While over a month late, New York State legislators passed a $229 billion state budget that avoids broad-based increases in the personal income tax, boosts education aid by more than $34 billion and sets in motion a minimum wage increase.  The final budget grew 3.9% over last year’s spending.

The delay was largely due to negotiated changes to the 2019 law that limited circumstances in which bail could be required.  The Governor was able to win those changes to expand bail consideration for judges, but she failed to reach an agreement on her other budget priority, a wide-ranging housing plan.

Highlights of the newly enacted budget include:

• An agreement to boost school meal spending by $134 million with a record increase in direct aid to school districts.  The budget also allows for 14 charter schools in New York City;

• A raise in a mobility tax to help bolster mass transit in the New York City metropolitan area;

• An increase in the New York City cigarette tax by $1 to $5.35 after lawmakers rejected Governor Hochul’s proposal to ban menthol cigarettes;

• Proposals to address climate change as the state works toward the goal of sharply reducing emissions by the middle of the century.  Gas hookups in new buildings and homes in the coming years will be prohibited;

• An increase in aid for capital costs at both SUNY and CUNY;
  
  
• An appropriation of $100.7 million to protect abortion access; and,

• A $1 billion investment to transform New York’s continuum of mental health.

While passage of the state budget was a major accomplishment, there is still much work that needs to be done.  The Legislature is scheduled to finish its deliberations in mid-June.

On February 1^st, the Governor unveiled a $227 billion Executive Budget that makes significant investments in mental health and continues to address the relatively high crime rates through community based services and further changes to the bail laws. During her presentation, she stated “We will make bold, transformative investments that lift up New Yorkers while maintaining a solid fiscal footing in uncertain times.”

Governor Hochul and legislative leaders will now start the process of negotiating the state’s financial plan, along with myriad policy initiatives included in the budget.  It will also offer a test after a particularly narrow victory in November for Hochul about whether she seeks a more moderate position on policy initiatives or takes a posture to placate progressives.  The New York State new fiscal year starts on April 1, 2023. 

When examining the New York State budget, it is important to note that the vast majority of expenditures are in two areas:  School Aid accounts for $31.3 million and the Medicaid Program expends $25.8 million leaving only $122.7 for state agency operations.   

Highlights include:

• “Transformative Infrastructure Projects” targeted at New York City.  Those projects include the Gateway Tunnel under the Hudson River, a $500 million investment in the MTA, and continuing renovations at New York City’s Penn Station and JFK Airport; 

• Continued funding for the next round of the Regional Economic Development Councils’ competition of up to $225 million in grants and tax credits;

• A new office called GO-SEMI what would work with Empire State Development to drive continued growth at Micron and other computer chip companies seeking to expand in New York;

• An additional $7.6 billion in childcare over 4 years and automatic eligibility for certain families;

• $34.5 billion for pre-K to grade 12 schools and expanding full day pre-kindergarten to 95% of all 4 year olds;

•  $7.5 billion in higher education spending, a decrease of $8.1 billion from last year.  It proposes tuition increases at SUNY state-operated campuses and CUNY;

• $1 billion for a fifth round of the Statewide Health Care Facility Transformation project to modernize health care facilities.  That includes $500 million to “enhance New York’s health care IT Infrastructure;”

• $700 million to bolster mental health programs statewide;

• $1 billion to help New York City pay some of the cost of sheltering some of the 40,000 migrants who arrived in New York City after illegally crossing into the United States;

• Hochul devoted an entire section of her budget to improving hiring and retention of the State Workforce.  Proposals include modernizing the civil service pay structure through a new job evaluation system that “better meet the needs of employers and the current job market.”  Also highlighted was an effort to renovate and reconfigure state offices to facilitate hybrid work schedules;

• Fund an aggressive $25 billion multi-year plan to build more residential units in the state afflicted with a severe housing crisis;

• Indexing the minimum wage to inflation.  Annual increases would be capped at 3%;

• A commitment to improving public safety with $337 million to combat gun violence, $1 billion for comprehensive mental health investment and reform;

• Several extensions of the tax law including extending the current $7.25 business income tax rate through 2026 on businesses with incomes of over $5 million generating around $800 million a year;

• A $15 million appropriation to “modernize the State’s paper-based procurement systems by transitioning it to an electronic procurement system;” and,   

• Beginning a pilot program at the Dormitory Authority of New York State (DASNY) for MWBE reciprocity between NYC and New York State certification and increasing the discretionary procurement threshold for MWBEs.

