Acting premier James Merlino visited the Youth Prevention and Recovery Care facility on Havlin Street on Friday morning to announce the state budget allocation.

The work is part of an $18 million overhaul of three Y-PARC centres - Bendigo, Frankston and Dandenong.

There will also be $123 million spent building five more Y-PARCs across the state.

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Bendigo Health chairman Bob Cameron said it was a "rip-snorting" announcement for the local centre.

He said it would mean the 10-bed facility could be updated, and he hoped it would allow for added capacity.

"We will be able to work through all that with the department, and we very much look forward to that," Mr Cameron said.

He said the facility played a crucial role, giving young people somewhere to go between crisis accommodation and community care.

"This service is very important for people with psych needs," he said.

"Sometimes people need acute care, but then they go back into the community - but sometimes they need to step down.

"And then we have people in the community with need, and sometimes they need to step up."

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The funding was framed in the context of the state government's overall $3.8 billion commitment to improving mental health services, as guided by the findings of the Royal Commission into the sector.

"This has been a wonderful facility that has made such a difference," Mr Merlino said.

"It supports around 200 young people a year and they do brilliant work."

Mr Merlino also defended the decision to increase taxes on some businesses to help fund mental health services.

"This is very targeted - we're talking about less than five per cent of employers with a national wage bill of more than $10 million," he said.

"The benefit to businesses across the state is massive.

"If we get this right, if we rebuild our mental health system, if we see a reduction in the level of need, it will mean billions to our economy."

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