Hochul unveils proposal for record-high budget with focus on housing, health care and transit

NICK GARBER

Gov. Kathy Hochul last Wednesday unveiled her plan for a record-high $227 billion state budget that would extend a corporate tax increase, delay the demise of a key tax break for a ordable housing construction, spend record amounts on Medicaid coverage and raise money to avoid subway-service cutbacks.

Covering the 2024 scal year, which lasts through next spring, the budget proposal also adds meat to proposals that Hochul hinted at last month in her State of the State address, including spending $1 billion to bolster mental health care, incentivizing local governments to build more housing, linking the minimum wage to in ation and revising the state’s bail-reform law.

e plan leaves unresolved major issues including a potential replacement for the 421-a tax break that incentivizes developers to build affordable housing. A replacement program could arise during talks with state legislators—which are expected to last until the April 1 deadline to nalize the annual budget.

e budget proposal arrives as the state’s nances are torn between immediate stability and longer-term uncertainty. In the near term, New at tension has given rise to conicting demands directed at the governor and the state Legislature.

York is ush with cash. Figures released Wednesday showed the state is enjoying an $8.7 billion surplus, fueled by a “remarkable surge” in tax revenue that has exceeded expectations for months, according to Hochul’s o ce.

But a mild recession expected to hit the U.S. this year, combined with dwindling federal pandemic aid, could curtail growth across the state and put a strain on agencies such as the Metropolitan Transportation Authority, whose leaders have warned of drastic service cuts if the state does not step in to supplant its disappearing federal dollars.

Progressives, citing the state’s surplus, have called on Hochul to spend heavily on child care, schools and aid for undocumented immigrants—calls that Hochul partly met in her proposal, with $9 billion in education spending and a $1 billion plan to aid asylum-seekers.

Some lawmakers had pushed the governor to reconsider her opposition to raising income taxes, and the left-leaning Fiscal Policy Institute warned against allowing a two-yearold corporate tax hike to expire as scheduled this year, saying it would cost New York $1.5 billion by the end of scal year 2025.

Meanwhile, the Citizens Budget Commission and other budget watchdogs have argued against income tax hikes. ey have encouraged the Legislature to use surplus money to bolster the state’s rainyday reserve fund and close out-year budget gaps—which would stand at $22.2 billion through scal year 2027 absent any balancing.

“ e gaps that we’re looking at now could, in fact, get worse if there is some downturn that impacts tax receipts,” said Patrick Orecki, director of state studies at the CBC.

Ultimately, Hochul heeded calls to keep the corporate tax increase alive past this year, proposing to extend through 2026 a Cuomo-era policy that raised rates for businesses making at least $5 million per year. But Hochul reiterated Wednesday that she would not move to raise income taxes.

Housing targets and a 421-a extension, but no replacement e budget cites the Covid-19 pandemic’s impact on construction schedules as the reason for the change. Some 33,000 housing units around the city were jeopardized by the 2026 deadline, according to the Real Estate Board of New York. e now-expired program gave developers a tax break for making 30% of the units in their buildings a ordable, but it expired in June.

Hochul’s budget plan includes some relief for housing projects already in the now-lapsed 421-a program, but it o ered few speci cs about what a comparable new program might look like.

Projects vested under the a ordable housing tax break currently need to be built by June 15, 2026, to receive the bene t, but the governor’s budget would extend the deadline by four years.

Last year Hochul included a pro- cord. e funds would go toward a 5% reimbursement rate for hospitals ( outing providers’ ask for an increase as high as 20%). gram to replace 421-a in her budget proposal, but the plan ultimately died in the Legislature. e budget proposal pushes forward on multiple components of Hochul’s New York Housing Compact plan to construct 800,000 homes in the state. It would require all municipalities to hit new targets for building homes on a three-year cycle, and it includes legislation to require neighborhoods to rezone areas within half a mile of a MetroNorth station to allow for denser development.

