NYS Dems seek ways to push back against expected cuts from Trump, Congress

ALBANY — New York Democratic lawmakers, looking for ways to defend against President Donald Trump’s intended funding cuts, have proposed legislation that would allow the state to keep the tax dollars it owes the federal government to fill the gaps.

The bill would allow the state to withhold payments, including state workers’ federal tax contributions, if the federal government fails to follow court orders to pay the funds it owes the state.

"This bill is about Democrats bringing a gun to a gunfight and about us doing what our charter lays out, which is our responsibility to protect New Yorkers," said State Sen. Jessica Ramos (D-Jackson Heights), the bill’s Senate sponsor. "As legislators, what we’re looking to do is ensure that there is no lapse in services to our most vulnerable population."

The proposal comes as the Trump administration and Republicans in Congress look to make massive cuts to federal funding streams, including safety-net programs such as shifting billions of dollars in Medicaid costs to the states — funding states have said they can’t possibly make up.

"Here's the sad truth: there is no state in the nation that has the resources to backfill these sweeping cuts," Democratic Gov. Kathy Hochul said in a March 28 news release announcing more than $360 million in federal cuts to New York health programs, including addiction and mental health support services.

With the uncertainty over funding and the Trump administration’s past resistance to obeying court orders on fiscal matters, New York and other blue states are exploring ways to push back, legal experts and lawmakers said. 

"In a time where the federal government is shrinking and there is intense confusion about the future, states are going to be looking inwardly and making sure that they’re meeting their obligations to their citizens to perform basic services," said Ted De Barbieri, a law professor and director of the Community Economic Development Clinic at Albany Law School.

New York’s bill would essentially give state officials the go-ahead to violate federal law, withholding funds including employee federal tax dollars, federal grant payments and potentially even employee Medicaid and Social Security contributions, which likely would trigger a federal court battle, according to bill sponsors and legal experts. 

Similar legislation has been proposed in Maryland.

Opponents of the New York bill say it could hurt state employees whose income withholdings would be kept from the federal government.

"I think it puts the state employees in a very, very difficult situation," Assemb. Ed Ra (R-Garden City) told Newsday. "I think that, realistically speaking, it’s not something we should do or could do. If a court order says that the feds have to give us the money, I think the feds have to give us the money. There’s always, obviously, subsequent court routes you can take if that’s not being complied with."

‘Uncharted territory’

State lawmakers are in the process of negotiating a proposed $252 billion state budget, which was due Tuesday, and includes approximately $91 billion in federal dollars — funding that may be at risk.

Hochul and other Democratic state leaders have called on members of the Republican-led Congress to oppose the cuts, and state Attorney General Letitia James, along with other attorneys general, are suing the administration for slashing health funds previously allocated by Congress.

In the interim, some Democrats are looking to provide the state options.

"We are in completely uncharted territory. Every day brings a new action by the Trump administration that those of us used to coloring inside the lines would not have been able to imagine," said Assemb. Micah Lasher (D-Manhattan), who is sponsoring the Ramos bill in the Assembly. "We are all going to have to get a lot more creative, a lot more strategic and a lot more aggressive in figuring out how to respond."

The bill, known as the "Reciprocal Enforcement of Claims On Unpaid or Reduced State Entitlements Act," or RECOURSE Act, would trigger a series of events if the federal government fails to follow a court order to release funds owed to the state. The state comptroller would be required to create a report of the federal funds being withheld and what funds the state owes the federal government. The governor, comptroller and state budget director would then have to unanimously agree to direct the state tax department to withhold payments to the federal government, according to the bill.

It would potentially equate to several billion dollars, Lasher told Newsday.

The federal withholdings on the nearly 179,000 state employees’ paychecks from 2024 was nearly $2.29 billion, according to the state comptroller’s office. The number doesn’t include employees who are exempt or for whom federal taxes aren’t otherwise withheld.

The comptroller, attorney general and budget office declined to comment on the bill. Hochul spokesman Avi Small said the governor would review the legislation if it passes both houses.

Court battles ahead

If a private employer were to not pay employee federal withholdings, it would be a federal crime and they would be subject to criminal penalties, said Cam Macdonald, general counsel for the Empire Center for Public Policy, a conservative think tank. 

State employee withholdings are no different, he said. "It’s not the state’s money. It doesn’t actually have any rights to that money."

The bill's aim is to deter the federal government from failing to comply with court orders and give the state leverage in the event that there’s a legal fight, Lasher said.

It also would give the state a way to make itself financially whole while lawsuits against the Trump administration over executive orders and staff and funding cuts continue to build up in the court system, said Sen. Liz Krueger (D-Manhattan), chair of the Senate Finance Committee, who is cosponsoring the bill. 

"Soon the courts will be so piled up with all these lawsuits that we won’t live long enough for them all to get done ... so why don’t we just hold the money we owe them and use it instead," she told Newsday. "We have an obligation as the state government to be exceptionally creative, think out of the box and attempt ways to hold ourselves whole and continue to provide services for 19.5 million New Yorkers, so I expect there are a lot of new ideas that will come out and be tested about how we do exactly that."

Krueger and other bill sponsors acknowledged that if passed, this legislation would likely be challenged by the Trump administration. The White House did not respond to a request for comment on the bill. 

Republicans Ra and Senate Minority Leader Rob Ortt argue Democrats should instead focus on state finances. 

"I think we need to get our fiscal house in order," Ortt told reporters Tuesday when asked about federal cuts.

Nothing is final yet, Ra told Newsday. "The overall conversation right now is about the potential of this and the potential of that. I think that we’re a long way from having certainty as to exactly what any of this stuff looks like," he said. "I do think we need to be responsible in passing this budget, we need to hold onto our reserves, we need to not drive up spending further, we need to not drive up our out-year budget gap so that if we do have to adjust later on we’re in the best possible position to do so."