Budget Framework

Inside the Tentative Deal, Unfinished Business, Looming Cuts

Good morning from Albany, New York, where lawmakers passed a tenth budget extender only days after Governor Kathy Hochul announced a “conceptual agreement” had been reached with leaders in the legislature on a final budget! Hochul previewed a budget topline number of $254 billion, $2 billion higher than her original budget proposal. To be clear, much remains undecided, including exactly how and where much of that quarter of a trillion dollars will be spent, but regarding the policy issues at stake here, there were very clear victories for Hochul. 

Here is what we know so far: 

Affordability

Hochul’s plan to send “inflation rebate” checks to New Yorkers is happening, with individuals earning up to $150,000 set to receive $200 (rather than the originally proposed $300) and families making up to $300,000 receiving $400 (instead of $500). Over 8 million New Yorkers are said to be eligible, while the reduction from the original proposal is expected to save nearly $1 billion. Additionally, the Child Tax Credit will be expanded to $1,000 for children under 4 years old and $500 for children aged 4-16, and the state will invest $350 million for childcare subsidies in New York City. 

Taxpayers earning less than $323,000 will receive a small tax cut, while a tax surcharge on those earning above $1.1 million was extended through 2032.

Education

Hochul’s proposal for a bell-to-bell ban on cell phones in public schools, one of her top policy priorities, will be included in the final budget. The state will provide at least $13.5 million to help school districts implement and enforce the bell-to-bell ban on cell phones and other internet-enabled devices. The final budget will also include $340 million to provide free breakfast and lunch for every K-12 student, as well as $47 million to make community college free for adults pursuing degrees in certain industries. 

Public Safety

Lawmakers reached a middle ground on changes to the discovery process after intense pushback from the legislature to Hochul’s original proposal. The final agreement will change how prosecutors provide evidence to defense lawyers before a trial. The goal is to prevent severe cases from being thrown out for minor technicalities. It also provides $120 million to assist prosecutors in discovery compliance. While the budget will not create a crime of “mask-based harassment” as initially proposed by Hochul, it will include a compromise that increases the penalties for an individual who commits a class A misdemeanor or higher while wearing a mask. To address public safety concerns further, New York’s involuntary commitment law has been changed. The changes codify legal guidance previously released by the state by expanding the category of medical professionals able to determine that a person is “at a substantial risk of physical harm” because of their inability to meet basic needs. The deal also includes roughly $180 million in funding for psychiatric services, staffing, and beds in New York City. Another $122 million is provided to sustain an increased presence of police officers in the subway, including officers on every MTA overnight subway train. 

Transportation

To fund the $30 billion-plus gap in the Metropolitan Transportation Authority’s (MTA) 2025-2029 Capital Plan, lawmakers settled on a restructured payroll mobility tax for businesses within the entire MTA service area. The payroll tax rate for companies in New York City with payrolls over $10 million a year will be increased from 0.6% to 0.895%, and from 0.34% to 0.635% for companies on Long Island and in Westchester, Dutchess, Orange, Putnam, and Rockland counties. For smaller businesses with payrolls under $1.75 million, the payroll tax rate will be nearly cut in half and eliminated for self-employed individuals making less than $150,000 a year.  

These are all big wins for Hochul, and all on issues that, according to recent polling, resonate well with New Yorkers, so much so that you can confidently expect to see many of them in political advertising in the near future. The New York Times says, “the messaging behind the budget—'your family is my fight'—may well be a preview of her campaign strategy and perhaps one that Democrats might follow in next year’s midterms.”

That said, the legislative leaders stuck firmly to their guns as well, crafting compromises that will be popular with at least most of their majorities and, for the most part, tolerable for the rest of their members. While there is plenty of griping from legislators about the pace of the budget negotiations, there is less discontent regarding the results, with the major exception of discovery, which left some members publicly expressing their unhappiness.

Nonetheless, the devil, as they say, is in the details, and we have not seen those details; of the ten budget bills, only the debt services bill is even in print. That is because the amount of money to be spent remains under negotiation, although some budget tables reportedly closed down late last week and over the weekend.

Many other issues remain open and under discussion, including changes to the public financing of state elections (although Speaker Carl Heastie has already said that the budget would include language allowing a state match on the first $250 of any donation up to $1,000), changes to state education especially around religious schools and the “substantially equivalent” requirements, and capital spending plans as well as more localized issues, including control over Nassau County Medical Center or funding issues regarding the City of Buffalo.

Lawmakers are also pondering what to do about any impact from federal cuts. The consensus is that it is a later question rather than a now one. Budget Director Blake Washington explained, “We have a statutory constitutional deadline to pass a budget. We want to deal with the facts as they are today, not what could or could be in two months from now. And that's what the plan is, to continue to engage with the legislature and address if there are any shortfalls. 

