Inch by Inch

Good morning from Albany, New York, where lawmakers will pass a fifth budget extender later today. This after the third and fourth extenders were passed last week. Expect this, too, to run only a couple of days, keeping legislators in town and creating at least the appearance of progress. 

The week past included Senate Democrats canceling conference on Tuesday, a clear signal that the sides remain far apart and some tension spilling into the public domain with Senate Deputy Majority Leader Mike Gianaris placing the blame squarely on Governor Kathy Hochul, telling reporters, “Movement is slow, frustration is growing. What it will take is flexibility from the executive.” Hochul took issue with that and outright accused the Trial Lawyers of lying about her auto insurance proposal, telling reporters, “I was responding to criticism that was trying to infer that we are the roadblocks, that we’re not trying to cooperate, we’re not trying to move this process along. And that is not true. When I don’t hear the truth, I’ll always call it out, including the trial lawyers that he is defending who are lying about cases.”

A spokesperson for Hochul was less diplomatic, saying in a statement, “If Sen. Gianaris is interested in making progress, he should urge his colleagues to support the governor’s efforts to lower auto insurance rates, rather than defending a broken system that benefits the trial lawyers—one of the top donors to the Senate Campaign Committee he controls.” Gianaris said later in the week that the dust-up was in the “distant past,” but the episode is emblematic of the dysfunction that has become a hallmark of the budget process. More optimistically (albeit only slightly hopeful) was Senate Majority Leader Andrea Stewart-Cousins, indicating “incremental progress,” and Assembly Speaker Carl Heastie telling reporters that “things are progressing” and that while “none of the big issues are settled,” they are still nearing a deal.

In a big win for New York City Mayor Zohran Mamdani, Hochul has launched a proposal for a tax on property owners who have second homes in New York City worth more than $5 million, a so-called pied-à-terre tax. The proposal comes amid the backdrop of Mamdani’s threats to raise property taxes across New York City without an income tax increase to address his city’s $6 billion budget gap. The tax would be an annual surcharge on both in-state and out-of-state residents who own homes, condominiums, and co-ops in New York City, but do not declare them as primary residences.

In a statement, Hochul said, “New York City is the greatest city in the world, and the people who call it home should not be left carrying the burden alone. As Governor, I understand the importance of stabilizing the city’s finances without compromising on essential services New Yorkers count on. If you can afford a $5 million second home that sits empty most of the year, you can afford to contribute like every other New Yorker.” Mamdani has touted the proposal as a big win for his “tax the rich” agenda, saying in a statement last week, “Alongside the governor, our administration is fighting every day to make sure we address this fiscal deficit fairly, where the wealthy contribute what they owe and our budget reflects our commitment to the working New Yorkers being priced out of our city.”

The Hochul administration has estimated that the new policy would impact 13,000 properties across New York City and would generate $500 million annually. Some are having trouble squaring this with Hochul’s no new taxes rhetoric. The Real Estate Board of New York, the top lobbying group of the real estate industry, slapped a banner across the top of its website reading “Stop the pied-à-terre tax” and urged members to contact state representatives to voice their opposition. “This annual tax will weaken the city’s broader economy—all without addressing its fiscal problems in the first place. Albany should focus on policies that encourage investment and housing production to create a more affordable city, not ones that stifle its growth,” declared REBNY president James Whelan in a statement. That said, most folks with a second home worth over $5 million are likely not voting in New York, and Hochul is able to deliver for Mamdani and his progressive coalition while also keeping her promise on personal income taxes and corporate rates; all together a net win for Hochul.

Even in the midst of budget negotiations, Hochul had time to take an unsolicited phone call from former New Yorker President Donald Trump, who would be subject to the proposed pied-à-terre tax (although that was apparently not the impetus for the phone call). Describing the contents of the discussion to reporters last week, Hochul said, “He called me, he just wanted to talk... I don't know. Whenever I have someone of influence on a phone call, I'm gonna fight for New York no matter what the topic is, we're also very interested in expanding nuclear. There's some decisions being made on a Department of Energy program that will help facilitate my big ambition to build more nuclear in the State of New York that has been built in the last 30 years anywhere in the country. And I'm real excited about this as I'm trying to figure out what our new energy future looks like in light of all those headwinds that we're facing. So I never miss an opportunity to champion what my priorities are for New York.” When pressed for more detail, Hochul said, "I don't know what he said. Oh, he said something to the effect of, 'You got to make sure crime doesn't come up with the City. We don't want people leaving the City.’…I just listen...it's hard to describe.” 

In political news, The Cook Political Report shifted four Senate races in the Democrats’ favor, though the GOP remains favored to maintain its majority. In her analysis, the Report’s Senate and Governors Editor, Jessica Taylor, noted, “At the core of the GOP’s problems is President Donald Trump and his dipping approval ratings. Nothing he has done lately has boosted his party’s prospects—including an unpopular military action in Iran that sent gas prices skyrocketing, even as he has dismissed voters’ concerns about affordability.”

The updated projections moved two races from “Toss Up” to “Lean Democrat”—the fight to succeed retiring Sen. Thom Tillis (R-N.C.) and Sen. Jon Ossoff’s (D-Ga.) reelection campaign. In North Carolina, former Democratic Governor Roy Cooper is now favored to defeat former Republican National Committee Chair Michael Whatley. Recruiting Cooper to run for Senate was seen as a major get for Democrats, given that he had won statewide elections in a state Trump had won three times. In Georgia, a crowded GOP primary field features Reps. Buddy Carter, Mike Collins, and former University of Tennessee football coach Derek Dooley, all vying for the chance to unseat incumbent Democratic Senator Jon Ossoff.

The report also moved Sen. Jon Husted’s (R-Ohio) race from “Lean Republican” to “Toss Up,” and Sen. Pete Ricketts’s (R-Neb.) reelection attempt from “Solid Republican” to “Lean Republican.” Husted was appointed by Ohio Governor Mike DeWine to fill the seat vacated by Vice President J.D. Vance and will likely face former Senator Sherrod Brown, who is looking to resurrect his political career after losing to Senator Bernie Moreno in 2024. Ricketts was also appointed to his seat in 2023 to replace former Senator Ben Sasse and is running against independent candidate Dan Osborn, who lost to Republican Senator Deb Fischer in 2024. We will be watching these races very closely.

 -Jack O’Donnell