Legislature takes a knife to Hochul’s agenda in budget proposals

On Tuesday, the state Senate stabbed Gov. Kathy Hochul in the back with a one-house budget that excluded many of her top priorities: bail reform, the charter school cap and suburban housing mandates. Instead, the proposed budget included a number of progressive policy proposals that the governor had ignored, including “good cause” eviction protections and health insurance coverage for undocumented immigrants. In its own one-house budget, also released on Tuesday, the Assembly also offered a strong rebuke of the governor's agenda but didn’t go quite as far as the upper chamber.

The rejection of Hochul’s agenda follows a surprisingly tight gubernatorial election and a contentious fight over the governor’s chief judge nominee that left tensions high between the two branches of government. With both chambers maintaining their supermajorities last year, state Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie are well-positioned to play hardball with the governor, even as she looks to flex her own influence with a full four-year term ahead of her.

Here’s how things broke down:

Non-starters

Unsurprisingly, neither the state Senate or the Assembly one-house bill included Hochul’s proposals to further weaken bail reform. Both Stewart-Cousins and Heastie have publicly said that they have no desire to revisit the bail reform debate. In the three years since the state’s bail reform laws went into effect, they have already been weakened twice.

Both chambers also chose to exclude the governor’s plan to lift the cap on charter schools in New York City, which would have enabled the Big Apple to approve up to 85 new charter schools within the five boroughs. The proposal faced strong opposition from powerful teachers unions in the state.

Housing

Perhaps the biggest blow to the governor comes in changes to her ten-year Housing Compact which sought to spur 800,000 units of new housing through a combination of zoning changes, developer incentives and municipal benchmarks for growth. 

The plan required her to replace 421-a, a controversial developer tax break to incentivize affordable housing production in New York City. A new version of 421-a would be key to building roughly half of the envisioned housing according to the governor’s plan. 

Last year, lawmakers rejected Hochul’s proposal for a 421-a replacement. This year, she promised to work closely with legislative leaders to find a solution they would approve.

But it seems the “three people in a room” did not find a compromise. Neither the state Senate nor Assembly one-house budgets included any replacement for 421-a. Both chambers also rejected Hochul’s proposals to override local zoning laws and require all municipalities to grow their housing stock by at least 3% – ideas which faced staunch resistance from suburban politicians. The state Senate opted for carrots over sticks, appropriating $500 million for “smart growth” programs and another $500 million in incentives for localities that meet housing goals.

The Legislature also included housing provisions that Hochul has declined to support in the past. 

The state Senate explicitly declared its support for “the core principles of good cause eviction” – tenant protections supported by housing activists on the left that would make no-cause evictions illegal and effectively cap rent increases on most market-rate units. The Assembly stopped short of explicitly endorsing “good cause” eviction protections, instead pledging to “explore pathways to protect tenants from arbitrary and capricious rent increases and unreasonable evictions of paying tenants.” 

Both chambers also included $250 million to create a Housing Access Voucher Program, which Hochul has resisted in the past.

Out of gas

The governor’s executive budget proposed phasing out the use of gas and other fossil fuels in new construction, and both chambers included versions of the governor’s plan in their one-house budgets. The Assembly backed the governor’s proposal to mandate that all new buildings under seven stories built after 2026 and all new buildings over seven stories built after 2028 use electricity rather than gas for heating and cooking. 

The state Senate one-house budget set a slightly more aggressive deadline of 2025 for smaller buildings and 2027 for larger buildings – a compromise between the governor’s proposal and the standalone All Electric Buildings Act, which calls for ending the construction of new fossil fuel hookups in smaller buildings as soon as next year.

That’s largely where the agreement on environmental issues ended. The state Senate’s one-house budget  the full version of the Build Public Renewables Act, which would expand the New York Power Authority’s ability to produce renewable energy and mandate it to phase out non-green energy, and which passed in the chamber earlier this year. It flat out rejected the governor’s stripped down version of the legislation, which did not mandate NYPA to build renewables and included no labor standards for renewable projects. 

The Assembly also rejected Hochul’s proposal, but stopped short of including the Build Public Renewables Act, which has stalled in the chamber and is not supported by NYPA leadership. Instead, the resolution pledged that any new renewable projects from NYPA would “fill energy generation gaps” to meet the state’s climate goals and include “strong labor standards and protections.”

Plans for the MTA

The Legislature did not include all of the Fix the MTA plan proposed by state Senate Deputy Majority Leader Michael Gianaris and Assembly Member Zohran Mamdani, but it did include one major part: freezing subway and bus fares at $2.75. Hochul’s proposed bailout of the beleaguered Metropolitan Transportation Authority, which gained her praise from the agency head, still relied on a proposed fare increase to nearly $3. The one-house proposals also include funding for a free buses pilot program in two New York City neighborhoods, a step praised by Gianaris and Mamdani as the first step towards universal free buses in the five boroughs. 

To pay for both the free buses and the fare freeze, the two chambers offered solutions that differed from the governor, who relied heavily on an increase to the payroll mobility tax rate in the commuter zone, which both chambers rejected. The Senate proposed increasing the corporate tax surcharge for the MTA from 30% to 45%, while the Assembly included an increased top corporate tax with revenue going to the MTA and other transit agencies around the state.

Yes new taxes

The governor proposed extending the corporate tax hike first adopted in 2021. The Legislature’s one-house budgets In addition to the revenue raisers the Legislature proposed for the MTA, both chambers also proposed increasing the income tax for the state’s top earners from tax years 2023 until 2027. For single New Yorkers earning between $5 million and $25 million, the tax rate would go up from 10.3% to 10.8%, and for those making more than $25 million, the rate would increase from 10.9% to 11.4%. This comes in addition to the Senate and Assembly both accepting Hochul’s proposed three-year expansion of the increased corporate tax rate first adopted in 2021.

Coverage for all

Last year, the governor rejected calls to expand the Essential Plan, the state’s subsidized health insurance plan, to cover undocumented immigrants. As a compromise, she proposed enrolling undocumented New Yorkers who are 65 and older in state-funded Medicaid plans.

In this year’s executive budget proposal, the governor suggested delaying the start of Medicaid enrollment until next year while once again rejecting any expansion of the Essential Plan to cover undocumented immigrants. Both the state Senate and Assembly one-house budgets rejected the proposed Medicaid enrollment delay and expanded eligibility for the Essential Plan to undocumented immigrants. 

In order to expand the plan’s eligibility to undocumented immigrants while using federal funds to pay for it, the governor will need to apply for a special federal waiver. The governor promised to apply for the waiver last year but never did.

Off to the races

Both the state Senate and Assembly agreed to Hochul’s requests for the state to loan more than $400 million to the New York Racing Association in order to redevelop the Belmont horse racing track in Long Island. 

The project – which also calls for the racing association to stop using the Aqueduct race track in Queens, freeing the land up for other purposes – has been controversial. Supporters of the $450 million loan say that it will create jobs and support upstate horse farms, while opponents of the plan point to the overall decline in attendance at horse racing tracks and suggest that the New York Racing Association will never be able to pay back the loan.

The Assembly one-house budget simply adopts the governor’s proposal for the loan, while the Senate one-house adds a few extra requirements relating to labor protections and the inclusion of affordable housing on the land currently occupied by the Aqueduct race track.