NY Budget Games

Pushback on Spending Plan, DC Deadline, Presidential Primaries

Author

Jack O’Donnell
January 22, 2024

Good morning from Albany, New York where Governor Kathy Hochul unveiled her Fiscal Year 2025 Executive Budget last week. Let the budget games begin! The $233 billion total represents the largest budget in state history, an increase of nearly $6 billion from last year. The biggest news? Hochul and her new Budget Director Blake Washington were able to balance the budget, eliminating a projected $4.3 billion deficit without a tax increase or dipping into reserve funds. Impressive. 

Here are some highlights:

  • Housing: Housing was a major point of contention in last year’s budget; this year’s proposal is more subdued. Hochul proposed $500 million to develop 15,000 housing units on state-owned land and is requiring localities to receive a ‘Pro-Housing Community’ certification before they can access hundreds of millions of dollars in state discretionary funds. Hochul also proposed a replacement for 421-a (the tax abatement incentive for affordable housing development in New York City) as well as an incentive package to convert commercial office space into residential units. Nonetheless, this will be a hot issue during budgets with housing advocates—and many in the Legislature—screaming for so-called Good Cause protection for tenants while responsible experts insist dealing with rent stabilized buildings is one of the keys to any housing solutions.

  • Migrants & Asylum Seekers: In welcome news for New York City Mayor Eric Adams, Hochul has allocated $2.4 billion to address the influx of asylum seekers, $1 billion of which is designated to reimburse NYC. $500 million will be drawn from the State’s rainy day fund to provide migrants with social services, shelter, and resettlement efforts. 

  • Health Care and Mental Health: Medicaid spending continues to be one of New York’s largest expenses. After the State spent $1.5 billion more than budgeted on Medicaid in the last fiscal year, Hochul proposed an increase to $35.5 billion, but conceded the need to “maximize our Medicaid dollars and reimagine the delivery system.” The federal government approved a $7.5 billion Medicaid 1115 Waiver, allowing New York to increase access to primary and behavioral health care. Hochul’s mental health agenda includes $55 million to create 200 new inpatient psychiatric beds and $45 million for school-based mental health services. 

  • Economic Development: $500 million was allocated to modernize and expand operations at the Albany NanoTech Complex and $200 million was allocated for the One Network for Regional Advanced Manufacturing Partnerships (ON-RAMP) program to establish workforce development centers in Upstate New York along the I-90 corridor. Hochul proposed a $275 million investment to support the new Empire AI initiative which will create a partnership with public and private institutions to advance AI research, most likely at the University at Buffalo, already recognized nationally as the leader in artificial intelligence research.

  • Education: School aid is proposed as an $825 million increase from last fiscal year, bringing the total to $35.3 billion. As part of Hochul’s initiative to increase reading proficiency, $10 million is earmarked to train teachers and assistants in evidence-based literacy practices. On the higher education side, SUNY and CUNY would receive $1.2 billion in capital projects funding and $207 million in operating aid. To advance the new Empire AI consortium, SUNY will receive $2.5 million to cover the operating costs of their involvement in the project. 

  • Climate Change and Resiliency: Hochul’s proposal includes a $500 million investment in water infrastructure projects over the next two years and $435 million to address coastal flooding, including $250 million for voluntary buyouts from individuals in climate-vulnerable areas. Also included was a $160 million investment to expand access to clean swimming areas and $47 million to plant more than 25 million trees over the next decade. Since 2017, water infrastructure projects have received $500 million in annual funding. Under the Hochul’s proposal, that $500 million would now be stretched out across two years. 

Governor Hochul’s Executive Budget was met with mixed reactions from her colleagues in the Legislature, with criticism largely stemming from her education proposals.

Battle over N.Y. education funding begins after Hochul's budget plan.

Hochul is looking to end the “hold-harmless” policy on school aid which prevents school districts from receiving less aid than they did in the previous fiscal year. The policy change would likely disproportionately impact school districts in high-income areas who Hochul said are “sitting on very healthy reserves.” Republican Senator Jack Martins, who represents Nassau County on Long Island, said the policy change is “disenfranchising certain districts for others,” while leadership in both chambers have remained noncommittal, though Assembly Speaker Carl Heastie added, "I don’t think there has been a bigger champion for education aid than the New York State Assembly.” The New York State United Teachers (NYSUT), a politically powerful union with sway over education policy, reiterated their concerns with the proposal in a statement saying, “The critical need to consistently support our students and educators should not vary with the fluctuations in our state tax revenue.” If enacted, Hochul’s proposal would result in a 2.4% increase in Foundation Aid, well below the 7.7% increase that was adopted the last two years. 

