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Chart by Alberto Mena<\/p>\nNew York State was already five weeks past the start of its 2027 fiscal year when Governor\u00a0Kathy Hochul\u00a0appeared in the Capitol\u2019s ceremonial Red Room on the morning of May 7 for what was billed as a special announcement. Flanked by top aides and applauded by a friendly audience of staff members, Hochul began: \u201cToday\u2019s the day! I\u2019m very proud to announce that we have reached a general agreement for the fiscal year 2027 state budget.\u201d<\/p>\n
What followed was a 20-minute presentation focused on nonmonetary initiatives that Hochul had injected into this year\u2019s negotiations: auto-insurance reform, easing the state\u2019s now-unreachable greenhouse-gas-reduction targets, trimming the environmental-review process to encourage housing construction, and banning 3-D-printed guns.<\/p>\n
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The governor spent much less time on the dollars-and-cents items that would shape the actual budget bills, including her plan to \u201cinvest\u201d an additional $1.7 billion in preschool childcare, a $1 billion one-time \u201cenergy refund\u201d for residential utility customers, and the state\u2019s approval of a $500 million pied-\u00e0-terre tax on high-priced second homes in New York City, along with additional aid for counties.<\/p>\n
As reporters peppered Hochul with questions about the deal, it became clear that she had exaggerated its completion. She had barely left the Red Room when Assembly Speaker\u00a0Carl Heastie\u00a0met reporters in an upstairs Capitol hallway to contradict her. There was, in fact, no budget deal, he said, citing \u201cmany open issues on money,\u201d and adding: \u201cI\u2019m never doing this again. Budgets are supposed to be about money, not policy.\u201d<\/p>\n
The speaker\u2019s frustration was understandable, if confusingly phrased. Money, of course, is the essence of policy, especially in a state that spends so much. But in each of her five fiscal-year cycles as governor, Hochul has added another layer of opacity to the already-murky annual process that produces the nation\u2019s second-largest state budget. Alongside spending and tax increases that fellow Democrats routinely push even higher, she has insisted that the legislature take up unrelated issues\u2014the sort of \u201cpolicy\u201d that Heastie meant.<\/p>\n
Though Hochul did not finalize crucial details of the budget agreement until later in May, the broader trajectory was evident much earlier. Under New York\u2019s strong executive-budget law, the buck stops with the governor. But Hochul barely tapped the brakes on spending growth in her January executive budget, the traditional opening bid in a legislative negotiating process that almost invariably drives the final number higher.<\/p>\n
Adjusted for bookkeeping gimmicks, Hochul\u2019s initial financial plan projected a hike of at least 8 percent in the state-funded portion of the operating budget\u2014more than double her administration\u2019s inflation forecast, and high even by New York standards. Including her latest budget, Hochul has increased the state operating budget (excluding federal aid and debt proceeds) by at least $46 billion, or 40 percent, over her five fiscal years as governor. In real terms, that marks the largest five-year increase since the late 1980s. Spending had surged far above the trend-line during the ten years before Hochul took office (see chart on page 60).<\/p>\n
Six years after the disruption of the Covid-19 pandemic, New York\u2019s budget has entered uncharted fiscal territory: larger than ever, structurally unbalanced, and growing at an unsustainable pace, yet temporarily flush with more surplus cash than Albany has ever seen. How the state arrived here adds a fresh twist to a jagged long-term trajectory best captured by the motto beneath the state seal: Excelsior\u2014\u201cEver Upward.\u201d<\/p>\n
Chart by Alberto Mena<\/p>\n
New York State has been synonymous with fiscal excess since the era of\u00a0Nelson Rockefeller, who was elected in 1958 and served a record 15 years as governor. Rockefeller\u2019s tenure coincided with a broader expansion of spending at every level of government. Even by those standards, however, he made New York an outlier\u2014quadrupling the state budget and quintupling its debt, creating the nation\u2019s most expansive Medicaid program, authorizing public-sector collective bargaining, and vastly enlarging the state university system. When Rockefeller took office, state and local taxes as a share of New Yorkers\u2019 personal income sat slightly below the national average. By the time he left office, they were well above it.<\/p>\n
Over the past half century, New York\u2019s state budgets have gone through periods of retrenchment and relapse. The first corrective came under Governor Hugh Carey, the Democrat who took office in 1975, just in time for a New York City fiscal crisis. Carey\u2019s first State of the State address set the tone for what would follow. \u201cNow the times of plenty, the days of wine and roses, are over,\u201d he memorably announced. Carey not only held inflation-adjusted state spending virtually flat across his eight years in office but in his second term reduced Rockefeller\u2019s sky-high income-tax rates by one-third.<\/p>\n
