FIRST READ

The governor unveiled her first executive budget last week. It was the largest in state history, making use of a windfall of federal aid.

HOCHUL’S FIRST BUDGET

Gov. Kathy Hochul has said many things in recent months about what she wants to get done in the upcoming year. Now she has to translate that into hard numbers and legislative language that can pass the state Legislature before the April 1 state budget deadline. Her Jan. 18 budget speech was a key step in that process. The budget process will be a test for Hochul as she runs for a full term in office. She has built her political brand on avoiding conflict with local officials and state legislators alike, but the give and take of budget negotiations will likely lead to conflict, though the state constitution gives the governor enormous power to pass a spending plan over the objections of the state Senate and Assembly.

BETTING ON NEW YORK

Nothing says high roller like a $216 billion budget, so it makes sense that wedged into Gov. Kathy Hochul’s executive spending proposal is a move to fast-track casinos for New York City. Hochul wants to open up a request for proposals for three new casinos and put an early end to a moratorium on building them in the city. Something has to bankroll that record-breaking budget, after all.

“We want criminals certainly brought to justice, but we certainly don’t want to criminalize poverty. That’s why we did the bail reform.”

– state Senate Majority Leader Andrea StewartCousins, via the Times Union

“I was not good with groundhogs at all. Probably shouldn’t have gone to the gym.”

– Former New York City Mayor Bill de Blasio, announcing he is not planning to run for governor after all

“As I said since I took office 147 days ago, my top priority is to confront this pandemic head on and to save lives, protect the health of New Yorkers and protect the health of our economy,” Hochul said in her budget address. “We also must pass a bold agenda that’ll do more than just help us recover from this crisis. We need to embrace this moment of possibility and use it to redefine New York’s destiny.”

Hochul’s proposed budget of $216.3 billion is notable because it is several billion dollars higher than the $212 billion budget approved last year – and more than $20 billion higher than the budget her predecessor unveiled one year ago. The governor is proposing the state devote $118.8 billion to operating funds, $95.5 billion to the general fund and $18.6 billion more to the state capital budget for public works. Her budget projects spending growth of 3.1% in fiscal year 2021 and a balanced budget through 2027.

Other budget highlights included $31.2 billion for school aid, including a $1.6 billion increase in Foundation Aid, as well as $2.2 billion for property tax relief, $2 billion for pandemic recovery and $1.2 billion for bonuses for front-line medical workers. Two advantages for Hochul this fiscal cycle are the billions of dollars in federal funding and unexpectedly high tax

receipts, which mean she will not have to make as many difficult choices as past years when the state’s finances appeared to be in disarray.

It appears as if the governor wants to keep local officials happy with some of her ideas. She vowed to have the state take over billions of dollars in Medicaid spending by local governments while maintaining the current categories of funding that help school districts purchase things like textbooks and school buses – notable changes from the budgets proposed by her predecessor. State Budget Director Robert Mujica told reporters that no significant tax increases were included in the proposed budget.

State lawmakers will now get ready to hold hearings and craft their formal response before Hochul releases any amendments to her proposed spending plan. “The policies I laid out two weeks ago are ambitious,” Hochul said in her budget address. “Just as importantly, they’re realistic and achievable and we’re in a position to fully fund them by making historic investments.” – Zach Williams

NEW YORK CITY’S BUDGET NOTABLES

The honeymoon period for Gov. Kathy Hochul and New York City Mayor Eric Adams continues. Hochul gave her first budget address, releasing a proposal that includes, among other things, a number of New York City-specific items. Some of them, like extending mayoral control of schools for four years, are likely to make the new mayor happy.

In total, the budget proposal projects that state spending on New York City will increase in fiscal year 2023 to almost $20 billion in local aid programs. That figure included school aid and a takeover of some local Medicaid costs. Transit and transportation infrastructure

Budget Director Robert Mujica, one of the few holdovers from the Cuomo administration, promised no big tax increases.

Hochul proposes 421-a 2.0

In her State of the State address, Gov. Kathy Hochul promised to end a controversial tax break to incentivize developers to build affordable housing in New York City. The 421-a program will expire this year, so lawmakers simply have to do nothing for it to go away. But Hochul pledged she would replace the program with something else, something she said would better use state dollars to stimulate more affordable housing construction.