Another area that prompted pushback was the proposal to extend mayoral control of NYC schools for four years.

Hochul backs four-year extension of mayoral control over NYC schools.

Hochul pushed for a four-year extension in her 2022 budget, but subsequent negotiations with the Legislature resulted in a two-year extension. Chair of the NYC Education Committee, Senator John Liu, pointed to an ongoing study by the Education Department to study the effectiveness of mayoral control and said, “It’s simply premature and senseless to lump mayoral control in with the state budget.” The policy is one of Mayor Eric Adams’ main priorities for this legislative session, but Speaker Heastie has expressed doubt that the budget process is the appropriate avenue saying, “You all know how I feel about policy in the budget.” 

Which issues will dominate the 2024 Legislative Sessions from D.C. to Albany?

Jack lays it out in our annual Legislative Preview.

Read it here.

Hochul’s commitment not to raise taxes, including on high-income earners, has sparked criticism from some progressive members of the Legislature. Senator Jessica Ramos, Chair of the Senate Labor Committee said, “We should be taxing the rich so that we can provide every single child in New York State with a sound education starting with universal child care.”

Ramos is the Senate Sponsor of the Invest in Our New York Act which enacts a slew of tax hikes on individuals and corporations, something Hochul has said she will reject in any negotiations. An increasing number of legislators, and a majority of New Yorkers, support raising taxes on the wealthy to increase revenue. Ramos has argued that raising taxes would eliminate the need for previous proposals to increase the subway fare or raise SUNY tuition, which she called “taxes by another name.” 

Ramos is the Senate Sponsor of the Invest in Our New York Act which enacts a slew of tax hikes on individuals and corporations, something Hochul has said she will reject in any negotiations.

Hochul’s budget also seeks to rein in the state’s Medicaid spending, something that has long been a goal of New York Governors. Nearly 40% of the state’s residents are covered by Medicaid and Hochul has tasked two bodies, the New York State Commission on the Future of Health Care and the New York State Master Plan for Aging, with finding ways to reduce Medicaid spending by $1 billion, though any fiscal impact will not be recognized until at least 2025. 

The New York State Teachers Union, As Well As 1199 SEIU United Healthcare Workers East & The Greater New York Hospital Association, Respond To Governor Hochul’s Proposed State Budget.

Despite a small increase to the reimbursement rate last year, hospitals and healthcare unions were hoping for a $6 billion investment to close the 30% reimbursement gap for safety net hospitals. In a joint statement,1199 SEIU United Healthcare Workers East & The Greater New York Hospital Association said, "Today’s State Budget announcement was an opportunity for the Governor to set a new course, but she did not. It’s no wonder that so many hospitals are in deep financial trouble and critical health indicators are worsening, especially in low-income communities.” Many lawmakers share that sentiment, setting up a potential showdown once One-House Budgets are released. 

Sen. Mark Walczyk-(R) Watertown

Republican State Senator Mark Walczyk, a captain in the U.S. Army Reserve, said farewell to Albany for the time being this past week as he is being deployed to Kuwait for nine months. 

We thank Senator Walczyk for his service and wish him a safe return.  

New York City Mayor Eric Adams also released his budget proposal last week. Bolstered by tax revenue that was $3 billion higher than projected and an estimated $2 billion savings on migrant costs, Adams was able to reverse course on planned budget cuts for the FDNY, NYPD, the Department of Sanitation, and three public library systems in NYC. The cuts would have resulted in a hiring freeze for the NYPD, public libraries being closed on Sundays, and the removal of some trash cans to cut back on labor costs. In his remarks, Adams offered, “We made these adjustments because we know that these are the services that are important to New Yorkers, and they’re important to this administration.” 

Biden signs stopgap funding bill to keep government open into March.

In Washington, D.C., the House of Representatives passed the Senate’s short-term Continuing Resolution (CR) to keep the government funded through March. This is the third CR passed in FY2024 and Speaker Mike Johnson, like his predecessor Kevin McCarthy, relied heavily on Democratic votes to get the measure across the finish line. Johnson has promised to seek policy riders in the appropriations process that will bring spending in line with conservative goals, however, Democratic control of the Senate and White House will certainly hamper those efforts. For some conservative members, relying on potential policy riders in the future is not good enough. House Freedom Caucus Chair Rep. Bob Good (R-VA) indicated they are entertaining removing Johnson through a Motion To Vacate and said, “Unfortunately, to this point, decisions have been made to form a coalition with Democrats on the material legislation that matters to the country.” The CR sets up a bifurcated funding deadline, with the first tranche of funding set to expire on March 2nd and the second funding stream set to expire on March 8th. Add in President Biden’s State of the State address on March 7th and that promises to be an interesting week! 

