New York Gov. Kathy Hochul is touting targeted tax cuts and one-time cash payouts as part of her $252 billion state budget proposal.
"Our budget priorities reflect what New Yorkers expect: common-sense solutions that make a real difference in people's lives. We're delivering three major forms of tax relief," Hochul said in presenting her budget Jan. 21.
Her spending plan for the fiscal year that begins April 1 includes a $1 billion state income tax cut for the five lowest brackets, one-time $3 billion "inflation refund" payouts of $300 or $500 to state residents, and $825 million for increased child tax credits for parents.
Hochul, who had been lieutenant governor, took office as governor in 2021 after predecessor Andrew Cuomo resigned, and won a full term in 2022.
Her budget director, Blake Washington, credited Hochul's fiscal management with putting the state in a strong position that allows it to cut taxes.
Higher reserves are one example.
"Leading the pack is $21.1 billion in reserves," he said at the Jan. 21 budget briefing. "Also coming into this year, we have a $5.3 billion surplus, largely related to personal income tax collections."
He said when Hochul took office about $5.6 billion was available for rainy days, labor settlements, and any number of other purposes.
"Since that time, we've more than tripled that value, almost quadrupled that, over four years," he said.
Washington said the Hochul administration, to "keep down issuance of more costly debt," has put $14 billion in cash in recent years toward the state capital plan.
"All this to say that we have the lowest debt to personal income ratio that the state's seen since the 1960s," Washington said.
The state government has had a strong year on the revenue front, Washington said.
"Since a year ago, our tax receipts have increased by $6.5 billion over original projections. And then moving forward with PIT, personal income tax, leading the way, we have our [projected] tax receipts in 2026 up significantly as well — $4.7 billion."
Advocacy group Reinvent Albany had mixed reviews of Hochul's proposal.
It approves raising tax credits for parents. "This is smart — parents with young children are among the groups most likely to leave the state because they cannot afford living here," it said
But it criticized the "inflation reduction" payments. "This pre-election year stunt is like throwing bales of hundred dollar bills out of a jet plane and claiming it makes New York a better, more affordable place to live."
It also criticized the governor for what it called billions of dollars of wasteful tax credits handed out to businesses, particularly tax credits for film and TV productions and Broadway plays.
Watchdog organization Citizens Budget Commission gave a thumbs-down to Hochul's spending plan.
"It balloons spending, fails to restrain unaffordable Medicaid and education spending growth, spreads many 'affordability' programs too thin to provide meaningful relief, and extends the 'temporary' income tax surcharge," CBC President Andrew Rein said in a statement.
The governor's proposal would extend the temporary income tax surcharge on higher brackets that is slated to expire in 2027; the administration says it brings in $5 billion annually.
Rein
"The tax rebate spreads $3 billion so thinly it will not have lasting impact, like it would if used to reduce ongoing costs by paying cash instead of borrowing for roads, bridges, or MTA infrastructure," he said.
Hochul's budget leaves questions unanswered about the Metropolitan Transportation Authority, the state-run operator of New York City public transit, bridges and commuter rail, which faces vast fiscal and capital needs.
The MTA's $68 billion five-year capital plan was
Hochul's
Washington in his briefing cited the legislative leaders' veto of the MTA's plan.
"So now we're into the space where that dialogue has to jumpstart again, where the Legislature, the MTA and the executive branch all work together to land upon a plan that is able to be financed and delivered within the planned period," he said.
After months of hemming and hawing, Hochul permitted the MTA to begin
The Trump administration
Joint legislative hearings on the budget began Jan. 27 and run through Feb. 27,
Kroll Bond Rating Agency rates New York state general obligation bonds AA-plus.
"The rating reflects the state's resilient and diversified economic base, ample liquidity, manageable fixed costs and fully funded pension system. A strong statutory and legal framework supporting financial management and debt policies underpins the rating," KBRA wrote Dec. 17 when it affirmed the rating.
KBRA assigns AAA ratings to New York's personal income tax- and sales tax-backed bonds.
S&P Global Ratings assigns its AA-plus rating to New York GOs.
"The rating reflects our opinion of New York's strong credit fundamentals, underpinned by its very proactive financial management, reflected by its commitment to structural balance and very strong reserve levels as well as its strong institutional framework," S&P analyst Ladunni Okolo said in October, when the rating was affirmed. " While its economy is currently one of the strongest among states, it faces long-term headwinds due to slower economic growth relative to the nation and potential volatility in tax revenue trends, particularly during an economic contraction due to its reliance on capital gains and exposure to the financial services sector."
S&P also rates New York's PIT and sales tax revenue bonds AA-plus.
Moody's Ratings assigns New York state its Aa1 issuer rating and assigns the same rating to the state's GO, personal income tax, and sales tax bonds.
Fitch Ratings rates New York's state GOs AA-plus and assigns the same rating to the state's PIT and sales tax revenue bonds.