Carey\u2019s successor, Democrat Mario Cuomo, ushered in a new era of extravagance, enabled by the Wall Street boom of the 1980s and compounded by Cuomo\u2019s annual struggle to reconcile the expansive but non-overlapping agendas of the legislature\u2019s majorities\u2014Democrats in the assembly and Republicans in the senate. For a time, prompted partly by a major federal tax reform, Cuomo and the legislature managed to keep slashing taxes, even as spending surged. But the severe New York regional recession of 1989 left Cuomo dealing, in his third term, with a fiscal hangover that ultimately contributed to his 1994 election defeat by George Pataki.<\/p>\n
Pursuing his agenda of additional income-tax cuts that brought the top rate below 7 percent\u2014less than half the Rockefeller-era peak\u2014Pataki held spending nearly flat during his first term, loosened his belt during the second, and then fought (and mostly lost) veto fights with the legislature that yielded a new spending boom in his third.<\/p>\n
Around this time, lawmakers made decisions that continue to shape state spending. The federal practice of matching most state Medicaid spending dollar-for-dollar (or more) proved too tempting for Albany, as Pataki and state lawmakers significantly expanded both the eligibility and scope of the state\u2019s program.<\/p>\n
Eliot Spitzer\u2019s first budget as governor in 2007 raised state-funded spending by 8 percent, including the first year of a historic expansion of state aid to what soon became, and have remained, the nation\u2019s highest-spending school districts. This profligacy left the budget once again at an elevated level, just in time for the market crash and Great Recession that followed.<\/p>\n
Spitzer resigned in disgrace after just over a year in office, leaving David Paterson to grapple with collapsing state receipts as capital gains, a key element of the state\u2019s top-heavy income-tax base, plunged about three-quarters in two years. Paterson made cuts and even layoffs\u2014and also agreed to a supposedly temporary hike in taxes on high incomes\u2014but the state was still drowning in red ink when he departed at the end of 2010.<\/p>\n
Taking office on the heels of the Great Recession, Andrew Cuomo offered a necessary course correction. \u201cWe need radical reform, we need a new approach, we need a new perspective, and we need it now,\u201d the younger Cuomo declared in his first State of the State speech in 2011. He froze state employee salaries, launched a cost-cutting \u201credesign\u201d of Medicaid, successfully pushed for a cap on local property taxes, and slashed state aid to local schools by a record $1.3 billion in his first year.<\/p>\n
Cuomo also set a target of 2 percent growth in state operating expenses. Even after adjusting for his bookkeeping gimmicks to reach that target, his first two terms produced New York\u2019s most sustained period of fiscal restraint since the Carey years. By the end of the decade, however, Cuomo\u2019s model was strained. Medicaid expenditures, in particular, had burst his earlier boundaries, a problem he dealt with by delaying $1.7 billion in payments from the end of one fiscal year into the start of another, adding to a growing gap in the program\u2019s funding at the start of 2020.<\/p>\n
Then came the pandemic, which for New York, as for most states and localities, began as a fiscal crisis and ended as a cash bonanza. The Empire State received billions from the federal government\u2019s initial pandemic-aid package in March 2020, followed by a second round of aid later that year. Capping off this largesse was President\u00a0Joe Biden\u2019s American Rescue Plan Act of early 2021, handing Albany nearly $13 billion in additional unrestricted aid that would not be fully spent for another four years.<\/p>\n
At the same time, after years of insisting that raising taxes on millionaires would be a mistake,\u00a0Andrew Cuomo\u2019s final budget targeted high earners with what became the state\u2019s largest income-tax increase in 60 years (and its highest top rate in 40). Meantime, defying nearly every prediction, the stock market surged through the final three quarters of 2020 and kept climbing in 2021, pushing tax revenues far beyond Cuomo\u2019s initially pessimistic projections.<\/p>\n
Thanks to the pandemic-aid windfall and the enormous surge in tax revenues, the state\u2019s general fund cash balance tripled in fiscal 2022 to more than $30 billion\u2014and kept rising over the next three years until it was the equivalent of more than 50 percent of annual general fund spending. The surplus was so large that, at a time of rising interest rates, the state earned another $14 billion in short-term interest income over four years simply from idle cash balances.<\/p>\n
But\u00a0Andrew Cuomo\u00a0would not be around to enjoy the gusher. In August 2021, four months into fiscal 2022, he resigned following a sexual harassment scandal and was succeeded by Lieutenant Governor\u00a0Kathy Hochul.<\/p>\n
Hochul\u2019s emphasis on policy initiatives distracts from the ongoing rise in spending, now dominated more than ever by two programs: Medicaid, the joint state-federal health-care program for the poor and disabled; and state aid to local school districts.<\/p>\n
