Tuesday's release of New York's executive budget included long-awaited details to set the stage for Fiscal Year 2024-25 — marking the official kick off of this year's expected fiery budget negotiations with the state Legislature.
Gov. Kathy Hochul's record $233 billion spending plan — up from $229 billion the previous year — includes funding for health care initiatives, education, affordability, public safety and increased state aid to address the ongoing surge of migrants coming to New York.
The governor said an average of 13,600 asylum seekers arrive in the state each month, driving up education spending $825 million and health care costs. The state will work to rein in an 11% increase in Medicaid costs exacerbated by the migrant crisis, which Hochul says is unsustainable.
"Over the last three years, our Medicaid spending is up 40%," Hochul said in the Capitol's Red Room on Tuesday. "We're trying to find ways now to save over a billion dollars in Medicaid."
Officials in the state Budget Division did not finalize how much of the next budget should aid in the humanitarian emergency until early Tuesday morning, or hours before the governor's address.
Hochul wants the state to commit $2.4 billion in the next budget to help tens of thousands of asylum seekers in the state, including $500 million from its reserve, or rainy day, fund. About $1.1 billion will be earmarked to aid New York City to house the newcomers and provide legal assistance to apply for asylum and secure employment.
"We're doing this not just because it's the right thing to do for the migrants for the city of New York — we also know the companies won't do business in New York if there are thousands of people sleeping on the streets," she said.
Republicans argue New York leaders created the emergency with pro-immigration policies, but agree a solution will take a bipartisan effort.
"I'm not thrilled to have to spend any money on the migrant crisis," Assembly Minority Leader Will Barclay told reporters Tuesday. "I don't think using a rainy day fund is a great idea."
Hochul will travel to Washington, D.C. on Friday to plead for federal immigration reform and more aid — a trip and request she and New York City Mayor Eric Adams have made several times with little return.
Patrick Orecki, director of state studies with the nonpartisan Citizens Budget Commission, says the commission would have preferred the $500 million be kept in the reserve fund instead of migrant spending. Hochul said she does not plan to spend more of New York's reserve fund, totaling at $19.5 billion, or about 16% of the total budget.
"As long as the state has a long-term plan for migrant costs, it's not inappropriate," Orecki said. "There should be a federal solution for it, but we know that's not coming, so the state and city have to work together to solve this. I think the state continuing to offer support, but having an eye toward how we can get costs under control and deal with this over a long term matters a lot, because it's not a one-and-done situation. We need to be thinking about this for many years."
The executive spending plan relies on $2 billion in additional tax revenue and savings, including proposed changes to the state's Foundation Aid formula, to close the $4.3 billion deficit. New York is also waiting on $1.5 billion to be repaid to the state from financially distressed hospitals, or about one-third of the state's health care facilities, that received additional support during the pandemic.
Budget Director Blake Washington credited the additional state personal income tax receipts and other savings to close the state's $4 billion deficit without raising taxes — an area where Hochul said she will not budge, even as a recent polls show a majority of New Yorkers support taxing the rich.
Progressive lawmakers and legislative leaders have long supported higher taxes on millionaires and billionaires to boost state revenue, as budget officials estimate a $5 billion budget gap in 2026 and 2027.
Senate Labor Committee chair Jessica Ramos said Tuesday not taxing the wealthy doesn't make mathematical sense, with the number of billionaires living in New York on the rise. She argues other proposals in the past, like increasing tuition at SUNY and CUNY campuses, are akin to higher taxes on low- and middle-income New Yorkers.
"Perhaps the notion is that we shouldn't find creative ways to tax the middle class New Yorkers to drive them away," Ramos said. "We should be taxing the rich so that we can provide every single child in New York state with a sound education, starting with the universal child care."
Even with the governor's hard line on not raising taxes, Assembly Speaker Carl Heastie said it's too soon for any proposal to be off the negotiating table.
"I try not to draw lines in the sand when you have to negotiate with other people," he said. "I'm not ruling out raising revenue because I don't know where we are yet on on spending."
Heastie gave few details on where he stands on some of the session's largest issues, and stressed he first needs to have discussions with his members as a conference.
"For me, in dealing with the members of the conference, I have to see what the spending wish list is, and then we have to start to see if we have enough revenue to match it," the speaker said.
State budget watchdogs have warned against raising income taxes, arguing it puts the state at a competitive disadvantage, but the state's fiscal health depends on long-term planning for future budget gaps.
"[Then] it costs more money to do business and live here," Orecki said.
Hochul's budget also includes details she announced in last week's State of the State address to tackle New York's lack of affordable housing, such as new tax incentives to build more housing units and convert office buildings into apartments, and legalize basement apartments in New York City.
But her proposal does not include tenant protections — something that is not expected to go over well during budget talks with the Legislature.
Heastie supports Hochul's efforts to construct more housing units, but said the Legislature will not accept a deal without tenant protections.
"As I said, none of this is going to happen unless we also look at the other side of the equation, which is we got to do something for people currently in housing when it comes to tenant protections," Heastie said Tuesday. "I'll say it again: You want a housing deal, there has to be something in it for developers, tenants and labor alike for the Assembly to agree."