Hochul laid out her idea for such a replacement in her executive budget. Absent from her briefing book, she included details of the new program in the Education, Labor and Family Assistant budget bill – an unusual place for housing legislation – buried all the way at the bottom. Dubbed the Affordable Neighborhoods for New Yorkers tax incentive – or the ANNY program – the proposal would create a new 485-w section of the state property tax law, giving housing wonks a new number and letter combination to confuse laymen.

Despite her promise to replace the existing tax break with something new, Hochul’s proposal serves more as a tweak to what’s already on the books. It keeps the same overall structure and conceit with a few changes to make the affordable units built slightly more affordable. Though applauded by some in the housing sphere, it doesn’t represent the kind of transformational change that housing advocates would like to see, with the plan considered more of the status quo in incentives for big developers.

Despite the improvements, Hochul’s proposal still approaches affordable housing development the same way as 421-a, with large tax breaks for developers for their entire buildings. “It’s just more of the same,” said Cea Weaver, campaign coordinator for the Housing Justice for All coalition. “It just doesn’t really seem that significant.” She questioned how the state would enforce the permanent affordability Hochul is promising, referring to the inclusion simply as “window dressing” until advocates know more.

Sam Stein, housing policy analyst at the Community Service Society, said the state could limit subsidies to just the affordable units, or abolish the tax break altogether and use what would have been lost revenue to directly finance construction of affordable housing. “But the new version doesn’t do either of these things,” Stein said. “It just adjusts the parameters of the existing program. – Rebecca C. Lewis

THE WEEK AHEAD

TUESDAY 1/25

State lawmakers are holding a 9:30 a.m. virtual budget hearing on public protection. INSIDE DOPE

The first of 13 scheduled budget hearings will likely include plenty of talk about controversial criminal justice reforms enacted by Democrats. MONDAY 1/31 MONDAY 1/31

Year-end federal campaign finance filings are due, which should give us a sense of how some of the biggest midterm races are shaping up. City & State honors New York’s 50 Over 50: The Age Disruptors with AARP New York in a 5 p.m. virtual event.

spending and a property tax relief credit are also being directed to New York City, along with the rest of the state.

There’s a long way to go before the governor and state Legislature hammer out a final budget, but here are some of the bigger items, affecting New York City in particular, to come out of Hochul’s $216 billion budget proposal.

Mayoral control of schools

Under this Bloomberg-era system, the New York City mayor is granted control over city schools – but only through the state Legislature’s decision to renew that control every couple of years. Hochul proposed extending the mayor’s authority for another four years. Despite calls to reform the mayoral control system under then-Mayor Bill de Blasio, there doesn’t seem to be much political will behind changing the system now, before the new mayor has had a chance to prove himself. Nonetheless, Hochul’s fouryear extension won’t go unappreciated by Adams.

Taking over Medicaid spending

Hochul’s budget proposal has the state taking over more than $5 billion in local Medicaid growth – a measure projected to save New York City $2.6 billion. The state’s takeover of Medicaid cost increases has been phased in over the past decade, following a freeze on the share of Medicaid costs that local governments have to pay.

Casinos in the five boroughs

Hochul wants to open up a request for proposals for three new casino licenses in New York state and end a moratorium on casinos in New York City until early 2023 to allow them to build in the five boroughs sooner. State Budget Director Robert Mujica said that Hochul’s proposal doesn’t specify the new casinos being in New York City, but noted there’s interest in building there. “The three (licenses) will probably be focused in the downstate area, but there’s no restriction there,” he said.

More spending on education

Spending on school aid statewide would reach $31.2 billion under the budget proposal, including increased spending on Foundation Aid in New York City of $345 million. The proposal also outlined a 4.7% increase of per-pupil funding in city charter schools. Hochul detailed a series of new investments in public higher education, including a $1.5 billion investment over five years in the SUNY and CUNY systems and expanding the tuition assistance program for part-time CUNY and SUNY students.

Expanding theater production tax credit

Like the tax credits that film and television productions receive for making their projects in New York, Broadway shows and other live productions in New York City – beaten down by the COVID-19 pandemic – would also be eligible for a tax credit. Hochul proposed expanding the existing New York City Musical and Theatrical Production Tax Credit, doubling the cap on the program to $200 million and extending the initial deadline to apply through June 2023.

New opportunities for affordable housing

Included in an overall $25 billion, five-year housing plan are several measures to expand the housing supply in New York City, including repealing a limit on the maximum density of the residential area of city buildings and making it easier to convert hotels into permanent housing. – Annie McDonough

Hochul’s budget proposal was kind to New York City - and its mayor.

Hochul’s budget includes a tax credit for theater and musicals.