Budget season is officially underway, as New York state faces a $2.3 billion budget gap heading into the 2026 fiscal year and a projected $13.9 billion hole by 2028.
Multibillion-dollar budget gaps for the next few years are shrinking, but there are still big question marks, including school aid, Medicaid and what to do about the Metropolitan Transportation Authority (MTA).
State Budget Director Blake Washington spoke with reporters at the State Capitol Friday, outlining how key issues will factor into the state’s financial plan.
First: Will it include a revenue replacement for congestion pricing?
“I think the next possible opportunity to deal with it will be in the budget, so yes,” Washington said.
On Foundation Aid, how will the Rockefeller Institute’s study into the Foundation Aid formula factor into how school funding is allocated?
“Their study is due Dec. 1, so we’ll see some of their findings, we’ll hear some of their recommendations. They’re non-binding, but they’re really important to inform this process,” he said.
Last year, many education leaders were exasperated that Gov. Kathy Hochul’s initial plan to end hold harmless – which ensures that districts don’t receive less money in Foundation Aid than the year before – came without warning or their input.
Washington noted that this year, budget officials will have hours of public comment conducted as part of the study to help inform any decisions as to how to rework the formula.
On migrant spending, Washington said he does not expect the state to spend more money on handling the migrant crisis than was allocated in this year’s budget.
As for whether any of that money will once again come from the state’s reserves, he said, “Not at this time. Having rainy day funds are really important to proving assurance that all of our programs that New Yorkers care about will continue unabated in the event of an economic downturn,” indicating that no money from the rainy day fund is included in any part of the financial the plan as it stands.
Tax increases? Not expected.
“The governor has always been very clear that she is not looking to increase personal income taxes any more than they are today,” he said. “We want to remain competitive with neighboring states.”
Nathan Gusdorf, executive director of the Fiscal Policy Institute, stressed that heading into next year, the governor and the Legislature will have their hands full when it comes to the congestion pricing gap.
“The truth is, it will be very difficult to come up with an alternative reliable revenue stream,” he said.
The state Division of Budget says out year budget gaps are $2.3 billion next year, $4.3 billion the following year and $7.3 billion for 2028.
Gusdorf said even with a brighter fiscal outlook than was initially anticipated and potential growth in the budget, the governor will still have tough decisions to make.
“The big challenge this session should be deciding how to allocate growth in the budget to the most important policy priorities and social spending areas,” he said.
One of those key areas, Medicaid spending, is still drawing controversy from last year’s budget. When it comes to continuing conversations about Medicaid and the state’s CDPAP program, in particular, Washington stressed that it’s a balancing act.
“It’s important that we take an objective view of that, but it’s equally important to make sure we’re keeping an eye on the consumer experience,” he said.
In early January, the governor will kick off next year’s legislative session with her State of the State and budget addresses in Albany.