NY Gov. Hochul’s $227B budget: Asylum-seekers, schools, MTA, And More

On Wednesday, Governor Kathy Hochul of New York unveiled a proposed state budget that would raise taxes on corporations and boost a payroll tax to assist improve New York City’s public transportation.

Democrat Kathy Hochul presented her $227 billion spending plan in the state Capitol. The presentation set off negotiations with state lawmakers that would last at least two months before the state’s fiscal year began on April 1.

In her State of the State address earlier this month, Hochul spelled out several of the far-reaching policy measures included in her budget proposal. This includes a housing strategy that might, in certain cases, allow the state to approve developments over local opposition and plans to index future minimum wage hikes to inflation.

The budget proposal, however, addressed several of Hochul’s concerns, such as whether or not she would prolong a corporate tax that is set to expire soon and how she intends to close the MTA’s budget gap.

Hochul described the budget she proposed as “a comprehensive strategy that furthers our progressive ideals and aspirations as New Yorkers, but also maintains budgetary restraint” in her budget address.

Consider these five key points from Hochul’s proposed budget:

Funds To Help Relocate New York City Asylum-seekers

According to New York City Mayor Eric Adams’ office, the city has seen an increase of almost 42,000 asylum-seekers since the spring. Adams has been practically pleading with the federal and state governments for months now to provide the city with greater funding.

Approximately $767 million, or a third of the city’s part of the cost of opening shelters and emergency response centers for asylum-seekers, is included in Hochul’s proposed budget for the coming year, totaling roughly $1.1 billion in support. According to Hochul, the state already covers 29% of the cost of maintaining the city’s current shelters under the Safety Net Assistance program.

About $162 million will go toward paying for the continued deployment of National Guard personnel to assist, while $137 million will go toward helping the city with health care expenditures for migrants.

The newly completed 1,000-bed facility at the Brooklyn Cruise Terminal in Red Hook, which has been at the focus of a standoff with a group of asylum-seekers who refuse to take shelter there because they label it “inhumane,” will also receive $6 million in direct funding as part of the package.

The state financing is inadequate to cover all the costs associated with the migrant population, and it is uncertain if Adams approves of the proposal.

Adams said on Wednesday, “The budget plan is new.” “It suddenly appeared. We’re looking into that right now.”

Hochul is advocating for a three-way split between the federal, state, and municipal levels of government.

The MTA Will Be Supported By A Higher Payroll Tax And Casino Revenue

While Hochul acknowledges that New York City may receive additional financing for resettling migrants, he is also requesting that the city provide funds of its own to help pay the MTA.

With ridership still below pre-pandemic levels, Hochul has been questioned for months about how she intends to close the MTA’s budget gap.

She proposed a change to the transit authority’s budget that would have far-reaching implications.

The governor proposes raising the MTA payroll tax by 1% for all businesses in the MTA’s service area in order to generate an additional $800,000,000 annually for the transit authority. She also demands an annual contribution of $500 million from the city and $300 million from the state. Similarly, the proposal calls for the MTA to develop and execute “operational efficiencies” of $400 million.

Hochul mentioned the decline in ridership as a “new dynamic” for the MTA in her speech.

We have to deal in realities, and those realities include the continued decline in ridership we had anticipated would rebound by now, she said. “The time for that has not come yet. It will return, I’m sure of it, but we haven’t arrived there yet.”

Hochul plans to give the MTA funding from casinos that are likely to be granted licenses in the New York City area in the near future. According to her budget briefing book, the number includes at least $462 million in annual tax revenue and a portion of the $1.5 billion in license fees.

Keeping The (More Expensive) Corporate Tax Rate In Place

Budget-wise, Hochul had already stated her opposition to tax increases. However, in her proposal made on Wednesday, she did support keeping in place a tax rate increase for large firms.

Legislators and Governor Andrew Cuomo raised the tax rate for corporations with an annual income of at least $5 million from 6.5% to 7.25% in 2021 because of a COVID-related liquidity shortage.

The increase was expected to last for only three years at the time. Hochul proposes keeping the tax rate at its current, higher level for an additional three years, which would generate between $800 million and $1.1 billion in revenue per year. Not until December 31, 2026, would it be nullified?

Since many Democrats in the legislature share her view that the current tax rates should be maintained — with some even advocating for them to be made permanent — she is likely to find support among her party’s ranks for this stance.

However, there will be no rise in the tax rate for individuals.

The Removal Of The Cap On Charter Schools; A Significant Increase In Education Spending

Hochul has proposed a significant increase in funding for schools. But she also wants to loosen restrictions on charter schools in New York City, a move that could pit her against progressive Democrats and the state teachers’ union.

According to her office, the governor intends to increase school funding for the upcoming fiscal year by $3.1 billion, bringing the total to $34.5 billion.

Foundation Aid, a type of funding determined by a formula that is intended to favor less wealthy districts in an effort to make the process more egalitarian, will see a $2.7 billion increase. This is in accordance with a promise made by Hochul’s government as part of a settlement agreement for a lawsuit that alleged the state had failed to provide adequate financing for the assistance program despite establishing it 17 years earlier.

The growth “completely funds the formula for the first time in its history, marking the final year of the three-year phase-in and assuring that each school district receives a minimum year-to-year increase of 3 percent,” according to Hochul’s budget book.

Hochul’s proposed budget will adjust the local cap on charter schools in New York City, allowing for the approval of at least 85 new schools throughout all five boroughs without increasing the statewide cap of 460.

Assembly Speaker Carl Heastie (D-Bronx) admitted that the Assembly has been reluctant to approve new charter schools in the past, but he didn’t completely rule it out.

However, “the Assembly’s attention has always been on attempting to take care of the requirements of the traditional public schools,” he added.

NYC Home Construction Is Being Greased Along

Housing development in New York City is a priority for Hochul, who aims to build 800,000 new houses across the state over the next decade. Her executive budget provides more details on how she intends to achieve this goal. Whether it’s an office building in Midtown or a basement in Midwood, proposed tax incentives and rule changes might make residential conversions easier.

Despite the fact that over 70,000 New Yorkers are currently staying in homeless shelters and that half of all tenants are considered “rent-burdened,” she has not yet provided specifics on affordability standards.

Hochul has proposed a tax credit for business owners who convert their properties into apartments, with rent caps for middle- and low-income New Yorkers.

She has advocated for increasing the residential floor area ratio (FAR), which controls the height and density of apartment buildings in high-rise neighborhoods, for the second year in a row. Current law caps FAR at 12 times the size of the property but exempts commercial structures from this limit. Any major business building converted to residences would have empty floors under the current law.

She proposes increasing tax breaks for converting garages, basements, and other “accessory housing units” into legal dwellings for renters and homeowners. Legally constructing ADUs has proven to be a costly endeavor for homeowners.

She also suggested extending the 421(a) program’s deadline so that developers may finish income-restricted housing developments and still receive tax benefits. It’s an indication of how long it can take to produce new housing that the law would apply to structures that have already broken ground but might not open until June 2030.

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