The state Health Department's Adult Mental Health Division has notified community organizations under contract to provide adult services that it has run out of money.

The Department of Health is trying to find other department funds that can be transferred to the division until June 30, but with the departmental and state budget deficits, “;it is not realistic to anticipate that sufficient funds to meet our needs will be transferred,”; acting Division Chief Michelle Hill said in a letter to purchase-of-service providers.

“;We must inform you that you can anticipate prolonged delays and, in some cases, stoppage of payments from the Adult Mental Health Division,”; she said.

“;It's complete emergency,”; said Marya Grambs, Mental Health America of Hawaii executive director. “;Hundreds if not thousands of people are going to be left without any mental health services, and that includes medication management.

“;I think the ball rests with the governor. She has to allocate some emergency funding to address this. It's a completely untenable situation. You cannot have people with serious and persistent illness who are not going to get treatment services.”;

Hill said the Adult Mental Health Division will continue to make payments as funds are available based on the order claims in which are received. The department received a $10 million emergency appropriation last year to cover a funding shortage, but that is not possible this year, she said.

Last year's shortfall also was helped by a big chunk of money from a backlog in Medicaid Rehabilitation Option payments by the state Department of Human Services. But billings and payments are current this year, Hill said.

The division's news of “;no money”; comes in the midst of concerns about the impact of caps on case management services to mentally ill adults, one of the steps taken in January to try to contain expenditures.

“;The reduction in hours was difficult to adjust to, but not paying providers at all is not going to work for us,”; said Brian Schatz, chief executive officer of Helping Hands Hawaii, which has about 800 clients in different programs.

Some nonprofit agencies possibly could obtain credit or private financing to sustain their programs, but for them “;to loan the government money over the next several months is unacceptable,”; Schatz added.

He and others are suggesting covering the mental health shortfall with federal stimulus money for Medicaid.

Senate Human Services Chairwoman Suzanne Chun Oakland (D, Kalihi-Liliha) and Senate Health Chairman David Ige (D, Aiea-Pearl City), met Wednesday with Health and Human Services officials to discuss the situation.

The legislators asked about using some of the $320 million in increased Medicaid funding to shore up mental health services, Chun Oakland said. However, the governor wants to use it to balance the budget, she pointed out.

“;I do hope the governor will reconsider and the Legislature will not use the entire amount to balance the budget.”;

State Human Services Director Lillian Koller said the additional federal money, for the period from Oct. 1, 2008, to Dec. 31, 2010, is not specified for Medicaid use and has few strings on how it can be used.

But if some or all of the $320 million was spent to prevent reductions in mental health services, expand physician fees or meet other needs, cuts would have to be made in other areas because the state deficit is $650 million or potentially higher, she said.

Health spokeswoman Janice Okubo emphasized that the department intends to make all payments for services, although there might be “;prolonged delays.”;

She said department officials have been meeting for months with providers to prepare them for the funding plight. They were told at a big meeting in November that the department had a projected $25 million deficit this fiscal year, ending June 30, she said.