Mayor Eric Adams and Gov. Kathy Hochul have announced budget proposals for the coming year that are remarkably similar.
They both used unexpectedly strong revenues to increase spending and avoid cuts to popular programs.
They touted a series of steps — especially income tax cuts — to convince voters they would do something about the high cost of living in New York.
And they are both taking a big gamble that they will be able to get through the next year without their plans being blown apart by President Donald Trump and Republicans in Congress, who are widely expected to slash federal aid to states and cities and social safety net programs as they take control of the federal budget.
But if that happens, Hochul wants New Yorkers to know who is responsible for the damage that could do in New York.
“States are not going to be able to backstop the loss of federal dollars,” she said after unveiling her budget. “So you have to put responsibility on the people who created this and that would be the elected leaders in Washington.”
The annual budget negotiations for both the state and the city come at a crucial time for the mayor, who is running for reelection this year, and the governor, who is already gearing up for what looms as a very competitive race in 2026. And they will need to win approval for their plans from the state legislature and City Council despite being met with a torrent of criticism over their approach.
Adams proposed spending $114.5 billion for the fiscal year beginning July 1, about the same as this year’s budget. He was able to reduce expected spending on asylum-seekers for the next two years more than $2 billion from what he had estimated when this year’s budget was adopted in June, given the sharp decline in migrants arriving in the city.
Strong tax revenues driven by gains in the stock market and Wall Street profits should produce a $2 billion surplus this year that is being used to balance next year’s budget and reduce future budget gaps.
Hochul’s plan for the state fiscal year that begins April 1 comes in at $252 billion, about $9 billion more than this year. The current year could produce a surplus as high as $5 billion, which allows the governor to increase funding for Medicaid and education.
The governor has spent the month unveiling a series of proposals to convince New Yorkers she will deliver relief to hard-pressed voters, which have gotten her very little applause.
She has unveiled a $3 billion plan to return what she called excess sales tax revenue the state received as inflation pushed up prices. Residents who file their taxes jointly and make less than $300,000 would receive $500 checks, while individuals making up to $150,000 would receive $300.
The budget also includes a $1 billion income tax reduction for taxpayers making up to $323,000 and an expanded child tax credit of $1,000 per child under age 4 and up to $500 per child from 4 through 16. The current tax credit is capped at $330 per child.
The rebate in particular has drawn sharp criticism for its attempt to give money to as many voters as possible. “It provides a little money to a lot of people. That doesn’t help anyone very much,” said Andrew Rein of the Citizens Budget Commission.
The progressive Fiscal Policy Institute agreed in a statement, saying it “would do little to alleviate the stresses imposed by inflation and other cost of living increases.”
The governor, who has repeatedly opposed tax increases, surprisingly called for extending a 0.8 percentage point income tax surcharge, which starts at incomes of a little more than $2 million a year for married taxpayers, until 2032. It had been scheduled to expire in 2029.
Extending the extra tax on high earners deflected pressure from progressives, while angering some of her most loyal supporters in the business community.
“The extension of the millionaire’s tax surcharge amounts to a tax increase for taxpayers who were counting on its expiration, many of whom may have been retaining their New York State residency with expiration of the surcharge in mind,” said Kathy Wylde, CEO of the Partnership for New York City. “It is easy to forget that we have a very progressive income tax, where the top 1% of earners account for almost half our personal income tax revenues.”
The mayor’s major affordability effort, announced in December, would eliminate or reduce city income tax for low-income residents who make just enough to have to pay some city income tax. He claimed that 400,000 residents would benefit, but an Independent Budget Office analysis found that it would help only $156,000 people and provide only $50 million in relief.
Both the governor and the mayor face pressure from progressive groups to expand spending. The Fiscal Policy Institute called for Hochul to put money into child care, housing and transit rather than tax breaks. The Working Families Party wants more cash assistance.
The debate over the state and city’s reserves also shows how the governor’s and mayor’s approaches please almost no one. Neither plans to add to their existing reserves, despite the extra cash and worries about what the Republicans will do.
The fiscal watchdog group the Citizens Budget Commission called on both to bulk up reserves, and criticized Hochul’s approach in an unusually harsh comment: “Gov. Kathy Hochul’s executive budget weakens the state’s fiscal foundation and competitiveness.”
The mayor didn’t fare any better with the group, which believes the mayor is underestimating spending in key areas like police overtime and housing vouchers: “Next year’s spending plan simply doesn’t reflect reality.”
Meanwhile, progressives are already suggesting the reserves can be tapped if Washington does cut money coming into New York or if it reduces safety net programs like Medicaid.
The Center For New York City Affairs issued a report this month calling for the state to dip into its $20 billion in reserves — a level it called “unprecedented” — to offset any cuts to aid.
The key to the state and city’s fiscal future may lie in Washington.
Trump and Congressional Republicans are committed to passing a major tax cut bill early this year and to pay for at least a part of it with reductions in spending, which could force Adams and Hochul into budget triage.
The city gets $8 billion a year in direct federal aid, about 7% of the budget. One-third of the $232 billion state budget is paid with federal funds, primarily for Medicaid, a likely Republican target.
City Comptroller Brad Lander estimates social safety net programs like Social Security and food assistance amount to $87 billion statewide.
The impact of Republican cuts would be far-reaching, says State Comptroller Tom DiNapoli.
“Short-term use of reserves cannot solve for a restructuring of the federal-state relationship regarding key programs, especially in health and social services,” he told THE CITY. “If states like New York are forced to go it alone or take on a much bigger part of the cost to fund health care or invest in feeding families, it is likely to cause an economic ripple that hurts us and creates great uncertainty at a fragile time.”
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