

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Source Appendix

1. SAMHSA, “Crisis Services: Effectiveness, Cost-Effectiveness, and Funding Strategies,” Publication No. SMA14-4848. 23% lower cost per case, 79% hospitalization cost reduction. https://library.samhsa.gov/sites/default/files/sma14-4848.pdf

2. Thomas S. Dee and Jaymes Pyne, Science Advances, June 2022. $646 vs $151 cost comparison. https://pmc.ncbi.nlm.nih.gov/articles/PMC9176742/

3. Bocar A. Ba et al., NBER Working Paper No. 34344, October 2025. $1,191 cost, $2,093 savings, $902 net, willingness to pay $102.91/year. https://www.nber.org/system/files/working_papers/w34344/w34344.pdf

4. NACo / WFMY, Guilford County. $400,000 savings, 170 hours, 344→4 calls. https://www.naco.org/news/north-carolina-county-decreases-911-non-emergency-calls-connecting-residents-services-they

5. Madison CARES program data ($1.7M budget) and Philadelphia mobile crisis program data (20 mental health emergencies per day). Program-reported figures from city reports.

6. Milbank Memorial Fund, “Mobile Crisis Teams and Medicaid Funding,” June 2025. 21 states, 85% FMAP, March 2027 window. https://www.milbank.org/quarterly/opinions/mobile-crisis-teams-and-medicaid-funding-advancing-behavioral-health-crisis-response-across-the-united-states/. KFF state tracking: https://www.kff.org/medicaid/a-look-at-state-take-up-of-arpa-mobile-crisis-services-in-medicaid/

7. Urban Institute, Denver STAR interim evaluation, 2024. 96% Medicaid billability, salary ranges. https://www.urban.org/research/publication/evaluating-alternative-crisis-response-denvers-support-team-assisted-response

8. Angela Kimball, Chief Advocacy Officer, Inseparable. Capacity vs. encounter funding structural mismatch analysis. Documented in Inseparable policy publications and congressional testimony.

9. NPR / KFF Health News, Aaron Bolton, February 5, 2026. Eugene collapse, Montana defunding and investment figures. https://www.npr.org/2026/02/05/nx-s1-5693908/police-mental-health-calls-988-911-mobile-crisis-teams

10. Ohio Governor DeWine, $51M MRSS expansion, November 2025. https://childrenandyouth.ohio.gov/home/news-and-events/all-news/governor-dewine-announces-plan-for-statewide-expansion-for-youth-mobile-behvaioral-health-service

11. City of Albuquerque FY26 budget. $23.3M proposed. CSG Justice Center, “Albuquerque, NM — Expanding First Response Program Highlights,” April 2025. https://csgjusticecenter.org/publications/expanding-first-response/program-highlights/albuquerque-nm/

12. Denver Caring for Denver sales tax. 0.25%, 70% voter approval, $35M/year. https://www.denvergov.org/Government/Agencies-Departments-Offices/Caring-for-Denver-Foundation

13. FOX 26 Houston, Harris County HART transition, May 2024. https://www.fox26houston.com/news/harris-county-mental-health-program-faces-uncertain-future-amid-financial-concerns

14. Keith L. Alexander et al., “The hidden costs of police misconduct,” The Washington Post, March 9, 2022. $3.2 billion across 25 departments. https://www.washingtonpost.com/investigations/interactive/2022/police-misconduct-repeated-settlements/

15. U.S. Department of Justice, Phoenix Police Department Findings Report, June 2024. https://www.justice.gov/d9/2024-06/Phoenix%20Findings%20Report%20Final%20-%20Final%20508.pdf

16. Jeff Billman, The Assembly NC, June 2024. Durham salary figures. https://www.theassemblync.com/politics/criminal-justice/durhams-new-model-for-public-safety/

17. City of Durham / ICMA 2025 Award. 10,000+ hours. https://icma.org/page/2025-community-health-safety-award-city-durham

18. Oklahoma City 57% reduction: KOSU, February 2026. https://www.kosu.org/health/2026-02-06/oklahoma-city-plans-to-expand-mental-health-crisis-response-with-state-opioid-settlement-money

19. WFYI (Indiana Public Media), Abriana Herron, “New initiative hopes to increase mental health crisis teams in Indiana,” March 20, 2025. Up to $1 million per organization. https://www.wfyi.org/news/articles/new-initiative-hopes-to-increase-mental-health-crisis-teams-in-indiana

20. Minnesota: Statute §245.469 (county mandate since 1988). HF2725 (2023 omnibus): $18 million for mobile mental health crisis grants, 988 telecom fee (12 cents/month) effective January 2024. Minnesota House Session Daily: https://www.house.mn.gov/sessiondaily/Story/17472. Minnesota Reformer, June 9, 2023: https://minnesotareformer.com/2023/06/09/whats-in-the-2023-health-and-human-services-bill/

21. Virginia 988 service fee: CrisisNow/CrisisTalk, May 4, 2021 (Virginia first state). https://talk.crisisnow.com/virginia-is-first-state-to-pass-988-service-fee-legislation/. State count: KFF, “988 Suicide & Crisis Lifeline: Two Years After Launch,” July 2024 (10 states by mid-2024). https://www.kff.org/mental-health/issue-brief/988-suicide-crisis-lifeline-two-years-after-launch/

22. Philadelphia: City Council FY2024 budget approval, June 22, 2023 ($6M base + $3M expansion = $9M). https://phlcouncil.com/city-council-approves-fy2024-budget/. WHYY, Nicole Leonard, June 23, 2023: https://whyy.org/articles/mobile-crisis-response-services-funding-mental-behavioral-health/

23. San Diego County behavioral health budget growth: KPBS, August 27, 2025. Over $1.25 billion of $8.63 billion county budget. https://www.kpbs.org/news/health/2025/08/27/san-diego-supervisors-ok-health-services-plan-benefit-protections. Director Luke Bergman interview, KPBS Midday Edition, 2025. https://www.kpbs.org/podcasts/kpbs-midday-edition/how-san-diego-county-behavioral-health-has-changed