Of course, Republicans do not agree. Assembly Member Ed Ra countered, "Democrats keep warning about thunderstorms while driving with the top down on the convertible.”

All of that is driving Hochul, as we wrote about last week, to seek emergency powers to reduce spending if the state loses more than $2 billion from federal cuts, a recession, or a combination of both. Hochul offered, “The legislature would have to approve this, but it's been in our laws before that gives the governor, in extraordinary circumstances, to be able to operate very quickly to protect New York State without having to call the session…as you know, sometimes these debates take a long time. I want to be able to move at lightning speed.” Under the proposal, Hochul would create a spending reduction plan that could be approved by the legislature without returning to Albany for a formal session. If the legislature disagrees with a part or all of Hochul’s plan, they would then submit their proposal, which Hochul would have to agree to. This remains a significant issue in ongoing budget negotiations.

"Democrats keep warning about thunderstorms while driving with the top down on the convertible.”

Assembly Member Ed Ra, (R) Nassau County

In Washington, D.C., lingering tension between House Speaker Mike Johnson (R-La.) and Rep. Elise Stefanik (R-NY) burst into public view last week after Stefanik pushed back on Johnson’s claim that he had spoken with her about running for Governor of New York. On Twitter, Stefanik posted, “This is not true. I have had no conversations with the Speaker regarding the Governor’s race.” The relationship between the two has deteriorated as Stefanik reportedly blames Johnson for Trump pulling her nomination to serve as U.N. ambassador due to the slim majority in the House. Stefanik has also not yet been added to the House Intelligence Committee after Johnson promised to do so. Johnson met with Stefanik on Wednesday, but denied any bad blood, saying, “This is a totally friendly, collegial thing. She’s a close friend and ally.” Should Stefanik choose to challenge Hochul, she would be a strong favorite to win the GOP primary, according to a recent poll

To mark his first 100 days in office, President Donald Trump held a rally in Warren, Michigan, at Macomb Community College last week. Metro Detroit’s Macomb County has been an epicenter of American politics. The region was the most Democratic suburb in 1960 and became the most Republican suburban county just 20 years later in 1980. This phenomenon was largely attributed to “Reagan Democrats”—working-class, socially conservative white Americans who felt left behind by governments and institutions. It was at Macomb Community College where Reagan, a former Democrat, famously said, “I didn’t leave my party; my party left me.” That message resonated then, and Trump is hoping it resonates with voters now as he continues reshaping the federal government and the American economy. Speaking to rallygoers, Trump said, “We've been abused by friend and foe, and in many cases, friend has abused us more so than foe on trade. So, I want to just let you know you're going to be very proud of this country very soon, and with my China tariffs, we're ending the greatest job theft in the history of the world.” More controversially was an interview yesterday on “Meet the Press.” Asked by NBC’s Kristen Welker whether it is, “OK, in the short term, to have a recession,” Trump shrugged. “Look, yeah, it’s—everything’s OK,” he responded. “This is a transition period. I think we’re going to do fantastically.” Watch the clip from NBC News.

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Much of Trump’s domestic policy agenda will hinge on the ability of Speaker Johnson and Senate Majority Leader John Thune (R-N.D.) to walk a fine line between GOP hardliners who want to see deep spending cuts and more moderate members who are hesitant to cut services that their constituents rely on. Nowhere is that dilemma more pronounced than in the House Energy and Commerce Committee, which oversees Medicare and Medicaid, and is tasked with finding over $800 billion in cuts under the House budget blueprint. Members have floated cutting the federal share of Medicaid payments to states that have expanded programs under the Affordable Care Act, as well as an alternative plan known as “per capita caps” that would shift the cost burden onto the states for any coverage beyond the federal allocation. Still, some GOP members worry that either plan would risk healthcare services for millions of low-income Americans. Rep. Don Bacon (R-Neb.), a moderate Republican from Nebraska, indicated that he would not support a bill that cuts more than $500 billion, and Rep. David Valadao, who represents the highest percentage of Medicaid recipients of any House Republican, said even that may be too much. Valadao declared, “I still think $500 billion is a lot, depending on how they score things. It might be all foo-foo numbers just to make people happy.” Even if Johnson gets his divided caucus behind a single bill, the Senate will still have to reconcile that with the budget blueprint they passed earlier this year, which does not prescribe the level of cuts House Republicans are eyeing. 

