Gov. Kathy Hochul on Wednesday defended her budget's plan to shift key Medicaid money away from county governments as local officials and some lawmakers raise an alarm over the measure. 

Hochul's budget would shift Federal Medical Assistance Percentage funds in the Medicaid program, redirecting them from county governments that administer Medicaid to the state. County officials, Democrats and Republicans alike, have protested, worried it could raise property taxes as a result. 

"It will certainly blow the property tax cap out of the water," said Putnam County Executive Kevin Byrne, a Republican, earlier this week. 

Byrne was among the county officials in Albany to protest the potential funding shift, linking what would normally be a little-noticed budgetary issue to a more universal concern over taxes. 

"We want to make sure we work with the state," he said. "It would be a big problem for our bottom line in our budget."

Republican Assemblyman Matt Slater agreed and wants the provision to be removed from a final budget agreement, expected by April 1. 

"It's unacceptable. We have to fight back on it," he said. "I know there's bipartisan support to make sure we are controlling our spending, but also protecting our property taxpayers." 

But Hochul, speaking with reporters after an event touting her housing plans in the budget, said the onus should be on a much bigger driver of property taxes in New York: schools. 

Hochul pointed to the billions of additional dollars sent to school districts each year, with a record of amount of spending in direct aid proposed once again this year and likely to win approval with the Democratic-controlled Legislature.  

"School districts can meet their needs, but also this is an opportunity for them to cut their school taxes," Hochul said. 

School taxes are typically far higher than the taxes paid to county governments by New York homeowners, who pay the highest combined property taxes in the country. 

Local taxing districts in New York are limited in how much they can raise in property taxes annually, with levy hikes capped at the rate of inflation or 2% increases, whichever is lower. 

At the same time, Hochul also indicated she is speaking with county officials who have raised concerns. 

"We're working with the counties," she said. "We've had a lot of conversations. I know what they're talking about."