Since 2022, New York\u2019s share of Medicaid spending has soared 60 percent, adding $16 billion in annual costs to what is already the nation\u2019s most expensive public-health safety net. As\u00a0Bill Hammond\u00a0of the\u00a0Empire Center for Public Policy\u00a0has chronicled, New York\u2019s Medicaid program was spending $4,492 per resident as of 2024, 77 percent above the national average. \u201cNew York could have shed $18 billion from its program and still ranked No. 1,\u201d Hammond notes. Hochul herself has called the spending \u201cunsustainable,\u201d yet her latest budget boosted the state share by another 10 percent, or $4.3 billion.<\/p>\n
One of the biggest drivers of Medicaid spending growth over the past decade has been New York\u2019s abuse-ridden Consumer Directed Personal Assistance Program. Lax state rules allowed new agencies to proliferate and advertise ways for people to get paid for caring for family members. Costs ballooned 13-fold between 2016 and 2023, with the annual burden on state and federal taxpayers reaching $11 billion. While moving to reduce the number of middlemen, Hochul has tacitly encouraged\u00a01199SEIU\u00a0to unionize the program\u2019s purported 400,000 caregivers and extract dues from them involuntarily.<\/p>\n
With public K\u201312 enrollment down from pre-pandemic levels, down still further from its 1999\u20132000 peak, and projected to keep falling because of declining birthrates and domestic outmigration, Hochul has also preserved\u2014after a brief attempt to change it two years ago\u2014the costly \u201csave harmless\u201d provisions of the state school-aid formula, which generally guarantee districts at least as much aid as they received the year before. This year\u2019s budget provides a minimum 2 percent aid increase, even to districts with shrinking enrollments.<\/p>\n
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After the spending splurge of the Rockefeller years, New York Governor Hugh Carey emphasized fiscal discipline, saying, \u201cNow the times of plenty, the days of wine and roses, are over.\u201d (Edward Hausner\/The New York Times\/Redux)<\/p>\n
Another factor likely to drive state spending even higher might as well be a line item in Hochul\u2019s budget: New York City\u2019s new mayor,\u00a0Zohran Mamdani.<\/p>\n
The fiscal affairs of New York State and New York City have always been deeply intertwined. Though Gotham has a larger population, economy, and tax base than most states, it remains dependent on Albany in crucial respects. The city\u2019s largest budget items\u2014public education and social services\u2014are shaped and partly financed by state aid. Except for the property tax, the city\u2019s major local revenue sources are also ultimately controlled by the legislature and governor. State law governs the structure of the property tax itself.<\/p>\n
Mamdani\u2019s predecessors, Bill de Blasio and Eric Adams, were hardly parsimonious; their city budgets boosted spending more than 60 percent over 12 years. But fully realized, Mamdani\u2019s Democratic Socialist agenda envisions a vast expansion of already-generous entitlements.<\/p>\n
The main point of contention between the new mayor and Hochul has been taxes. Candidate Mamdani\u00a0promised a 51 percent increase in city resident income taxes on millionaires and backed a significant hike in the state corporate tax, without explaining how the resulting revenue would flow to the city. Hochul opposed both proposals, though her posture was somewhat disingenuous. Just ahead of the mayoral primary, she extended Cuomo\u2019s higher personal income-tax rate, originally set to expire in 2027, through 2032. She also extended the state\u2019s corporate-tax surcharge.<\/p>\n
Soon after taking office, Mamdani raised the stakes by declaring a \u201cgenerational fiscal crisis\u201d and threatening to seek a 9.5 percent increase in city property taxes if the state didn\u2019t back his \u201ctax the rich\u201d agenda. The tactic backfired, annoying Hochul and igniting a hostile reaction from homeowners and city politicians alike. A month later, Mamdani endorsed Hochul for reelection, and in early May, the governor agreed to a series of measures widely mischaracterized as a $4 billion \u201cbailout\u201d of the city. In reality, the governor\u2019s budget package consisted mainly of permission for the city to impose the pied-\u00e0-terre tax and to indulge in an egregious financial gimmick\u2014effectively borrowing billions of dollars from its pension funds by pushing a portion of its required pension contributions off until the mid-2030s.<\/p>\n
Albany\u2019s appetite for spending is nothing new. But the \u201crobust\u201d economy that Hochul cited in this year\u2019s opening budget message has lost momentum in the 2020s.<\/p>\n
From the recession-ending year of 2010 through 2019, personal income growth in New York slightly lagged the national average but remained above the 50-state median. From 2019 through 2025, however, the state ranked dead last, with income growth of just 32 percent, far behind the national rate of 42 percent.<\/p>\n
A broader measure of economic growth tells a similar story. From 2010 to 2019, New York\u2019s GDP grew faster than the national average, ranking 15th among the states. But from 2019 through 2025, the Empire State fell below both the national average and the 50-state median in GDP growth. Part of that decline reflected the severity of the pandemic recession, but the recovery since 2022 has also been weak by national standards.<\/p>\n
