New York lawmakers continue to move ahead on developing a state budget that is due to be in place by April 1st. After the governor introduced her budget in January, state lawmakers held hearings on her plan to obtain testimonies from agency heads and stakeholders, and on March 1st the governor and the Legislature agreed on available revenues. According to their estimates, the state has an additional $550 million to $800 million in expected revenues to allocate in the upcoming 2025-2026 budget.
This week it is expected that both the state Senate and the Assembly will release their counterproposals to the governor’s budget plan. The “normal” process would be that the leadership of both houses then meet with the governor to hammer out a final agreement.
This year’s budget debate, however, is being conducted under the dark shadow cast by the Trump Administration and the new Congress.
The House of Representatives has advanced a budget plan that contemplates big cuts to federal programs and the extension of a massive tax cut. Despite comments that deep programmatic cuts are needed to tackle the federal government’s yawning deficit, the tax reduction makes that gap even larger.
The House’s plan, which will need to be adopted by the Senate in order to move to the President, is vague on key details. For example, the plan calls for cutting $2 trillion in spending over the next decade, without specifying which programs should be cut, although it is widely expected to dramatically impact the nation’s Medicaid program.
That’s troubling for New York as Medicaid, health insurance available to those of modest income, is the biggest expenditure in New York’s state budget. In addition, Governor Hochul’s budget plan includes an expectation that the state will receive over $90 billion in federal assistance.
But the timetable for Congressional action is unclear. At best, the federal budget is approved well after New York’s fiscal year begins. Yet the development of a federal budget plan has been chaotic, to say the least; and with narrow Republican majorities in both the Senate and House, unless a bipartisan agreement develops (at this point seemingly extremely unlikely), it will be difficult to have a final agreement in place before New York lawmakers must act.
Under the circumstances, it will it be hard to fashion a Republican budget consensus, for now leaving the details of what programs will be cut and by how much as anyone’s guess. And to make matters worse, unless some sort of short-term agreement can be finalized by the end of this week, some areas of the federal government will run out of money and have to close down. Faced with this prospect, the House leadership is currently floating a stop-gap plan to keep the government open through the Fall while a more permanent plan can be put in place.
Given those uncertainties, how can the governor and legislative leaders cobble together a final budget?
Governor Hochul’s executive budget plan anticipates a “normal” Congressional outcome, one in which the federal government sticks by its financial obligations to New York and muddles along as in years past.
Whether that assumption turns out to be reasonable remains to be seen. In the meantime, what does Albany do?
In the short term, a reasonable approach would be to work with the plans advanced by the governor and each of the houses. Lawmakers have raised their concerns about Washington’s “dark shadow,” but they have little to go on. New York’s budget deadline is the end of this month, so state lawmakers and the governor have a responsibility to put a budget in place by then based on the best information currently available. It is possible that Washington will “kick the can” on a budget agreement until later in the year. If so, state lawmakers could return then and make adjustments to New York’s budget once the dust settles over the Congressional budget agreement.
In the meantime, the state will have to deal with well-known problems that will likely get worse if federal cuts are enacted. Problems like private colleges whose finances are weakening, funding for environmental programs to protect drinking water and address the worsening climate, help for struggling municipalities, the list goes on.
Whether the new Administration and the new Congress will make things worse for New York, only time will tell. Governor Hochul has put aside over $20 billion in reserve for a financial “rainy day.” The way things are looking, that “dark shadow” cast by Washington may mean financial rain clouds. However the nation’s and state’s budgets play out, we should be getting ready for a stormy few years.