Hochul and Adams Budget Generously, Despite Looming Washington Threats
State and City Budgets Reflect Strong Revenues and Efforts to Ease Cost of Living
Mayor Eric Adams and Gov. Kathy Hochul have announced budget proposals for the coming year that are remarkably similar. They both used unexpectedly strong revenues to increase spending and avoid cuts to popular programs. They touted a series of steps – especially income tax cuts – to convince voters they would do something about the high cost of living in New York.
A Big Gamble
They are both taking a big gamble that they will be able to get through the next year without their plans being blown apart by President Donald Trump and Republicans in Congress, who are widely expected to slash federal aid to states and cities and social safety net programs as they take control of the federal budget. But if that happens, Hochul wants New Yorkers to know who is responsible for the damage that could do in New York. "States are not going to be able to backstop the loss of federal dollars," she said after unveiling her budget. "So you have to put responsibility on the people who created this and that would be the elected leaders in Washington."
State and City Budgets
The annual budget negotiations for both the state and the city come at a crucial time for the mayor, who is running for reelection this year, and the governor, who is already gearing up for what looms as a very competitive race in 2026. And they will need to win approval for their plans from the state legislature and City Council despite being met with a torrent of criticism over their approach.
Adams’ Plan
Adams proposed spending $114.5 billion for the fiscal year beginning July 1, about the same as this year’s budget. He was able to reduce expected spending on asylum-seekers for the next two years more than $2 billion from what he had estimated when this year’s budget was adopted in June, given the sharp decline in migrants arriving in the city. Strong tax revenues driven by gains in the stock market and Wall Street profits should produce a $2 billion surplus this year that is being used to balance next year’s budget and reduce future budget gaps.
Hochul’s Plan
Hochul’s plan for the state fiscal year that begins April 1 comes in at $252 billion, about $9 billion more than this year. The current year could produce a surplus as high as $5 billion, which allows the governor to increase funding for Medicaid and education.
Rebates and Tax Cuts
The governor has spent the month unveiling a series of proposals to convince New Yorkers she will deliver relief to hard-pressed voters, which have gotten her very little applause. She has unveiled a $3 billion plan to return what she called excess sales tax revenue the state received as inflation pushed up prices. Residents who file their taxes jointly and make less than $300,000 would receive $500 checks, while individuals making up to $150,000 would receive $300. The budget also includes a $1 billion income tax reduction for taxpayers making up to $323,000 and an expanded child tax credit of $1,000 per child under age 4 and up to $500 per child from 4 through 16. The current tax credit is capped at $330 per child.
Criticism
The rebate in particular has drawn sharp criticism for its attempt to give money to as many voters as possible. "It provides a little money to a lot of people. That doesn’t help anyone very much," said Andrew Rein of the Citizens Budget Commission. The progressive Fiscal Policy Institute agreed in a statement, saying it "would do little to alleviate the stresses imposed by inflation and other cost of living increases."
Extending the Millionaire’s Tax Surcharge
The governor, who has repeatedly opposed tax increases, surprisingly called for extending a 0.8 percentage point income tax surcharge, which starts at incomes of a little more than $2 million a year for married taxpayers, until 2032. It had been scheduled to expire in 2029. Extending the extra tax on high earners deflected pressure from progressives, while angering some of her most loyal supporters in the business community.
The Impact of Republican Cuts
The key to the state and city’s fiscal future may lie in Washington. Trump and Congressional Republicans are committed to passing a major tax cut bill early this year and to pay for at least a part of it with reductions in spending, which could force Adams and Hochul into budget triage. The city gets $8 billion a year in direct federal aid, about 7% of the budget. One-third of the $232 billion state budget is paid with federal funds, primarily for Medicaid, a likely Republican target. The impact of Republican cuts would be far-reaching, says State Comptroller Tom DiNapoli.
Conclusion
The debate over the state and city’s reserves also shows how the governor’s and mayor’s approaches please almost no one. Neither plans to add to their existing reserves, despite the extra cash and worries about what the Republicans will do. The fiscal watchdog group the Citizens Budget Commission called on both to bulk up reserves, and criticized Hochul’s approach in an unusually harsh comment: "Gov. Kathy Hochul’s executive budget weakens the state’s fiscal foundation and competitiveness." The mayor didn’t fare any better with the group, which believes the mayor is underestimating spending in key areas like police overtime and housing vouchers: "Next year’s spending plan simply doesn’t reflect reality."
Frequently Asked Questions
Q: What is the purpose of the governor’s and mayor’s budget proposals?
A: To provide relief to hard-pressed voters and avoid cuts to popular programs.
Q: How do the governor’s and mayor’s budget proposals differ?
A: The governor’s plan is more focused on tax cuts and rebates, while the mayor’s plan is more focused on eliminating or reducing city income tax for low-income residents.
Q: What is the impact of Republican cuts on the state and city’s fiscal future?
A: The impact would be far-reaching, with potential reductions in federal aid and social safety net programs like Medicaid and food assistance.
Q: What is the plan for the state and city’s reserves?
A: Neither the governor nor the mayor plans to add to their existing reserves, despite the extra cash and worries about what the Republicans will do.