The 12-county downstate region\u2014including New York City, Long Island, and five lower Hudson Valley counties\u2014has long been the state\u2019s economic engine, accounting for virtually all private-sector job growth during the 2010s. The 50 counties north of the mid-Hudson, the truer definition of \u201cupstate,\u201d spent the decade falling further behind, generating few new private-sector jobs. Since 2020, all of New York\u2019s net job growth has come from the publicly subsidized health and social-assistance sector.<\/p>\n
Andrew Cuomo, mindful that his father\u2019s narrow 1994 defeat stemmed from losing the counties north of New York City by 26 points, became fixated on reviving upstate regional economies through billions of dollars in state-backed megaprojects. Those interventions\u2014including a heavily subsidized\u00a0Tesla\u00a0solar-panel factory in Buffalo that became a billion-dollar boondoggle\u2014produced little lasting benefit, largely because Cuomo was unwilling to confront the many Albany-imposed barriers that stifled organic growth in the first place.<\/p>\n
Hochul\u00a0has continued Cuomo\u2019s practice of showering struggling upstate downtowns with tens of millions of dollars while placing another massive state bet, further boosted by federal CHIPS subsidies, on a\u00a0Micron Technology\u00a0plant near Syracuse that remains years away from operation. To slow the rise of New York\u2019s already-high utility rates, which threaten both job creation and \u201caffordability,\u201d Hochul has supported modest delays in the timetable for meeting the state\u2019s stringent carbon-emissions targets. But the state still faces, before the end of the decade, Albany\u2019s planned suite of restrictions, bans, and taxes meant to crush fossil-fuel consumption. Beyond these limited adjustments, her replacement for Cuomo\u2019s economic strategy amounts to little strategy at all.<\/p>\n
With a gubernatorial election looming in November, a late-spring Siena poll showed Hochul\u2019s favorability and approval ratings sinking to their lowest levels in a year, though her lead over Republican challenger\u00a0Bruce Blakeman\u00a0widened slightly. The incumbent still enjoys two major advantages: the Democratic Party\u2019s overwhelming statewide enrollment edge; and President\u00a0Donald Trump\u2019s enduring unpopularity in the deep-blue Empire State.<\/p>\n
Beyond routinely denouncing Hochul as \u201cthe worst governor in America,\u201d Blakeman has hardly emerged as a forceful advocate for fiscal change. During a three-day strike by Long Island Rail Road workers in mid-May, he effectively sided with the union in criticizing Hochul. \u201cWhen I\u2019m Governor, labor will finally have an ally in the Governor\u2019s mansion,\u201d he wrote in an X post\u2014not reassuring in a state where high taxes are driven in large measure by organized labor\u2019s influence and demands.<\/p>\n
Reducing New York\u2019s tax burden would require substantial and sustained reforms to public education and Medicaid, both of which would mean confronting the state\u2019s powerful public-sector unions, something that Hochul has shown little appetite for doing.<\/p>\n
The state\u2019s annual spending commitments already exceed projected recurring revenues, pointing to multibillion-dollar budget gaps beyond the current fiscal year. Looking ahead to a hoped-for second full term, the 67-year-old governor appears to be betting that tax revenues remain strong and the economy resilient enough to sustain another term spent sympathizing with voters over the state\u2019s \u201caffordability crisis.\u201d<\/p>\n
For now, New York is more dependent than ever on income taxes paid by multimillionaires and highly profitable businesses, the very taxpayers most likely to feel targeted by the agenda of\u00a0Mamdani, whose views many state lawmakers share. To the extent that Hochul has a plan for confronting even a routine recession or bear market\u2014both inevitable eventually\u2014it seems to rest on the hope that roughly $15 billion in budget reserves, along with a similar amount of unrestricted cash still generating short-term interest income, will be sufficient to bridge the next fiscal downturn.<\/p>\n
Two years ago, in her budget message, Hochul offered a rhetorical warning: \u201cThe truth is, we can\u2019t spend like there\u2019s no tomorrow, because tomorrow always comes.\u201d Assuming that the governor is reelected, that\u2019s a message she should heed\u2014before it\u2019s too late.\u00a0\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"New York State was already five weeks past the start of its 2027 fiscal year when Governor\u00a0Kathy Hochul\u00a0appeared…\n","protected":false},"author":2,"featured_media":319826,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[9,24,55,54,56],"class_list":["post-319825","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-york-city","tag-new-york","tag-new-york-city","tag-new-york-city-headlines","tag-new-york-city-news","tag-ny"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/319825","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/comments?post=319825"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/posts\/319825\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media\/319826"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/media?parent=319825"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/categories?post=319825"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ny\/wp-json\/wp\/v2\/tags?post=319825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}