Gov. Kathy Hochul to present budget proposal, balancing new programs against fiscal constraints

ALBANY — Gov. Kathy Hochul on Tuesday will outline how she plans to pay for her affordability agenda, balancing big ticket items such as increasing aid for child care with a roughly $4 billion budget gap and fiscal uncertainty out of Washington.

The Democrat, who is running for reelection, last week released her State of the State legislative agenda with plans to spur housing development, lower automobile and homeowner’s insurance, increase nuclear power and boost oversight of utilities to rein in costs.

"The State of the State is the policy poetry for the governor," said Blair Horner, senior policy advisor with the New York Public Interest Research Group. "The governor’s policy prose comes out in the budget. We get to actually see what it is she’s proposing that sounded good in the State of the State."

The spending proposal is expected to total more than $254 billion, and will kick off negotiations with the Democratic-led State Legislature. The budget is due by April 1, the start of the state’s fiscal year.

While the governor holds significant power in the budgeting process, Hochul will face a number of challenges, fiscal experts told Newsday.

"The state budget process will unfold in a period of heightened and persistent uncertainty regarding federal actions and how they will affect the state’s finances, services and economy," said Maria Doulis, deputy comptroller for budget and policy analysis with the state comptroller's office.

Federal cuts to Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, are expected to increase the state’s costs by more than $3.4 billion, according to the state budget office. The Trump administration also has threatened cuts to child care and other programs.

State Comptroller Thomas DiNapoli on Friday said the state needs to boost its reserve funds. The state's primary reserve fund has about $14.6 billion, according to the budget office.

"Continued threats from Washington pose a risk to the state’s finances, as well as its economy. The federal spending cuts necessitate a continued bolstering of reserves in order to protect the services New Yorkers rely on," DiNapoli said.

Election pressures

In addition to the fiscal uncertainty, Hochul will face political pressure not only from state lawmakers, with all 213 legislative seats up for election, but also from newly-elected New York City Mayor Zohran Mamdani, a prized political ally who could help boost election turnout.

Mamdani and some state lawmakers have called for an increase on corporate taxes as well as income taxes on millionaires and billionaires.

Republicans, including Nassau County Executive Bruce Blakeman, who is running for governor, have criticized Hochul and state Democrats for the cost of living and high taxes in New York.

"The big friction point of this budget is going to be whether they do a significant tax hike," said Bill Hammond, senior fellow at the Empire Center for Public Policy, a think tank based in Albany.

Hochul insists that she doesn’t support raising income taxes, but last week acknowledged that drastic cuts from Washington could change those plans.

"I don’t support raising taxes just for the sake of raising taxes," Hochul told reporters at a Jan. 15 news conference. "I have to keep all my options on the table, but we don’t have to do this to fund the ambition I’ve laid out in my State of the State address."

Strong tax revenue

Higher than anticipated income- and sales-tax revenue is expected to help fill a roughly $4.2 billion budget gap for fiscal 2027 and pay for additional programs.

Financial experts warn however that the state needs to rein in spending.

In the long run, the state faces a roughly $20 billion budget gap, said Andrew Rein, president of the independent Citizens Budget Commission. "We need to stabilize the budget because what happens is if we keep on piling more and more spending on top of what we can’t afford ... we risk our own self-inflicted crisis."

Rein agrees with the governor’s focus on affordability but said the state should shift dollars from existing programs that aren’t delivering value for New Yorkers.

The state — which has some of the highest taxes in the nation — has an affordability issue and an out-migration issue, Rein said. "We need to make sure New York makes smart choices that make us competitive."