The hospital upgrade, set to cost $20 million, was announced during the March state election, with a promise that construction would begin before the 2023 election.

Today's state budget funds the planning stage for the project, according to a media release issued by member for Northern Tablelands Adam Marshall. He said planning money would be released next financial year, and the process might take as long as two years.

Marshall, also minister for agriculture and western NSW, also announced the first planning funding for the $80 million Moree District Hospital redevelopment, and another round of funding for the two-stage Inverell District Hospital redevelopment, slated to cost $60 million.

"This is an historic time health facilities in the Northern Tablelands, with Armidale, and Inverell and now Moree and Glen Innes Hospitals set to be fully redeveloped and upgraded," Mr Marshall said.

"This is the first time Moree and Glen Innes Hospital have appeared in the Budget papers and now these redevelopment and upgrade projects are locked in."

Mr Marshall said the upgrade of Glen Innes Hospital would mean local residents could receive top-class medical treatment in their town home towns.

"Armidale is already seeing the benefits of its hospital redevelopment and Inverell is now well underway - now it's Moree and Glen Innes' turn," Mr Marshall said.

"There's no doubt that new and upgraded hospitals help dramatically in attracting and retaining quality medical staff, but it's the local patients who will notice the most difference and that's what these projects are all about - local people."

The news from today's Budget comes on the back of a visit by Health Minister Brad Hazzard recently.

The upgrade will involve demolition of the old nurse's quarters to make way for new health infrastructure, potentially a co-located ambulance or a helipad. The scope of works beyond that remains unclear, but will involve a total gutting of the building.

Glen Innes hospital does not have a helipad, and patients are regularly flown out of an oval for medical evacuation. That included the police wounded in January's shooting. Sometimes patients cannot be flown out.

The state government also budgeted for the first $3.5 million to start construction of the John Hunter "Health and Innovation Precinct" in Newcastle, set to cost $780 million.