Finances in MY executive budget? It’s more likely than you think

With a reelection on the horizon and turbulence out of Washington, Gov. Kathy Hochul is playing it safe in her executive budget proposal this year. And unlike years past, the finances – not policy – took center stage.

Hochul announced her $260 billion budget plan on Tuesday. While that’s still a record high, this year’s number is only $6 billion higher than last year’s enacted budget. Despite calls from New York City Mayor Zohran Mamdani, Hochul did not pitch any income or corporate tax hikes to help pay for his agenda and other costly priorities pushed for by his allies in Albany. She did, however, propose extending the state’s top corporate tax rate of 7.25% for another three years. First passed in 2021, the tax hike is set to expire at the end of this tax year.

Blake Washington, Hochul’s budget director, described the spending plan as a “current law budget” – one that focuses on keeping existing programs and requirements funded with little expansion into new territory. The notable exception is of course the additional $1.7 billion in new child care investments to begin the pathway to universal statewide child care. 

The one exception to the “no new taxes” line that Hochul has repeated ad nauseam is a proposal to tax nicotine pouches like Zyn at the same rate as tobacco products. The issue is sure to be prickly after the state Legislature failed to approve a ban on the products last year amid strong pushback.

The fiscal year 2027 outlook includes a notable drop in federal aid, about $10.3 billion. Washington said that the state expected the decrease as a result of expiring pandemic funds and the first big cuts from President Donald Trump’s so-called “One Big Beautiful Bill.” State officials have already taken action to fend off some of the worst cuts to the Essential Plan, which was estimated to cost the state $3 billion, by requesting the federal government permit New York to return to the Basic Health Plan under the Affordable Care Act. The state had recently expanded its no-cost, low-income health insurance plan to cover people making up to 250% of the poverty line, but returning to the Basic Health Program (which only covers people making up to 200% of the federal poverty line) would keep the federal funding in place. 

If the federal government does not allow New York to revert to the Basic Health Program, the state would lose half of its Essential Plan funding and also be forced to cover hundreds of thousands of immigrants as required by a state court ruling nearly two decades ago. The federal government has not yet granted the state request, and it could choose not to, so the budget plan accounts for the losses by adding over $2 billion in Medicaid spending to cover those who would need to switch over from the Essential Plan.

Marquee policy proposals that have mired down negotiations the past four years were noticeably absent from the governor’s budget proposal this year. Despite previously hinting that she would consider revisiting 2017’s Raise the Age law that governs how minors are tried in court, Hochul ultimately chose not to continue her years-long trend of tweaking criminal justice reforms as part of the budget. Her proposals to change the 2019 bail and discovery laws almost completely overtook budget talks the past several years leading to increasingly long delays to passage. Last year, Hochul oversaw the latest budget in 15 years as she refused to give any ground until legislative leaders compromised on rolling back parts of the discovery law at the behest of prosecutors.

While Hochul may not be gearing up for a prolonged policy fight this year, one may still take place depending on how strongly lawmakers could be. 

State Senate Majority Leader Andrea Stewart-Cousins expressed support for the New York for All Act for the first time in her opening session remarks earlier this month. A growing number of her members have backed the immigrant protections, which would ban local cooperation with federal immigration officials statewide, among other things. Support for new state laws to protect undocumented immigrants, including other measures like one to fund attorneys for those in immigration court, has begun to hit a fever pitch even among traditionally more moderate Democrats.

Hochul paid lip service to protecting New York’s immigrant population with proposals to withhold certain public safety grants from local governments that work with Immigration and Customs Enforcement and designate areas like houses of worship and hospitals as sensitive locations ICE cannot enter without a judicial warrant. But she has still declined to offer support for New York for All, saying simply that she would review any legislation that passes both chambers. 

With Mamdani’s triumphant victory in New York City, legislative leaders may also feel emboldened to fight harder for tax increases on the wealthy, which they have included in their one-house budget rebuttals for years but rarely went to bat for. Pressure from the new mayoral administration and its allies in Albany could finally change those dynamics, though lawmakers historically like to avoid tax increases of any kind in an election year.