A great example of how hard Johnson’s job is was the failure to reach an agreement in a meeting last week with “SALT Republicans,” a group of GOP House members pushing to raise the federal cap on state and local tax deductions. The cap disproportionately impacts citizens in states like New York and California with higher state and local taxes, and much of the GOP conference rejects the idea of providing a de facto tax cut for blue states. Republican Rep. Nick LaLota (R-NY) said after the meeting, “It was a lively discussion, but we’re still far away.” Johnson was more optimistic, offering, “We heard some very valuable input from the members of the SALT states and completely understand their priorities, and we’re trying to work that in and find consensus on the right number, and we will.” The previously unlimited deduction was capped in 2017 as one of the main ways to offset some of the costs of the tax cuts enacted that year. If Republicans were to lift the cap, they would need a new cost offset as they seek to renew the 2017 tax bill.  

Furthermore, Republicans are grappling with some of Trump’s specific promises, including his campaign vow to eliminate taxes on tips, overtime pay, and Social Security benefits, as well as his recent suggestion that tariff revenue means that the U.S. could stop taxing income under $200,000, NYT’s Andrew Duehren reports. Sen. Ron Johnson (R-Wis.) is a critic: “My beef with what’s being proposed right now—there’s no guiding principle other than, ‘well, this is what President Trump promised on the campaign.”

Additionally, the White House is preparing to formally ask Congress to cancel nearly $10 billion in already approved funding for public broadcasting, foreign aid initiatives, and other programs the Trump Administration wants to axe. House Appropriations Chair Tom Cole (R-Okla.) said he is open to the idea, but wants to work with the White House before they submit the so-called “rescissions package” to avoid a long and arduous markup process. Speaking to reporters, Cole said, “I prefer the input being informal and ahead of time. We’re in no hurry. Government doesn't depend on this. Nothing depends on this. It's an exercise in saving money, becoming more efficient. Those are important things to do. And I can get them done quicker when I see what I'm dealing with, and particularly when the cardinals are involved in decisions and have a chance to make their input and their suggestions.” 

Finally…

A tip of the cap to Rochester’s own Fred Costello, the longest-playing organist in pro sports. 

Jack’s deeper dive into NY budget talks in the run-up to a tentative deal and more in his Monday Morning Minute podcast:

🎙️Compromises reached on governor’s budget priorities

🎙️Medical aid in dying, NY prison changes

🎙️D.C. budget dance

🎙️Revamping the Democratic Party

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Congratulations to our Kara Hughes, OD&A Senior Advisor & Head of New York City Practice for being named Who's Who in Government Relations in 2025 by City & State NY!

City & State NY writes: With more than two decades of public policy experience, Kara Hughes is one of the state’s go-to consultants for elected officials, nonprofits, and advocacy groups looking to mount successful campaigns. Hughes began her career in California, working in then-U.S. Sen. Barbara Boxer’s office, helped Hillary Rodham Clinton get elected to the U.S. Senate in 2000, and later led then-New York City Mayor Bill de Blasio’s office of legislative affairs, where she helped make ranked choice voting a reality. Recently, Hughes has helped clients navigate the migrant crisis, congestion pricing, and government regulations on new technologies.

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New to the NYS Legislature

Assemblymember Patrick Chludzinski, a Republican, represents New York’s 143rd Assembly District, covering the Erie County towns of Cheektowaga and Lancaster, the villages of Depew and Sloan, and parts of Buffalo’s Ellicott, Fillmore, and Lovejoy Districts. A decorated military veteran and career law enforcement officer, Pat brings more than two decades of public service to the State Assembly.

Pat joined the Cheektowaga Police Department in 1999 and steadily rose through the ranks to become Detective Lieutenant of the Youth and Family Offense Unit. Over his career, he completed 26 specialized law enforcement trainings and was awarded six Distinguished Conduct Awards and multiple Letters of Commendation for his service, including for the apprehension of armed robbers. He also served as Commander of the Cheektowaga Police Honor Guard from 2014 until his election to the Assembly.

A U.S. Army and Army National Guard veteran, Pat was activated after the 9/11 attacks to assist in search and rescue efforts at Ground Zero. He later served in Baghdad during Operation Iraqi Freedom, earning numerous honors, including two Army Commendation Medals with Combat Valor Device and a Combat Service Badge.

With a deep understanding of the public safety and economic challenges facing New Yorkers, Pat is committed to making the state a safer, more affordable place to live and raise a family. He holds a degree from Erie Community College and studied Psychology and Criminal Justice at Buffalo State College.

Pat lives in Cheektowaga with his wife, Tanya, and their three daughters—Ava, Kendra, and Reyha. His lifelong dedication to service continues to guide his work in Albany on behalf of the 143rd District.

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This Day in History

May 5, 1981:

Imprisoned Irish-Catholic militant Bobby Sands dies after refusing food for 66 days in protest of his treatment as a criminal rather than a political prisoner by British authorities.

He was 27.

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