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Gov. Kathy Hochul on Tuesday unveiled a $233 billion budget for New York State that includes $2.4 billion to help New York City manage its migrant crisis — a $500 million increase reflecting the mounting costs as immigrants continue to arrive.
The budget proposal sought to thread the needle between the necessity to exert financial discipline as projected multibillion-dollar deficits loom, and the pressing needs posed by the migrant situation as well as substantial increases in Medicaid costs.
The presentation built on the State of the State address that Ms. Hochul gave last week, in which she outlined a broad vision for bolstering mental health care and public safety across the state, but spoke only briefly about the migrant crisis.
The issue took center stage on Tuesday, with the governor offering a package that will help cover the costs of sheltering migrants and asylum seekers, as well as provide funds for case management, National Guard staffing, medical and legal bills, and employment-related services.
Under Ms. Hochul’s proposal, New York State will take over funding for roughly 3,000 beds, fully covering the cost of existing shelters at Creedmoor, the state psychiatric hospital in Queens, and at Randall’s Island. This will come on top of the state’s pledge to fund a 2,000-bed shelter at Floyd Bennett Field in Brooklyn.
New York’s commitment, which comes as the state faces likely reductions in other areas, speaks to the political urgency of the crisis for Democrats, who will be forced to defend their party’s handling of immigration in a presidential election year.
Looming increases to Medicaid will require the state to spend an additional $3 billion in related costs this year. Enrollment is up on state-subsidized plans, accounting for roughly $400 million in new costs. On top of that, the state is still awaiting the repayment of a $1.5 billion loan it made to distressed regional hospitals amid the coronavirus pandemic.
“We’ve been left hanging,” Ms. Hochul told reporters and officials gathered in the Capitol’s stately Red Room.
The state will be aided by a revised projection that finds higher revenues resulting in a $2.2 billion surplus. As such, the governor’s proposal struck some as austere; the progressive Fiscal Policy Institute characterized the budget as “modest” and said that it lacked “the deep investments needed to reverse New York’s affordability crisis and stem the state’s population loss.”
But Ms. Hochul, perhaps in anticipation of such criticism, said she knew it was “a lot more pleasant to say yes to everybody, but now the reality of the economy requires us to make the tough decisions.” And she once again held the line, rejecting calls for new income taxes.
The budget proposal officially kicked off the annual negotiations between the governor and legislative leaders over how the state will spend over $230 billion throughout the 2025 fiscal year, which begins April 1. And while the governor and the leaders of the Senate and Assembly are all Democrats, there will be no shortage of items to haggle over, with education at the forefront.
The governor voiced her support for extending Mayor Eric Adams’s control of New York City public schools by four additional years — twice as long as the current two-year period of control.
Ms. Hochul is also proposing to end the decades-old practice, known today as “hold harmless,” that ensures that school districts never receive less money in one year than they did the previous year.
While the proposed budget would boost overall school aid by $825 million — or 2.4 percent — the increase is significantly smaller than those in recent years and would result in certain districts receiving less money than they did last year, in part because much of those funds came from a one-time federal infusion tied to Covid recovery.
“As much as we may want to, we are not going to be able to replicate the massive increases of the last two years,” Ms. Hochul said. “No one could have expected the extraordinary jumps in aid to recur annually.”
Another consequential change to education funding under the proposed budget would be altering the Foundation Aid formula, New York’s complicated system for determining how much money to allot to individual school districts, to base the funding in part off the average cost of living over the past decade, as opposed to the previous year.
The governor vowed to maintain the state’s budget reserves at 15 percent of state operating funds, up from just 4 percent when she took office in 2021. But she also dipped into those reserves for the first time in her tenure, using $500 million to account for the increase in the state’s spending on migrants.
The $2.4 billion in state spending for the migrant crisis still falls short of the $10 billion that Mayor Adams has said it will cost the city through the summer of 2025. (The Adams administration had projected the crisis would cost the city $12 billion before lowering that estimate last week.)
Ms. Hochul said on Tuesday that she would be visiting Washington later in the week to renew calls for federal support, including work authorizations for migrants.
Mr. Adams, a Democrat who has seen his approval rating fall after several rounds of unpopular budget cuts, was expected to give his own budget presentation on Tuesday afternoon.
Ms. Hochul also wants to build more housing, and has proposed an extension of the 421a housing tax credit for four years to complete the projects that are in the pipeline. At the same time, she said, she will negotiate a longer term solution with the State Legislature to help build hundreds of thousands of new units over the next decade. Democratic lawmakers have called for statewide tenant protections to be part of any housing package; such protections are anathema to the real estate lobby, which has been a stalwart supporter of the governor.
The budget also prioritizes the state’s mental health system, including a $15 million allotment to develop supportive housing for people with intellectual disabilities, and a combined $12.4 million for housing and service teams to support people with serious mental illness who are either homeless or involved with the justice system.
The governor also highlighted investments in transportation and opioid treatment, as well as hundreds of millions of dollars in new work force development sites that the governor said would help train workers of the future.
The budget proposal includes an important change to the way that cannabis is taxed, removing the potency tax and replacing it with a simpler weight-based formula. Cultivators and processors have long complained that the potency tax is a burden.
The change would lower the overall effective tax on cannabis by nearly a third, to 22 percent from an estimated 34 percent, according to the New York State Society of Certified Public Accountants.
This would likely result in lower consumer prices, helping legal retailers to compete with the illegal shops that have saturated the market with untaxed and untested products.
Governors in New York have typically used the state budget as a vehicle to shoehorn in policy initiatives; last year, Ms. Hochul used the budget to amend the state’s bail laws to make it easier for judges to hold people accused of crimes while they await trial.
And while today’s presentation did not include any major nonfiscal policy proposals, those issues have a habit of popping up during budget negotiations.
Speaking to reporters after Ms. Hochul’s address, the Senate majority leader, Andrea Stewart-Cousins, stressed that today’s presentation was only the beginning.
“We’re going to talk about, you know, her approaches to a lot of things in the budget,” she said with a chuckle. “That’s why this is going to be an exciting phase. We can’t wait.”
Luis Ferré-Sadurní, Ashley Southall and Troy Closson contributed reporting.
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