ALBANY — With New York flush with cash, Gov. Kathy Hochul proposed a $216.3 billion budget Tuesday that would allow the state to boost school funding 7%, offer bonuses and raises to health care workers, increase child care spending and mail property-tax rebate checks right before Election Day this fall.
Hochul, a Democrat who became governor in August when Andrew M. Cuomo resigned, said her budget would increase spending by $4 billion or 3% over last year. But the state would be able to cover the growth and set aside billions in its cash reserves thanks to a rare phenomenon in state finances: a budget surplus.
Because of a faster-than-expected economic recovery from the pandemic and massive federal aid, the state is looking at about a $6 billion surplus for the fiscal year that ends March 31. It's an unusual circumstance for state lawmakers and gives Hochul an opportunity to spend generously and avoid tax hikes in a year in which at least a half dozen rivals say they want to run against her.
Hochul said the surplus will allow the state to make record investments in schools and infrastructure, while providing more tax breaks. She also wants to speed up the timetable for opening three downstate casinos and set aside a significant portion for the state’s cash reserves.
"This is a once-in-a-generation opportunity to make thoughtful, purpose-driven investments that our state and in our people that will pay dividends for decades," said Hochul, who is running for election. "And that's exactly what my budget will do."
Further, New York state does not project any budget shortfalls for the next four years. That’s a dramatic change in a state where "out-year gaps" are not just expected but praised when they amount to just a few billion dollars.
"For the first time ever, with smart planning," Hochul said, New York will not have any outyear deficits for the coming year.
And, also perhaps a first in some time, Hochul said her proposal doesn’t include any tax or fee increases.
"Rather than raise taxes, this budget is about putting money back in people’s pocket," she said.
Even some Republicans acknowledged the governor's plan, with so much cash on hand, presents a little something for everyone.
"There's a lot of stuff most people in the Legislature are going to be happy with," said Assemb. Edward Ra (R-Franklin Square), ranking Republican on the powerful Ways and Means Committee. He said his colleagues liked the combination of increased spending on schools and infrastructure while offering tax credits and property-tax rebates.
"It seems she was almost able to present a budget that makes almost everyone happy — which is remarkable compared to where we were last year," Ra said, referring to a massive budget hole largely filled by Congress.
Neither Assembly Speaker Carl Heastie (D-Bronx) nor Senate Majority Leader Andrea Stewart-Cousins (D-Yonkers) commented immediately on the governor's plan.
Notably, Hochul's plan abandons a 2% cap on state spending growth that Cuomo had imposed during his tenure. Financial watchdogs had praised the cap while pointing out Cuomo often shifted spending items "off budget" to various state authorities to mask actual growth.
Hochul unveiled her budget on the same day a new poll showed her with a large lead over her potential rivals in a Democratic primary and when her campaign announced she raised nearly $22 million in campaign funds since August — a record for a New York candidate over such a short period.
Among the highlights in the governor’s proposal:
- Increases education spending $2.1 billion overall, a 7% increase. This would include a $1.6 billion increase in "Foundation Aid," the primary source of state aid to local school districts.
- Provides $2.2 billion in property-tax relief. The Hochul administration said a rebate would be based off the property taxes a homeowner pays. Eligibility is capped at $250,000 annual household income. Rebate checks would be mailed this fall. The average benefit for those outside New York City is $970.
- Authorizes $1.2 billion in bonuses and wage hikes for health care workers. This includes a $3,000 recruitment bonus and a 5.4% cost-of-living raise.
- Earmarks $1 billion in transportation funds for a "pave our potholes" program around the state.
- Greenlights $350 million for small business tax credits, especially to cover pandemic-related expenses.
- Sets aside 15% of spending for state reserves, such as its "Rainy Day Fund."
- Relieves counties of the semiannual headache of asking lawmakers to renew their sales tax rates.
- Extends mayoral control of New York City for four years, a plum for Mayor Eric Adams. The mayor and governor have said they want a productive city-state relationship without the constant bickering that marked the Cuomo years.
The governor called for a $1.4 billion hike in child care subsidies, which she said would benefit 400,000 more children. That's still short of a "universal" child care subsidy that would cover all children, a plan some progressive legislators back.
And she called for expanding the state's Tuition Assistance Program to part-time students at universities and community colleges.
In somewhat of a surprise, Hochul wants to begin the process for opening new downstate casinos this year, rather than waiting until 2023. Her administration said it would propose legislation that would allow the state’s gaming board to solicit proposals later this year.
The casinos would not have to be located within the five boroughs of New York City, said Robert Mujica, Hochul’s budget director. Nor would an upstate proposal be ruled out.
Mujica, who also served as Cuomo's budget director, acknowledged the 2% cap on the growth of state spending had been dropped by Hochul. He said state spending now is projected to grow about 3% annually through 2027 and said the decision to spend more on schools and health care is something New Yorkers want as they continue to deal with the pandemic.
"You need to make investments at this time, in this moment, to respond to what's going on in the world," Mujica said. "Governor Hochul does it responsibly … so you have reserves."
Andrew Rein, president of the Citizens Budget Commission of New York, a watchdog group, praised Hochul's decision to boost state reserves to 15% of spending. But he pointed out the national benchmark for states is 17%, so New York is still behind.
Further, Rein noted historically a governor's proposed budget is just the starting point for negotiations and legislators — all 213 are up for reelection this year — typically add billions of dollars in spending.
"This year’s budget negotiations risk a feeding frenzy that could destabilize the state’s future finances," Rein said.
What to know
Major proposals in Gov. Kathy Hochul's $216.3 billion state budget:
- Increases education spending $2.1 billion overall, a 7% increase.
- Provides $2.2 billion in property-tax relief.
- Authorizes $1.2 billion in bonuses and wage hikes for health care workers.
- Earmarks $1 billion in transportation funds for a “pave our potholes” program around the state.
- Greenlights $350 million for small-business tax credits.
- Sets aside 15% of spending for state reserves, such as its “Rainy Day Fund.”
- Abandons the state's 2% cap on state spending growth.
- Speeds up the timetable for opening three new downstate casinos.