For the second consecutive year, New York Gov. Kathy Hochul has proposed the largest budget in her state’s history.
One of the most expansive items on the budget is Medicaid, with the state projected to spend $35.4 billion on the program in the upcoming fiscal year—an increase of $4.3 billion from the current year. Some 7 million New Yorkers are enrolled in Medicaid, 900,000 more than pre-COVID-19 levels.
The proposed budget also includes a range of items that Hochul has recently promised, including $1 billion for middle-class tax cuts, $3 billion for so-called inflation refund checks, and $800 million for an expansion of the state’s child tax credit.
The tax cuts would apply to individuals who earn less than $215,400 and married couples who file their taxes jointly and earn less than $323,200. Tax rates would be reduced by 0.1 percent in 2025 and 0.2 percent in 2026.
Under the $3 billion “inflation refund” initiative, families earning less than $300,000 would receive $500 checks, while single people making less than $150,000 would receive $300 checks.
The expanded child tax credit would provide families with children younger than 4 years old a $1,000 credit per child starting in 2025. Families with children ages 4 to 16 would qualify for a $500 credit starting in 2026.
The measures were made possible by stronger-than-expected tax revenues. The Hochul administration projects a $3.5 billion surplus by the end of fiscal year 2025 and anticipates closing FY 2026 with a $1.8 billion surplus.
“We’re investing more in New Yorkers because we have more resources to do so, and we’re doing it responsibly,” Hochul said on Jan. 21 at her budget presentation in Albany.
Noting that many New York families are still struggling with inflation and rising costs of living, Hochul said her plan avoids new tax hikes. It seeks to give five extra years of life to former New York Gov. Andrew Cuomo’s “millionaire’s tax,” which increases the income tax rate to more than 9 percent for individuals earning more than $1 million and couples earning more than $2 million.
Cuomo’s tax was enacted in 2021 and was originally set to expire in 2027. Hochul’s budget extends it through 2032.
As expected, the Jan. 21 proposal didn’t address the Metropolitan Transportation Authority’s $33 billion revenue gap in its $68 billion five-year capital plan, which lawmakers rejected in December 2024 based on a consensus that the gap can’t be closed without creating new taxes or fees.
Looking ahead, the state’s budget projects increasing deficits, with gaps of $6.5 billion in fiscal year 2027, rising to $9.8 billion in 2028 and $11 billion by 2029.
Adding to the fiscal uncertainty, newly inaugurated President Donald Trump might reduce funding to blue states such as New York and California, potentially using the cuts as leverage on issues such as immigration enforcement. New York currently anticipates receiving $90.8 billion in federal funding for FY 2026.
“Let me be clear, changes at the federal level will create new challenges for our state and for programs that New Yorkers care deeply about,” Hochul said on Jan. 21.
