State lawmakers have begun passing the bills necessary to implement the state budget for the fiscal year that began April 1. Here are some of the emerging details.
The budget authorizes $229.8 billion in spending, a 3.7 percent increase from last year and a 69 percent increase from just a decade ago (fiscal 2014). This figure, known as the “all funds” budget, includes Medicaid, COVID relief money and other federal aid as well as borrowed capital funds.
Looking at the budget on a “state operating funds” (SOF) basis, which excludes federal money and long-term borrowing and better reflects what Albany must finance with taxes and fees, the budget comes in at $127.1 billion, up 4.1 percent from last year and up about 42 percent from FY14 (inflation was less than 30 percent during the latter period).
Much of the growth was driven by increases in Medicaid and school aid, which together make up about half the state budget by this measure.
The budget appears to use nearly $1 billion from the state’s fund balance to close the gap between expenses and revenues, leaving the state with less cash to plug holes as they develop.
And some big gaps are already on the horizon: Governor Hochul’s budget division in February projected a $5 billion shortfall in fiscal 2025 (just 11 months away), followed by an even larger one (more than $8 billion) in fiscal 2026. Those looming differences between revenues and expenses have grown considerably because this year’s budget deal increases recurring expenses in programs such as Medicaid beyond what Hochul was proposing.
Albany depends on volatile tax revenues from New York’s financial sector. Factors ranging from interest rates and inflation to the health of the commercial real estate sector could negatively affect the profits and bonuses that fuel those receipts. Meanwhile, the revenue forecasts are blurrier than usual. Albany has also recently changed the way many finance firms and workers pay their state taxes, leaving tax revenue models in uncharted territory. It means state officials could take longer to recognize a downturn in state revenues, requiring more sudden and severe action in response.
Legislative leaders requested and received “messages of necessity” to rush the votes on some of the budget bills, allowing them to forgo an otherwise constitutionally required three-day wait before votes. This has become a routine process in the adoption of state budgets.
There was no need to rush the bills through, since lawmakers in March had authorized this year’s debt-service payments and had adopted a series of short-term spending measures to keep making payroll.
It Does More Than Just Spend
Under Governor Andrew Cuomo, state officials developed the practice of packing non-budgetary policy issues into the spending proposal, and Governor Hochul continued it.
The governor had proposed sweeping changes to how housing is built, which included targets for new development. The plan faced opposition in downstate suburbs and was omitted from the final deal.
Hochul also sought changes to the state’s criminal justice law, pressing successfully to give judges more discretion in setting bail.
On the energy front, the budget requires the state Power Authority (NYPA) to shut down its gas- and oil-fired power plants by 2030. It also allows NYPA to build renewable energy projects and also calls for barring new buildings from using natural gas or oil beginning in 2026 for smaller buildings and by 2029 for the remainder.
The budget hikes the minimum wage to $15 upstate and $16 downstate beginning in January, rising to $16 and $17 respectively by 2026. The wage would hike automatically with inflation unless the unemployment rate rises suddenly or the number of jobs declines.
Lawmakers and Hochul also tweaked the state’s separate minimum wage for home-care workers — a move Bill Hammond explained last week was designed to bail out a union-controlled benefit fund.
One positive change to come out of this was the authorization of an additional 22 public charter schools, including up to 14 in New York City, giving more families a no-cost alternative to their geographically assigned public school.