The New York state Division of Budget sent a letter to state agencies on Tuesday warning them to keep their funding requests flat ahead of the FY25-26 budget that New York lawmakers will have to pass in April of next year.

“While there is a growing consensus that the national economy is proceeding toward a ‘soft landing,’ New York’s status as the world’s financial capital makes it susceptible to a multitude of economic, geopolitical, and market risks,” the letter to agency commissioners from state Budget Director Blake Washington, reads. “A thorough consideration of state commitments will allow the state to be better positioned to meet planned out-year spending growth, and in the event of an economic downturn, will lessen the need for potential reduction in critical services at a time when New Yorkers would otherwise be in most need of our support. To accomplish this, agency budget requests for State Fiscal Year SFY 2026 should not exceed the total SFY 2025 Enacted Budget agency funding levels, excluding one-time investments."

New York is expected to face a large multi-year spending gap, with more than $5 billion next year, expected to swell to a $9.9 billion budget gap by 2028.

The $239 billion spending plan lawmakers passed this spring did not increase taxes, gave $2.4 billion for services for asylum seekers and rollbacks for state employees under Tier 6.

Next year’s budget will come with a number of unresolved and monumental issues. Gov. Kathy Hochul’s surprise last-minute pause of New York City’s congestion pricing plan blew a $15 billion hole in the Metropolitan Transportation Authority's budget, an organization that was not mentioned in Washington’s letter Tuesday.

In addition, the state Health Department's Commission on the Future of Health Care is tasked to effectively rein in New York's ballooning $100 billion Medicaid program, which is traditionally the largest share of the budget, after lawmakers rejected Hochul’s proposed cuts to Medicaid programs.

The Rockefeller Institute is commissioned to study the state’s badly outdated Foundation Aid formula for school funding and their recommendation for any amendments to the “Save Harmless” or “Hold Harmless” provision, which ensures districts don’t receive less aid than the previous year if their population drops. The institute’s report is due on Dec. 1.

Agency budget requests are due no later than Oct. 17. Hochul will present a budget to the state Legislature in January, which will initiate weeks of hearings and negotiations before the final budget is due April 1.