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 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 under $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 individuals making less than $150,000 would receive $300.
The expanded child tax credit would provide families with children under four years old a $1,000 credit per child in 2025. Families with children aged 4 to 16 would qualify for a $500 credit 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 Fiscal Year 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 Tuesday at her budget presentation in Albany.
Noting that many New York families are still struggling with inflation and rising costs of living, Hochul’s plan avoids new tax hikes. It seeks to give five extra years of life to former Gov. Andrew Cuomo’s “millionaire’s tax,” which increases the income tax rate to over 9 percent for individuals earning more than $1 million and couples earning over $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, Tuesday’s proposal didn’t address the Metropolitan Transportation Authority’s (MTA) $33 billion revenue gap in its $68 billion five-year capital plan, which lawmakers rejected in December 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 like New York and California, potentially using the cuts as leverage on issues like immigration enforcement. New York currently anticipates receiving $90.8 billion in federal funding for Fiscal Year 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 Tuesday.
