Budget Mania

Good morning from Albany where there is plenty of chatter about a “handshake agreement” on the budget by Thursday, allowing lawmakers and Executive Chamber staff to spend Easter with their families.  While anything is possible, it is certainly not likely and the betting here is that the Easter Bunny comes before the final budget.

There are major issues still to be resolved between the Legislature and Governor Kathy Hochul including: 

• Revenue. There is no agreement on how much the budget will spend; the Assembly and Senate both proposed budgets roughly $13 billion higher than the Executive proposal. Democratic Assembly Member Amy Paulin said once a topline number gets ironed out, things could move quickly offering, “We don't even have table targets, so it's very difficult to gauge when this budget process will be over, but that could change tomorrow. Once there's agreement on some of the big items, it moves very quickly, but as far as I know, that agreement hasn't happened yet.” To justify the higher spending proposal, the Legislature is pushing for a tax increase on those making more than $5 million, a policy that Hochul has rejected in the past and has promised to do so again this year. 

• Education. Both Houses rejected Hochul’s proposal to adjust the formula governing local school aid, instead proposing a $1 million study on the issue. Overall education aid increases by 2.4 percent in the Executive Budget proposal, but under the proposed changes to the aid formula, roughly half of the school districts in the State would receive less aid. Hochul has pointed to declining enrollment and healthy cash reserves in some districts as reasons for the changes saying, “We’re funding empty seats these days when you base it on a formula that goes back to 2008. I want to have the conversations with the Legislature, how we make the right adjustments, how we do what’s right certainly for our students, certainly for the teachers, but also for the taxpayers who are saying, ‘Why is the school system sitting on enormous reserves?’”

• Medicaid Funding. In response to the Governor’s $1.2 billion in Medicaid cuts, the Legislature proposed implementing a premium on Managed Care Organizations (MCO) that would generate roughly $4 billion a year to help fund Medicaid. MCOs would then be reimbursed by the federal government (assuming the Centers for Medicare and Medicaid Services aka CMS approve the plan). Senate Finance Chair Liz Krueger endorsed the proposal saying, “So that's an easy answer of how we pay for the Medicaid cuts without it impacting revenue from other sections of the budget.” The Senate and Assembly both included a 3% Medicaid reimbursement rate increase, with the Assembly pushing for a 7.5% increase for hospitals and nursing homes. There is a growing consensus around the MCO tax idea.  That said, it would only be a temporary fix—it is unlikely to last past three years—and one that does not address the long-term issues of growing Medicaid costs.  That said, most everyone in Albany agrees that New York—a longtime donor state to the federal government—should take the federal money (if we can get it) and run.

• Housing. The Legislature and Hochul continue to want a comprehensive housing package.  However, the Executive housing proposal was muted after last year’s ambitious proposal was soundly rejected by the Legislature. Progressive lawmakers and housing advocates continue to push “Good Cause Eviction,” a package of policies that would shore up tenant protections and place certain caps on rent increases. Senate Housing Committee Chairman Brian Kavanagh indicated that his conference could be open to a compromise in the budget as long as it included provisions similar to Good Cause Conviction saying, “It’s certainly worth considering.” Any broad package would likely need to include a 421-a deal, a fix for affordable housing owners, labor standards, and incentives for residential conversions.  One option that is being floated is a housing fund in the budget with details to be worked out before the end of the legislative session.

• Retail Theft. Hochul’s public safety agenda includes cracking down on organized retail theft. The plan would allocate $45 million to create a Retail Theft Joint Operation, a collaborative effort with state and local law enforcement to identify and respond to organized retail theft. To add to that effort, Hochul has also proposed upping the penalty for assaulting a retail worker and introduced a tax credit to help businesses increase store security. Assemblyman John McDonald offered, “I think there’s open conversation and understanding what it looks like,” but some of his Democratic colleagues are more skeptical, especially as the Legislature has led a long turnaround in state criminal justice policies that have resulted in fewer people being jailed for minor offenses. 

