Talks to intensify on NYS budget that raises school aid, cuts taxes

ALBANY — Gov. Kathy Hochul and Democratic legislative leaders will meet behind closed doors this week to negotiate a state budget expected to significantly increase spending for schools and health care while cutting taxes for the middle class, despite the threat of deep cuts in federal aid.

The budget of at least $252 billion is due before the April 1 start of the fiscal year. But rank-and-file Democrats said they expect to miss the constitutional deadline by several days.

One concern that surfaced last week is the need for an additional way to fund the Metropolitan Transportation Authority. The Trump administration pledges to cut billions of dollars in funding in order to try to stop the congestion pricing program in Manhattan. Fees charged to drivers are supposed to help fund the MTA’s massive needs to renovate transit systems, including the Long Island Rail Road, while combating traffic congestion and global warming.

"Discussions on revenue raisers is definitely going to have to be part of the MTA," Assembly Speaker Carl Heastie told reporters Thursday. "The discussion on revenue raisers is more centered on the MTA than anything else at this point."

Heastie wouldn’t say how the leaders might raise revenue for the MTA, but state budgets have in the past relied on increases in the payroll tax charged to larger employers on Long Island, the five boroughs and the northern suburbs. Past increases have sparked outrage by commuters, who usually bore the brunt of the tax increase.

An official close to talks said early discussions focused on raising revenue for the MTA from only the biggest firms, to limit the impact on New Yorkers.

"We’ll figure it out," said Heastie, a Bronx Democrat.

"When you spend this much money, there is obviously a lot of good things here," Sen. Andrew Lanza (R-Staten Island) said. However, "when you spend $17 billion more than the largest budget in the country, we feel that makes New York $17 billion less affordable for New Yorkers."

The deputy minority leader said at a joint legislative budget hearing on March 17 the budget fails to address the influx of migrants, high utility costs and "a fiscal climate that is less than inviting."

When the budget talks began on March 17, the leaders focused attention on their theme of making New York more affordable.

"We prioritize affordability," Senate Majority Leader Andrea Stewart-Cousins (D-Yonkers) said. She promised the budget will be a "fiscal battle plan" to increase school aid, Medicaid health care for the poor, working poor and hospitals, and to help build affordable housing

Hochul began the "affordability" mantra with her budget proposal to the State Legislature in January, saying, "This year’s budget will put money back in New Yorkers’ pockets."

Her proposals are still in play:

• Tax rebate checks for the middle class up to $500 for families making less than $300,000 a year. Single filers making less than $150,000 a year would get $300 checks.
• $3 billion in additional tax breaks for families making less than $323,000 a year.
• An $825 million increase in school aid now at $34 billion. The Assembly proposes a $2.7 billion increase over current funding and the Senate, more than $1 billion.
• Extending a temporary income tax surcharge on New Yorkers making more than $2.1 million a year, to raise $5 billion in revenue.

But Hochul is also driving the budget talks with policy measures. Under the state constitution, governors have extraordinary leverage over the legislature to pass policy measures in the spending plan. Hochul told legislative leaders her top policy objectives include:

• Restricting cellphones in classrooms by students. Hochul had proposed a "bell-to-bell" ban, but legislators are hearing calls from some schools and parents urging more local control in setting the policy.
• Making it easier for police and the courts to send people suspected of mental illness, particularly in crimes or on the subway, to psychiatric hospitals for mandatory evaluation. Democratic legislators have been opposed to the measure because they say it isn’t effective and unfairly targets the small number of mentally ill people who commit crimes.
• Restricting use of masks in public, except for health and religious reasons, as another crime-fighting measure. While supported by Republicans, Democrats have been critical of the measure which could result in arrest of pro-Palestinian demonstrators who cover their faces out fear of retribution.

There is less friction from the Democratic majorities over the finances in Hochul’s budget, but the Senate and Assembly majorities want to spend more. The independent Budget Commission said the Senate and Assembly proposals would increase state operating funds by 13.7%, or four times the rate of inflation, over the current year’s spending.

"Even in a normal political year, I would be concerned that this budget is reckless in terms of spending," Bill Hammond, of the conservative-leaning Empire Center think tank, said in an interview. "But this is not a normal year. There is every indication that Congress wants to reduce federal spending dramatically and the Trump administration is finding ways to do that with executive action."

Targeted areas include federal aid for colleges, hospitals and clinics funded by Medicaid, and schools which Heastie said could lose $4 billion in federal aid under Trump’s plan to eliminate the U.S. Department of Education.

But that pain may not be felt for months.

The strategy of the Democratic governor and the Democratic leaders of the Senate and Assembly so far is to ignore the threatened cuts in crafting the budget. They hope the Republican efforts will fail to gain approval in Congress or be rejected by the courts as unconstitutional.

If the threatened federal aid cuts stick, however, lawmakers expect to hold a special session in the fall to face prospects of cutting programs or raising taxes, which they will blame on Trump and the Republican Congress going in the 2026 midterm congressional elections.

"They are kind of whistling past the graveyard in terms of their fiscal plan," said Michael Kink, executive director of the Strong Economy for All advocacy group.

He said the state budget should further tap the wealthiest New Yorkers and corporations to protect the poor, working poor and middle class so they don’t get hit hardest by federal cuts.

"We know that huge federal cuts are coming, and I think it would be smart to prepare for that," Kink said in an interview.

By Michael Gormley

michael.gormley@newsday.com@GormleyAlbany

Michael Gormley has worked for Newsday since 2013, covering state government, politics and issues. He has covered Albany since 2001.