First Take on Gov. Hochul’s $252 Billion FY 2026 Budget

January 21, 2025

Reinvent Albany Priorities in Governor Hochul’s FY 2026 Executive Budget
(Our first take is primarily based on the Governor’s Budget Briefing Book. We are reviewing the budget legislation, and will provide additional commentary in the coming days.)

Thumbs Up

  • Increase in child tax credit. This is smart – parents with young children are among the groups most likely to leave the state because they cannot afford living here. 
  • $114.5 million for public campaign finance program ($100 million for matching, $14.5 million for administration).
  • $142.4 million funding for State Board of Elections.
  • $488 million for the Attorney General’s office, up from $378 million (largely from Juul settlement funding).
  • $400 million for Downtown Albany and State Museum. 
  • $6.5 million to support Subway Co-Response Outreach Teams (SCOUT). The Governor proposes creating spaces within five NYC subway stations for mobile outreach teams to better coordinate services for unhoused individuals.
  • $9.3 million for the Commission on Judicial Conduct, as requested by the Commission.

OK

  • $3.8 million for the Authorities Budget Office, up from $3.7 million.
  • $8.3 million for the Commission on Ethics and Lobbying in Government (COELIG), up from $8.1 million. This increase is welcome, but falls short of the larger increase requested by the Commission in order to fulfill its expanded mandates.
  • $598 million for the Comptroller’s office, up from $567 million (increase of $30 million). 

No Way 

  • $9.1 billion in direct cash payments to Hollywood film/TV producers over the 13 years from 2023 to 2036. The FY 2026 budget includes $1.4 billion in new state cash payments to the film/TV industry to extend the film production tax credit by two years through 2036. The film/TV production subsidy is considered the most wasteful of New York’s menagerie of billions of corporate handouts costing taxpayers $700 million a year and $75,000 per job. Additionally, the Governor suggests “removing certain restrictions on above the line qualified costs” which could mean New York State taxpayers will soon be writing big checks to the likes of Tom Cruise and Brad Pitt.
  • $800 million in direct cash payments to big Broadway productions. The Governor has proposed expanding this tax credit to $400 million annually and extending it for two years through 2027.
  • $3 billion in irrational “inflation reduction” payments to households making up to $300,000. This pre-election year stunt is like throwing bales of hundred dollar bills out of a jet plane and claiming it makes New York a better, more affordable place to live. 
  • 10-year, $2 billion extension of the Excelsior program, which gives tax credits to businesses that create jobs in New York. Labor economist and national subsidy expert Tim Bartik has shown these tax credits only affect job creation 2 to 25% of the time.
  • An Excelsior sweetener for companies that are part of the semiconductor supply chain (7% jobs tax credit, 3% investment tax credit). 
  • R&D reimbursable tax credit for research investments exceeding $100 million.
  • Allowing Capital OTB to use one million in capital acquisition funds for operating expenses.
  • Extending lowered casino slot tax rates to 2028.
  • $234 million raid from the Indigent Legal Services fund to the state general fund. 

Irksome and Misleading

  • Governor Hochul failed to propose the roughly $2.2 billion in recurring taxes and fees needed to finance at least $33 billion in additional funding for the MTA’s 2025-2029 capital plan. This is an abdication of the Governor’s responsibility to millions of downstate transit riders and puts the engine of the state economy at risk. The Governor is playing a dangerous game of political chicken with the Legislature to see who will be the grown-up in Albany. Additionally, the Governor said she supported the 2025-2029 plan, but has now requested that the capital plan be updated. She has only proposed $3 billion in capital funds from the state (the MTA requested $4 billion each from the state and city).
  • The executive budget vastly understates the total size of state borrowing and spending because it does not include state authorities. NYS authorities spend about $50 billion a year and borrow 95% of all debt by state government entities (think SUNY, MTA, Thruway, Dormitory Authority, etc.).
  • Revenue projections do not show the cost of billions in state tax expenditures. For instance, the film/TV tax credit alone will cost the state at least $700 million in FY 2026, which, because of accounting gimmickry, is subtracted from revenue before revenue estimates are published. 

The Numbers in Brief

The Governor’s budget includes a $5.3 billion surplus and state reserves of $21.1 billion, which are largely based on two big revenue assumptions: First, New York will get $91 billion in federal aid and second, there will be a big boost in income tax – those making over $2.1 million annually will continue to pay a higher tax rate through 2032; it was set to expire in 2027. 

State Operating Funds are considered the best measure of state spending activity. This budget assumes inflation of 2.7% and includes a year-to-year increase of State Operating Fund spending of $10.5 billion or 7.9%. New York’s budget growth is being driven by the continued explosion of NYS Medicaid costs, which have tripled over the last 15 years and will increase 14% this fiscal year to $35.4 billion. (The budget assumes a historically high $57.6 billion of federal Medicaid grants.) 

Budget Transparency and Process

The Governor and Legislature should also take steps to increase transparency and follow a regular, accountable budget process, like holding the quick-start meetings last November. This should include publishing basic financial plan tables with one-house and enacted budgets, drastically limiting the use of lump sum appropriations, avoiding use of messages of necessity, and ensuring that appropriations do not exempt pre-audit review by the Comptroller (see also joint letter from watchdogs regarding emergency budget powers). Unfortunately, the budget continues to grant universal transfer and interchange authority between agencies, and includes large “special emergency appropriation” slush funds.