• Energy. The Senate included the NY HEAT Act, a priority for many environmental advocates who hope the measure will help expedite the transition to green energy. The Assembly included provisions to eliminate the so called 100-foot-rule, a policy that requires gas companies to provide free natural gas hookups within 100 feet of an existing line, subsidized by existing ratepayers. Opponents of the bill have raised questions about utility reliability if the change is enacted and some powerful voices in organized labor worry the proposal could cost jobs. Mario Cilento, president of the New York State AFL-CIO, said alternative energy should be “readily available and affordable across the state before proposals like the NY HEAT Act are considered.”  

• Empire AI. One of Hochul’s most ambitious proposals was her $250 million plan to establish an AI consortium with a cutting-edge AI computing facility at the University at Buffalo. Other consortium partners, including Columbia University, Cornell University, New York University, and Rensselaer Polytechnic Institute, would each contribute $25 million and would have remote access to the computing power necessary to run modern AI software. The funding was included in both legislative proposal and looks to be adopted with more detailed budget language. 

With those issues—and plenty of others—still outstanding and only four days until lawmakers are scheduled to leave town, a pre-Easter budget seems unrealistic. Senate Minority Leader Rob Ortt: “There’s no way we’re going to have a budget done on the 28th.” 

In political news, Ohio held its Primary Election last week. The Trump wing of the Republican Party won another victory with preferred candidate, former car dealer Bernie Moreno, easily defeating his two opponents in the United State Senate race.  Notably, one of his opponents was tate Senator Matt Dolan who was closely aligned with Ohio Governor Mike DeWine, a vocal critic of Trump. 

The win propels Moreno into a contest with incumbent Democratic Senator Sherrod Brown. Brown is one of the last of a dying breed of blue collar Democrats who appeal to voters in traditionally red states. To win reelection, Brown will have to win over a sizable number of working-class Republicans, as well as Ohio’s Nikki Haley supporters who are more likely to be in line with Brown’s views on support for our allies around the world and the threat that former President Trump poses to democracy. Brown has been known to reach across the aisle to find compromise saying, “I fight for Ohioans. There’s a reason I win in a state that’s a little more Republican.” 

“A little more Republican” is one way to put it. The state voted for Donald Trump by eight percentage points in both 2016 and 2022 and the GOP currently controls the offices of Governor, Secretary of State, Attorney General, and both chambers of the State Legislature. Still, Brown is confident his accomplishments will break through. He points to major projects including Intel’s semiconductor manufacturing facility in Ohio, largely made possible by the CHIPs and Science Act he helped become law. Brown also pushed for a provision in that bill that requires a project labor agreement before construction can begin, resulting in 7,000 union trade jobs for Ohioans. Brown is hoping that his penchant for getting thing done, and his strong support for and from organized labor, rather than the broader political winds, will be the deciding factors this November.  

Another elected official in a tough reelection race, Rep. Marc Molinaro (R-NY), is rumored to have a Mary Poppins themed burner account on Twitter… we will let you be the judge. 

-Jack O’Donnell

Client News

OD&A client Intuition Robotics was proud to join Assembly Members Steven Otis, Chair of Science and Technology, and Ron Kim, Aging Chair, for a presentation on AgeTech Demo Day of its revolutionary product ElliQ, an AI-powered companion designed to support and accompany older adults on the journey to age independently, while reducing loneliness and isolation. Read more here.

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Thank you for taking the time to read about the OD&A team over the past few weeks. Each of my colleagues offers our clients a unique set of talents and expertise that comes from our training, personal experience, and our very diverse paths that brought us here. Together, this team is much more than the sum of its parts; we push each other, complement each other, make each other better, and certainly have each other’s backs.

We do that because we believe in what we do. We believe in our clients. You are the ones changing the world—in health care, in labor, in climate and energy, in tech, in culturals, and in so many other ways and places—and it is truly a privilege to support you and that work.

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This Day in History

March 25, 1969: John Lennon and Yoko Ono stage their first bed-in for peace in Amsterdam.

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