New York Legislature releases budget rebuttals

The state Senate and Assembly unveiled their one-house budget proposals, offering a rebuttal to Gov. Kathy Hochul’s $223 billion budget pitch from earlier this year. Legislators proposed a housing compromise that would create a new developer tax break to incentivize affordable housing tied to new tenant protections. They also want reforms to the state’s Tier 6 pension program and new taxes on wealthy New Yorkers.

“We are close to the end of the beginning,” state Senate Majority Leader Andrea Stewart-Cousins told reporters on Tuesday, returning to her familiar method of describing the lengthy state budget timeline. Her chamber will vote on their budget resolution on Thursday, which she called a “blueprint for more affordable, equitable and prosperous New York.”

The state Senate proposal adds to Hochul’s executive budget plan, pitching an agenda that is $13.4 billion more than the governor’s. According to the chamber’s financial plan, the majority of that increase comes from increasing Medicaid spending, rejecting Hochul’s cuts to Foundation Aid school funding and lawmakers’ housing plan.

The Assembly proposed a $13.1 billion increase in spending compared to the governor’s budget. Like the Senate, it attributed that to school aid and Medicaid, as well as human services, indigent legal legal representation and transportation. “As Yogi Berra used to say, it's getting late early,” Heastie told reporters on Wednesday of the prospect of getting a budget deal before Easter now that negotiations are really getting underway. “Or you could say 15 days in Albany time is a lifetime.” The budget is due April 1.

In January, Hochul unveiled an executive budget proposal that included no new taxes and a controversial change to the state’s school funding formula that would result in cuts in aid to many districts across the state. Here’s where the three “people in a room” stand on some of the major issues. 

Housing

Although Hochul largely backed off her ambitious housing plans from last year, Democrats in the Legislature are attempting to get their own bold plans off the ground. Notably, the state Senate suggested the creation of a new public benefit corporation – the New York Housing Opportunity Corporation – to finance new housing construction on state-owned land. The $250 million proposal is characterized as a reincarnation of the successful Mitchell-Lama program established in the 1950’s that led to about 100,000 units of middle-income housing. The state Senate signaled its support to create a new developer tax break to replace the expired 421-a program to incentivize affordable housing creation. But the Senate wants to require developers who benefit to build housing that’s more affordable than what was allowed under 421-a, and they’re tying their tax break to new tenant protections. Although the resolution doesn’t include specifics on what those protections would look like, it did say such protections would “align with the core principles of Good Cause Eviction” legislation in the chamber. Both chambers also omitted the governor’s “placeholder” proposal for a new developer tax break to replace 421-a.

The Assembly did not follow suit with its own sweeping proposal in its budget rebuttal, nor did language specifically mention “good cause” eviction in relation to tenant protections. But in its budget resolution, the chamber said it sought to advance policies that “protect tenants from arbitrary and capricious rent increases and unreasonable evictions” as part of a broad housing deal that includes developer incentives. Heastie confirmed on Wednesday that he does support a new 421-a-like tax break if labor and developers agree on wage requirements for projects. The house also included $500 million for existing Mitchell-Lama housing and the Foundations for Futures, which Assembly Housing Committee Chair Linda Rosenthal characterized to City & State as something akin to Mitchell-Lama by “providing relatively affordable units to people who then can receive a certain amount of equity.” The program would create limited equity coops on land owned by the state, a municipality, a nonprofit or another such group.

Both chambers also again advanced language to create a $250 million rental voucher program meant to help New Yorkers at risk of eviction or homelessness receive rental assistance. 

School aid and mayoral control 

As expected, both houses are calling on Hochul to reverse her school funding proposal, which would change the Foundation Aid formula and remove a provision that stipulates that districts must receive at least as much money from the state as they did the year before. Hochul’s budget director has expressed a willingness to revisit the school funding question after the Division of the Budget found the state would receive over $1.3 billion more in revenue than originally projected at the time of the executive budget. The chambers instead proposed conducting a $1 million study on potential changes to the Foundation Aid school funding formula, while keeping the current formula in place for now. “That is how you would define kicking the can down the road,” Hochul said of proposals to conduct studies to change the Foundation Aid formula, but said she is “open to all ideas.”