At the same time, Congressional Leadership is trying to hammer out a bipartisan immigration bill in exchange for a foreign aid package to provide military assistance to Ukraine, Israel, and Taiwan. President Biden hosted Speaker Johnson and Senate Majority Leader Chuck Schumer for a meeting at the White House last week where Schumer expressed optimism saying, “We are closer than we have ever been. For the first time, I think the chances of getting it done in the Senate are greater than not getting it done.” Senate Minority Leader Mitch McConnell has also provided his blessing saying, “this is a unique opportunity to accomplish something in divided government.” Many hard-liners in the House have no interest in a bipartisan deal and instead are insisting the Senate adopt their ultra-conservative border bill, H.R. 2. Rep. Chip Roy of Texas said he “anticipates telling McConnell to pound sand” while Rep. Marjorie Taylor-Greene said she will move to oust Johnson is the House passes any Ukraine funding, regardless of any border provisions. 

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“We are closer than we have ever been. For the first time, I think the chances of getting it done in the Senate are greater than not getting it done.”

Senate Majority Leader Chuck Schumer

Last week saw the first contest of the 2024 Presidential Election with the Republican holding primary caucuses in Iowa.  Former President Trump won a decisive victory, although only amongst a small subset of voters. Of the 752,000 registered Republicans in Iowa, only 110,000, or 15%, braved the cold to participate in the caucuses. Still, the performance was good enough for a 30-point victory which is the highest margin of victory in the history of the Iowa caucuses. 

One bright commentator noted, why would America let Iowa lead the presidential nominating process?  These are the same people that let a man with no knowledge of music sell them band instruments and uniforms for their children all based on the revolutionary “think” method. 

Equally interesting were the exit polls from Iowa, where Trump’s continued grip on the Republican Party was even more evident. 66% of respondents said they do not believe Joe Biden legitimately won the 2020 election and 65% of respondents said they would still support Trump if he were convicted of a crime. Trump dominated among voters who listed immigration or the economy as their top concern, with former UN Ambassador Nikki Haley winning with voters concerned about foreign policy and Florida Governor Ron DeSantis winning on abortion. 

DeSantis and Haley, both failed to pull away from the other and gain the momentum that a definitive second place finish could have provided. DeSantis and Haley respectively received 21.2% and 19.1% of the vote. It was the death knell for DeSantis’s once promising campaign that crashed and burned and ended last night. Nikki Haley needs a win or close second place finish in New Hampshire to convince her supporters, and donors, that she is gaining ground on Trump. Independent voters are able to vote in party primaries if they so choose and that may be Haley’s best hope to close the gap. Otherwise, the Republican primary will be over. We will be watching on Tuesday night.

Finally…

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Client News

White House Official, Buffalo Councilmember Zeneta Everhart Join NYAGV to Discuss Gun Violence & Solutions After Racially Motivated Massacre in Buffalo

OD&A client, New Yorkers Against Gun Violence (NYAGV) is honored to partner with newly elected Buffalo Councilmember Zeneta Everhart, the Deputy Director of the White House Office of Gun Violence Prevention, and other community leaders to bring residents of Buffalo together to discuss the gun violence crisis impacting Western New York. The event on Wednesday, January 24 is part of NYAGV's Public Safety Partnerships: Connecting Communities to End Gun Violence program. [Read more.]

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Employee Spotlight

Background: Joined OD&A in 2020 after serving as Director of Policy & Planning for the North Atlantic States Regional Council of Carpenters where he managed the legislative agenda of the union in New York, New Jersey, Pennsylvania, Delaware, and Maryland.

Specialty: Master at unraveling the legal complexities surrounding law and regulation-making in New York as well as providing strategic advice, guidance, and planning to help our clients arrive at solutions and achieve results.

Notable Clients: New York State Building and Construction Trades Council, Climate Jobs NY, RWE Clean Energy

Successes: Expansion of New York’s prevailing wage law, the National Popular Vote interstate compact, the NYS Fair Play Act, and both New York’s and Maryland’s wage theft laws which were designed to help exploited workers throughout the construction industry.  He also spearheaded the successful lobbying effort to establish numerous labor and procurement standards for the renewable energy industry.

Extras: Graduate of Ithaca College and Albany Law School. His father, Michael Cinquanti has served as Mayor of Amsterdam, NY since 2020.

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This Day in History

Justice Harry Andrew Blackmun

January 22,1973: In a landmark decision, the U.S. Supreme Court legalizes most abortions (Roe v. Wade). Authoring the majority opinion, Justice Harry Blackmun states that the criminalization of abortion does not have "roots in the English common-law tradition."

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