In her presentation of the $232.7 billion state budget for the upcoming 2025 fiscal year, which starts in April, Gov. Hochul channeled St. Augustine: She wants New York to be less profligate, but not quite yet.
Hochul said some good stuff about New York “not spending the money we don’t have.”
But she offers no solutions, neither for the state’s newest intractable spending problem — shelter for migrants — nor for the old rising costs, Medicaid and education.
The governor said “we can’t spend like there’s no tomorrow, because tomorrow always comes.”
So she proposed a spending hike of just 0.5%, well below the nation’s still-elevated 3.4% inflation rate.
That’s lower than Hochul’s spending hikes of the past two years, when the budget rose by 10.7%, slightly higher than the nation’s 10% inflation over the same two years.
And it means the upcoming budget is balanced.
Top taxpayer exodus
But: That’s largely because we’re reaping revenues from income-tax hikes the state enacted three years ago, under former Gov. Andrew Cuomo.
The top rate rose from 8.82% to 10.9% — a hike Hochul could reverse to stem the loss of wealthier earners to other states.
As the state comptroller reported in December, nearly 4,000 taxpayers with incomes above $500,000 left the state in 2021, double the 2019 level.
Instead, Hochul will attempt to sustain the unsustainable.
Federal aid to the state budget after the COVID-19 years is finally falling — from a high of $89.3 billion this year to $84.6 billion.
Most of that extra federal funding went to education and Medicaid, which have grown by double-digit percentages in recent years (even, in the case of the former, as statewide school enrollment has declined 10%).
Rather than reduce spending on these programs as extraordinary federal aid disappears, she wants to increase state taxpayer spending to make up for lost aid.
So Hochul proposes that spending by state taxpayers will actually rise by 4.5% over the next year, to $136.2 billion, above the inflation rate.
(The remainder of the state budget is infrastructure, largely funded with debt.)
At least state-funded education spending will rise by “only” 2.7%.
Medicaid is a different story.
With 39% of state residents covered by the program, Medicaid spending is projected to rise another 10.9%, to $30.4 billion, for a total increase of 38% over three years (plus another $52 billion from the feds).
Hochul’s plan to control Medicaid spending is to plan to come up with a plan.
It’s true that New York’s outsized education and health-care spending predates Hochul.
And it’s true that she’ll face pressure from a lefty Legislature for even higher spending — meaning, though, she should start with an even lower opening base.
Still, she is responsible for an entirely new spending item, which her budget calls “extraordinary”: assistance to New York City for migrants.
For the next fiscal year, Hochul projects to spend $2.4 billion on the migrant crisis, up from $1.9 billion this year.
Hochul is providing money to New York City for migrants in part as a political calculation: A truly assertive Mayor Adams could say the city’s supposed obligation to provide shelter to all comers is actually a state obligation.
As long as Hochul keeps some money flowing to the city, she keeps the mayor quiet on that front.
But Hochul proposes no policy to reduce this spending.
For example, she offers no official insight into whether she thinks the state Constitution, as interpreted by a mid-level state court four decades ago, actually does requires the state or the city to provide shelter to everyone in the world.
And she offers no criticism of President Biden for opening the border.
Instead, she oddly singled out the GOP-led House of Representatives as a hurdle against being able to “restore the rule of law at our border.”
This, when the mayor’s own budget, also released Tuesday, shows no end in sight: The city actually projects the number of migrants requiring city shelter will rise to 90,000 sometime this fall and stay there, costing at least $4.9 billion a year (including the new state funding).
Hochul’s long-ago predecessor Hugh Carey said in the 1970s fiscal crisis that “the days of wine and roses are over.”
For Hochul, it’s not quite last call at the bar or the florist.
Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.