Both the state Senate and the Assembly also removed Hochul’s proposal to extend mayoral control of New York City schools for another four years. The mayor has had control of schools in New York City since 2002, but that control is set to expire later this year.

New taxes

Like last year and other years past, both houses have pitched temporarily raising taxes on New York’s highest earners as well as increasing the corporate tax rate. Under the proposal, those making between $5 million and $25 million would see their tax rate increase to 10.3% to 10.8%, and those making more than $25 million would have their rate increased from 10.9% to 11.4%. That would last through the 2027 tax year. Both chambers also proposed raising the corporate tax rate from 7.25% to 9% through the 2026 tax year. Lawmakers included the same provisions in their one-house budgets last year, but they did not make it into the final budget. And Hochul, who has been adamant on not increasing taxes, said on Tuesday again that the proposals are a “nonstarter” for her during negotiations, even as she declined to opine on other ongoing budget talks. State Senate Finance Committee Chair Liz Krueger on Tuesday described the tax proposal as relatively minor in the grand scheme of the budget. They would raise an estimated $2.2 billion per year. “We do not believe it will have a negative impact on their lives, or on their income, or on their policy positions as New Yorkers,” Krueger said of the wealthy residents who would be subject to the taxes.

Pension reform

The state Senate included provisions to make some changes to the state’s Tier 6 pension program, which at this point covers a majority of state employees. Notably, it would amend Tier 6 by changing the final average salary calculation window from five years to three years for pension payouts. The Assembly included the same provision in its budget resolution, directly referencing existing legislation in the chamber that would bring about the change. The proposal is one that top unions in the state including the AFL-CIO and New York State United Teachers have been pushing for. 

Retail theft and hate crimes

Both the state Senate and the Assembly flat-out rejected Hochul’s proposal to increase the criminal penalty for assaulting a retail worker. Hochul expressed optimism that lawmakers will still remain open to the idea. “History will show that this is when the conversations begin,” Hochul told reporters on Tuesday. “Clearly there will be more than that in terms of differences in opinion.” State Senate Deputy Majority Leader Michael Gianaris told reporters on Tuesday that the chamber is committed to addressing retail theft problems, but through different means. He suggested that retail workers themselves are not asking for those increased penalties and pointed to a new provision in the one-house resolution that would aggregate retail theft crimes over a period of several months to make it easier to convict repeat offenders. “We think that’s a better approach,” Gianaris said.

The Assembly also omitted another provision from Hochul that would create new criminal penalties for selling stolen goods, while the state Senate kept the pitch with some changes.

Both chambers also took out Hochul’s proposal to expand the list of hate crime offenses. Gianaris said that issue can get addressed outside the budget process.

The environment

The state Senate included the full NY HEAT Act, one of the major priorities for climate activists this year. The legislation would eliminate a rule that requires nearby ratepayers to foot the bill of a new gas hookup within 100 feet of an existing line, and require that the utility bills for low- and moderate-income New Yorkers never exceed 6% of their income. Hochul included the 100-foot rule in her executive budget, but not the cap on utility prices. The Assembly, in its one-house budget, included the cap but not the elimination of the 100-foot rule. However, the chamber in its budget resolution said it is “exploring” the prospect of repealing that rule.

Previously vetoed bills

The state Senate decided to throw at least two pieces of legislation that Hochul vetoed at the end of last year into their spending plans. Lawmakers included the Challenging Wrongful Convictions Act, which would make it easier for New Yorkers wrongfully convicted of crimes to get their conviction overturned, pairing it with about $10 million to assist with implementation. The chamber also included the Grieving Families Act, which would update the state’s wrongful death laws to permit family members to seek damages for the emotional pain of losing a loved one. The governor has vetoed that bill twice.