Strong returns on Wall Street mean there’s no need to raise New York state taxes this year, Gov. Kathy Hochul’s top fiscal aide said.
Hochul is proposing a $260 billion budget on Tuesday that includes new spending for child care and continues increases in school aid for every district, state Budget Director Blake Washington said. The state’s share of Medicaid spending will increase by several billion dollars to make up for federal cuts enacted last year.
While Hochul’s budget proposal extends higher corporate rates that were set to expire, it doesn’t increase business, sales or income tax rates.
“We're not raising taxes because we don't need to,” Washington said. “With the amount of revenue coming into the state of New York, thanks to a progressive tax code, there's no need.”
The Democratic governor’s budget presentation will kick off weeks of hearings and months of negotiations with the state Legislature. Democrats, who control both the state Assembly and Senate, have favored increasing taxes on the rich. Legislators are advocating broader spending in a number of areas.
The state’s current fiscal year ends on March 31, so a new budget must be in place before April 1. In recent years the governor and lawmakers have missed the deadline by several weeks, but passed short-term funding bills that kept the government operating while they continued to negotiate.
Those hangups have come from policy proposals that Hochul bakes into her budget legislation. This year, she is proposing new restrictions on children using AI chatbots as well as protest-free buffer zones around houses of worship.
The biggest new spending proposal is for child care. Hochul wants to increase funding for an existing day care voucher program by $1.2 billion – or around 50% – and provide around $500 million in new funding for pre-kindergarten programs around the state serving 3- and 4-year-old children.
Hochul is proposing to again spend $77 million to pay for extra police on New York City’s subway system. And amid a continuing staffing shortage in the state’s correctional system, Hochul is proposing $535 million to pay more than 2,000 National Guard personnel who are working in prisons.
The proposed budget also includes $20 million for Riverbank State Park in West Harlem and a $5 million program, tied to the World Cup, to fund soccer fields.
Washington, the budget director said the new expenditures are possible because of continued consumer spending and what’s projected to be a good bonus year for Wall Street bankers. The state is now expecting an additional $3.7 billion of revenue in the fiscal year that ends March 31 and an additional $7.4 billion is available for the coming budget year.
There were already signs of fiscal improvement: The Budget Division said in October that tax receipts were around $700 million ahead of projections for the first half of the year. The Office of the New York State Comptrollers office said last week that income, business and sales taxes were about $2.3 billion ahead of projections for the first nine months of the state fiscal year.
The lingering question is how long the strong flow of revenue will last, and whether it will grow in tandem with the rising expenses of the new childcare system. While the first year of Hochul’s promised support for 2-Care is projected to cost $75 million in its first year and $425 million in its second year.
“Without new, robust, and consistent public funds, New Yorkers will suffer,” said Brahvan Ranga, manager of the Invest in Our New York campaign, which pushes for higher taxes. “True statewide universal childcare, where the workforce is paid a living wage, requires long term, stable revenue - not shifting funds from other programs and agencies year after year creating winners and losers.”
There is also considerable uncertainty about federal funding.
The state has asked the federal government for a waiver that would let it continue to provide services to non-citizen immigrants, who are now covered as part of the Essential Plan, which provide a state-backed health insurance coverage. The Republican-authored federal spending bill passed last summer limited immigrants eligibility for Medicaid, a joint state-federal program that provides health care for low-income and disabled people.
Additionally, President Donald Trump has threatened to withhold federal funding for sanctuary cities including New York. Federal agencies have also frozen grants for infrastructure and child care, prompting the state to sue.
Washington said the state’s goal is to keep covering people currently enrolled in state-backed insurance plans.
“At a time of enhanced volatility out of Washington and a drive to shed enrollment and to scare people away from becoming covered, we in the state of New York are holding the line,” he said.
