Budget Watch

Good morning from Albany, New York, where, in 1961, Martin Luther King visited Wilborn Temple to highlight that civil rights was a national—not just a regional—struggle. 

Albany is where Governor Kathy Hochul delivered her annual State of the State address last week, unveiling proposals that will serve as the blueprint for her reelection campaign this year. In her remarks, Hochul offered a succinct summary of her agenda, saying, “The 2026 State of the State agenda is grounded in a simple belief: government should make life more affordable, keep people safe, and expand opportunity—not shrink it.”  

Anticipating Republican attacks that the state has become too expensive on her watch, Hochul focused on proposals to make life more affordable for New Yorkers, including a package of bills to bring down utility costs. As we previewed last week, Hochul’s marquee affordability proposal was a pitch to eventually provide free, universal childcare across the state.

To kickstart that initiative, the state will be investing $4.5 billion to expand universal pre-K and implement universal 2-Care in New York City. The plan also allows for childcare pilot programs as Upstate communities look to catch up with New York City. Some believe the cost of statewide implementation—estimated between $12 billion and $15 billion—will ultimately be prohibitive, but Hochul declared that her plan will “deliver universal childcare for every single family in New York. Full stop.” Hochul also proposed reworking the state’s environmental review process to expedite housing development and other infrastructure projects in what she is calling the “Let Them Build Agenda.” 

For a complete legislative roadmap, the team at OD&A has prepared a very thorough and engaging policy preview:

On immigration enforcement, Hochul indicated she would support legislation allowing New Yorkers to sue ICE agents in civil court for violating their civil rights. The declaration garnered the loudest applause of the day. Hochul said, “Let me be clear; public safety will always come first, but it must be pursued lawfully and with humanity.” The proposal would also restrict federal immigration authorities from entering schools, hospitals, and places of worship without a judicial warrant. Hochul stopped short of endorsing the New York for All Act, legislation that would codify immigrant protections and restrict local law enforcement from collaborating with ICE. The bill has been a priority for immigration advocates, and Senate Majority Leader Andrea Stewart-Cousins publicly supported it for the first time last week. Expect some friction here between how far the legislature wants to go and where Hochul is comfortable, as well as blistering attacks from Republicans on both.

Hochul touted declining crime statistics from the past year in her address, but acknowledged there is still work to do on public safety. Following a high-profile anti-Israel protest outside a Queens synagogue earlier this month, Hochul proposed a law that would ban protesters from demonstrating within 25 feet of religious institutions and healthcare facilities. The state will also be putting an increased focus on 3D-printed guns, pushing legislation that would require manufacturers of 3D printers to install software that would prevent the machines from printing firearm components. Hochul has so far resisted calls to revisit criminal justice laws, including the Raise the Age law, which would allow more teenagers to be charged as adults. 

You can find the complete list of Hochul’s State of the State proposals here. 

Of course, the devil is in the details, and we will learn more about them tomorrow when Hochul and Budget Director Blake Washington unveil the specifics of the Executive Budget proposal. A couple of things to keep in mind:

• Last year’s budget came in at $254 billion.

• Hochul has been strong on resisting any increase in personal income tax for the wealthiest New Yorkers, but signaled more openness to other revenue raisers.

• Hochul has offered proposals around energy and utility companies, protecting immigrants from deportation, and holding ICE accountable.

• Foreshadowed changes to outdated or inefficient state regulations and significant changes to SEQRA. 

We will be watching for the details of all of this and more . . .

While federal cuts will make paying for all this challenging, Comptroller Tom DiNapoli had some more optimistic news last week, reporting that state tax collections beat expectations. New York tax revenue was $85.8 billion through the first three quarters of the current fiscal year, $2.3 billion higher than in the Division of Budget’s mid-year update. Receipts were up $5.9 billion compared with the same point last year. DiNapoli, while urging caution based on the federal situation, offered: “The state enters the final quarter of the fiscal year in good financial condition.”

Meanwhile, the Senate announced two new committee chairs to replace members who are moving on to new jobs. Senator Luis Sepúlveda has been appointed as the next chair of the Senate Judiciary Committee, replacing former Senator Brad Hoylman-Sigal, who left the Senate last year to become Manhattan Borough President. In a statement, Majority Leader Andrea Stewart-Cousins said, “I am confident that under his leadership, the Judiciary Committee will continue to set a high standard for fairness and transparency. I congratulate Senator Sepúlveda on this well-deserved appointment and look forward to working with him as he leads the committee.”

Senator April Baskin, a great friend of the firm, was appointed to serve as Chair of the Senate Committee on Commerce, Economic Development, and Small Business following Sean Ryan’s departure from the Senate to become Mayor of Buffalo. In a statement, Baskin offered, “I am grateful to Senate Majority Leader Andrea Stewart-Cousins for entrusting me to lead this prominent committee at the beginning of my tenure as a state senator. I want to assure residents of New York State, as well as my colleagues in the Senate, that I will remain focused, assertive, and attentive to all economic development and small business reform and practices across our great state.” We could not be more pleased for Sen. Baskin.

The Senate wasted no time getting back to work this year, passing a package of election-related bills intended to defend New Yorkers’ right to vote. The most notable bill in the package is legislation from Senator James Skoufis that will move New York’s presidential primary from June to the first Tuesday of March, known as Super Tuesday, when the frontrunners traditionally separate themselves from the field. Skoufis argued that the change will make New York more relevant in presidential primary elections, saying, “As it stands now, presidential candidates only come to New York for one reason, if we’re speaking frankly. And that is, they collect big checks from corporate boardrooms and penthouses in Manhattan, and they fly out that night to some battleground state or some state that is relevant in the primary nominating calendar.” The voting package also prohibits “deceptive practices” in elections, bars foreign-influenced businesses from funding campaigns, and prevents the disclosure of personal information of election workers.

Speaking of presidential primaries, national Democrats remain divided over which state will vote first in the 2028 presidential primary. The order has major implications for candidates, and the debate has reignited longstanding disagreements over the racial, regional, and rural-urban divides within the party. Iowa and New Hampshire had been the first two stops for both parties for decades, until former President Joe Biden, as a reward for the Palmetto State's role in propelling him to victory in 2020, moved South Carolina to the front of the line in 2024. All three of the aforementioned states are jockeying to stay at the front of the line, as are non-traditional states including Nevada, Michigan, and Georgia. The formal guidelines set forth by the Democratic National Committee require one state each from four regions—the East, Midwest, South, and West—to be included in the early primaries before Super Tuesday, but Democrats are considering which region and which state going first will help Democrats in the general and down ballot. Hilary Barrett, the Nevada Democratic Party’s Executive Director, believes that her state’s combination of a large, diverse metropolitan center as well as rural enclaves elsewhere in the state makes Nevada perfectly suited to go first, saying, “If Democrats are serious about winning back working-class voters, Nevada should be first in the nation.” Party officials from Iowa have pointed out that the GOP will caucus there first in 2028, regardless of what the DNC does, arguing that the Democrats would be ceding the state to Republicans if Iowa is not first on the list. Stay tuned to see where the Democrats land!

 -Jack O’Donnell

OD&A client, M&T Bank, was on hand to attend inauguration ceremonies for New York City Council members, marking the start of a new term in City Hall. It was a meaningful moment to engage with city and state leaders and celebrate the work ahead for New York’s communities.