Victoria's 2021-22 state budget allocated $200 million to a school mental health fund, due to be rolled out in rural and regional government schools from mid-2022.

It's part of a total $3.8 billion allocated to rebuilding the mental health system in Thursday's budget, after the Royal Commission into Mental Health tabled its report into Victoria's "broken" system in March.

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Bendigo Senior Secondary College assistant principal Kylie Hand said schools were yet to see the finer details of the fund, but any focus on prevention and early intervention in students' mental health was welcome.

Mrs Hand said she hoped the funding would allow young people to get early mental health support, as any issues arose.

With BSSC students in their final years of school, Mrs Hand said she would be keen for a program which could build strong links to community agencies.

Mrs Hand said mental health was an issue affecting students Australia-wide.

"We are seeing an increase in probably the volume as well as the severity of mental health issues in young people, and that's been compounded by the lockdowns of last year," she said.

"It is important that we have got those links with the correct services so schools are able to make appropriate referrals."

Budget papers say the fund will allow schools to select and implement mental wellbeing supports that best meet the needs of their students, while connecting them with specialist services where needed.

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Among items funded were a new entity, the Victorian Collaborative Centre for Mental Health and Wellbeing, to bring together people with lived experience, researches and clinicians.

A new independent statutory Mental Health and Wellbeing Commission will also be established.

Headspace Bendigo manger Lindsay Rose welcomed funding decisions in line with the recommendations of the Royal Commission.

Mr Rose said Headspace was particularly happy to see funding for youth mental health.

He said most important was that funding was used to improve access to mental health services for young people, but also make sure help was ongoing.

Bendigo's Youth Prevention and Recovery Care unit received funding for an upgrade, part of $148 million shared out across facilities throughout the state.

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