Some of the biggest points of disagreement might come from the non-fiscal issues presented in the Executive Budget.  Issues likely to make the budget negotiations difficult may include:

• Bail Reform – the budget proposal includes changes to the State’s cash bail law negotiated three years ago;

• Cap and Invest – Hochul proposes to create a “cap and invest program” to raise billions of dollars and lessen the impact of the investments needed to meet the goals around reduced emissions and increased renewable energy; and,

• Gas Hook-Ups – the Governor’s electric buildings proposal would ban gas hook ups/equipment in new construction.

This week, Governor Kathy Hochul delivered her first State of the State Message.  Governor Hochul was narrowly elected to a full term when Andrew Cuomo resigned after serious allegations of sexual misconduct.  It was the first time in several years that the annual speech was given to a joint session of the Senate and Assembly, and it kicked off what is expected to be a challenging session with the Legislature.

Titled, “Achieving the New York Dream,” the Governor laid out an ambitious agenda to “create a more affordable, more livable and safer New York.” 

Many of her plans seemed squarely aimed at helping New York City navigate its way to recovery and her partnership with New York Mayor Eric Adams is dramatically different than her predecessor’s rocky relationship with former Mayor Bill DeBlasio.  Ms. Hochul’s loftiest rhetoric described her far reaching billion-dollar plan to close some of the gaps in the mental health system for New Yorkers.  She also highlighted her efforts to enhance the public safety in all corners of the state and enlisted the Legislature stating that “crime is the top concern.” The Governor highlighted other initiatives for this budget and legislative session including:

• A plan to tackle the dire shortage of housing statewide to meet the goal of 800,000 new housing units over the next 10 years;

• An effort to ensure that the minimum wage keeps pace with inflation by raising it annually in step with rises in consumer prices;

• Expanding access to childcare by providing $7 billion over four years for affordable childcare;

• Mandating that all new construction be zero-emission starting in 2025 for small buildings and starting in 2028 for large buildings;

• Direct $1.3 billion in annual state procurement funds to food grown in New York to create an additional demand for New York agricultural products;

• Establish a “Future of Health Care Commission” to drive a “holistic, data-driven view” of the State’s health care delivery system;

• Promised to invest in the Metropolitan Transit Authority’s long term fiscal health; and,

• Increasing public safety initiatives and investments to drive down gun and violent crimes.

Governor Hochul also mentioned three procurement reforms that she will be advocating in this legislative session:

• Streamlining the Minority and Women’s Business Enterprise (MWBE) certification process by pursuing reciprocity with other state and local certification programs;

• Accelerating the use of electronic signature technology within state government, starting with a select group of state agencies; and,

• Adopting an eProcurement system to facilitate digital transactions with vendors, increase standardization across procurements and create a single point of entry for vendors to view solicitations and manage state contracts

Further details on these executive initiatives will be available when Governor Hochul introduces the State’s 2023-24 Executive Budget.

The New York State Legislative Session came to an end, for now, when the State Assembly was the last House to officially adjourned on Saturday, June 4.  The legislature ended the session having passed 1,007 bills, which is the most in legislative history. 

Both Houses passed legislation largely in reaction to several issues on the federal level.  These include:

• Legislation to implement new gun safety measures, such as requiring that a person obtain a license prior to purchasing a semiautomatic rifle and raising the age to purchase a semiautomatic gun from 18 to 21;

• Legislation to enhance protections for those seeking abortion care, including prohibiting New York state from cooperating with out of state legal cases involving abortion; and,

• Legislation requiring political subdivisions (e.g., local governments, local board of elections and school districts) with a history of voter disenfranchisement to obtain clearance prior to making certain changes to their election laws. 

The session also passed several pieces of legislation that will affect the procurement process in New York State.  A legislative package sought to help bolster the state’s MWBE program:  one bill would allow MWBE firms to use funding from the MWBE lending program to pay off debt while another bill sought to address fraud in the MWBE program that could hurt many legitimate MWBEs by denying them opportunities as a result of unscrupulous subcontractors. 

Another piece of legislation that awaits Governor Hochul’s approval, would restore the Office of the State Comptroller’s review of certain state contracts.  The Comptroller’s independent contract review is seen as an important step to increase oversight, accountability and transparency in state procurement.

While the Governor and legislators went home to campaign for their re-election, many observers believe that both Houses may return after the November general election to take up additional issues.