Hochul’s proposal includes expanding primary care and preventive Medicaid services through increased reimbursement rates, expanding the Medicaid buy-in program for New Yorkers with disabilities. It would widen Medicaid coverage for primary and urgent care within the shelter system, and it would put $72 million toward three SUNY disproportionate-share hospitals that care for a high percentage of Medicaid patients.

A budget brie ng book does outline multiple new tax incentives, including an exemption meant to encourage multifamily a ordable housing development, but representatives for Hochul’s o ce did not immediately respond to a question about whether the exemption was meant to serve as a 421-a replacement.

Casinos, payroll taxes fund

an MTA rescue

A scal rescue package for the cash-strapped MTA makes up a key component of Hochul’s budget, including at least $1.3 billion in new annual revenue through an increase in payroll taxes and earnings from in-the-works casinos.

Hochul proposed $800 million in new annual funding from the Payroll Mobility Tax on downstate businesses for the MTA, along with a share of the $1.5 billion in licensing fees for up to three planned downstate casinos.

According to the budget book, those proposals would largely cover impending budget shortfalls. e infusion of cash could prevent service cuts, but it would not stop a fare increase of 5.5% planned for this year.

MTA o cials had warned that the agency requires $600 million this year to balance its operating budget and avoid drastic service cuts.

Medicaid and mental health investments

e governor proposed almost $35 billion for state-funded support for Medicaid alone—which is a re- suading them to pursue further changes. e cost would be split evenly between the city, state and federal governments, with the state reimbursing some expenses for opening emergency shelters and providing health care. e budget also puts speci c dollar amounts on portions of the governor’s $1 billion plan to address mental health—which she announced last year. Advocates had mixed reactions. e plan would reserve $890 million to build 3,500 units of supportive housing for New Yorkers with mental illness, $60 million for 12 new comprehensive psychiatric emergency programs and $18 million for 150 state-operated inpatient psychiatric beds.

Heeding a call from Adams, Hochul’s plan also includes a $1 billion “framework” to provide services for the more than 41,000 asylum-seekers who have entered the city in recent months.

Total mental hygiene spending is proposed to be about $10.5 billion for scal 2024.

Hochul proposed measures to protect New Yorkers’ reproductive care access by increasing reimbursement rates. She also wants to reform the managed-care system and build a comprehensive, statewide health care strategy.

She proposed a $1 billion capital investment in health care facility transformation: $500 million fornancing capital improvements for eligible providers, improving health care delivery, and another $500 million for nance information tech improvement.

In the life sciences realm, the budget proposes a $1.7 billion investment in the Wadsworth Center Laboratories, a research-intensive public health center.

Bail reform and $1 billion for migrants

As promised during her Jan. 10 State of the State speech, Hochul said she will seek to alter New York’s 2019 bail reforms by removing a requirement that judges use the “least restrictive” means of ensuring that defendants return to court.

e change e ectively would give judges more leeway in their ability to set bail—a frequent request by Mayor Eric Adams and many law enforcement o cials.

If enacted, it would be the third change to the 2019 law, following similar revisions in 2020 and last year. But Democratic state lawmakers who passed the original reforms have defended the law against what they view as baseless attempts to tie it to pandemic-era crime increases. Hochul could have a tough time per-

It is unclear whether that commitment would satisfy Adams, who has said the migrant crisis could cost the city as much as $2 billion.

Minimum-wage increases

Hochul followed up on her State of the State proposal to tie the minimum wage to in ation by linking it to the Consumer Price Index for urban wage-earners and clerical workers in the Northeast. e policy would cap annual increases at an unspeci ed gure to prevent a single-year increase that could “threaten employment,” according to her budget book—and would allow increases to be paused during “certain economic conditions.”

New York would be the 14th state to link the minimum wage to in ation, according to the Economic Policy Institute. Only California and the District of Columbia have a higher minimum wage. Massachusetts also requires employers to pay at least $15 per hour. ■