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Hochul faces challenge in new budget: Close a $4.3 billion gap

Gov. Kathy Hochul greets Speaker Carl Heastie in the Assembly Chamber before her State of the State speech on Jan. 9, 2024.
Susan Watts
Office of Gov. Kathy Hochul
Gov. Kathy Hochul greets Speaker Carl Heastie in the Assembly Chamber before her State of the State speech on Jan. 9, 2024.

This week, Gov. Kathy Hochul delivered her State of the State message. Next week, she’s due to release her budget plan. 

Hochul is expected to detail how she will close a multibillion-dollar budget gap — and how to pay for the care of the tens of thousands of asylum-seekers who came to New York over the past year.

The state faces a $4.3 billion deficit for the fiscal year that begins April 1, and the gap is expected to grow to over $9 billion in the following year. 

Hochul will need to show in her budget presentation how she will close that gap. Choices range from tamping down on spending growth to raising taxes or imposing new fees.

State Comptroller Tom DiNapoli, who provides independent oversight of the state’s finances, said revenue collections have been uneven, tax collections are down from a year ago, and the economy is still volatile.

“We've been kind of flashing that yellow light of caution for a while,” DiNapoli said. “So I would still flash that yellow light.”

He urged Hochul and the Legislature to be careful managing the state’s money this year.

“We have to make some tough choices on spending, be careful on taxation, and not resort to more debt,” DiNapoli said.

Hochul seems to agree with that advice. She told her state agencies last fall to hold the line on spending and said that she opposes calls from progressive lawmakers to increase taxes on the state’s wealthiest residents.

“I'm not raising taxes in our budget this year. Taxes are high enough in the state of New York, and we have to live within our means,” Hochul said on Nov. 20, 2023.

There’s one area of spending that the governor may not be able to avoid increasing, and that is taking care of the over 100,000 asylum-seekers who have crossed the southern U.S. border and have been bused to New York from other states, including Texas.

Hochul avoided talking about the migrant crisis during her State of the State speech, saying that she was putting off the controversial topic until she releases her spending plan.

She has said the state spent nearly $2 billion last year to help New York City house and feed the migrants. About $350 million was spent to convert a former naval air base at Floyd Bennett Field in Brooklyn to a temporary tent shelter.

When the midyear budget report was released in October, Hochul said the spending rate was “unsustainable,” and her budget director, Blake Washington, recommended that the state consider limiting spending on legal aid support and caseworkers who help the migrants find jobs.

But the governor has also said there will be more money spent to help the migrants in the new budget.

Senate Deputy Majority Leader Mike Gianaris — who, like Hochul, is a Democrat — said the migrants are already in New York and need help, so the state will have to find a way to pay for the assistance.

“The migrants are here, and as long as they’re here, we need to make sure we provide for them as required by law and as required by humane values,” he said.

Gianaris said New York will have to deal with the migrant crisis until the federal government “does its job.”

The two biggest portions of the budget are health care and education, and in the past, when there have been multibillion-dollar deficits, governors have trimmed money from school aid and Medicaid.

In the past two years, Hochul has fully funded what’s known as foundation aid for schools, finally fulfilling a nearly two decades-old court order that required the state to spend billions more on its poorest schools. So far, though, the governor has only committed to spending an additional $10 million to improve reading scores.

She also announced on the same day as the State of the State that the federal government will allow New York to spend nearly $6 billion more over the next three years on health care through a Medicaid waiver. The money will be targeted to support financially struggling safety net hospitals, help improve health equity, and fund more staff to ease ongoing shortages.

She said she would also like to use an additional $200 million from the opioid settlement fund to help address the overdose crisis.

Karen DeWitt is Capitol Bureau chief for the New York Public News Network, composed of a dozen newsrooms across the state. She has covered state government and politics for the network since 1990.