Mayor & Governor (photo: Darren McGee/Governor's Office)

New York State’s $229 billion budget deal for the new fiscal year has both good and bad news for New York City and Mayor Eric Adams’ Albany agenda.

It directs additional funding for the ongoing migrant asylum-seeker crisis, provides a lifeline to the cash-strapped MTA, funds rent relief for public housing residents, extends a child tax credit, increases enforcement for illegal marijuana sales, and more. But it excluded regulatory changes and tax incentives that would have boosted the city’s housing production, allowed new charter schools, and increased a tax on city businesses while requiring more funds from city government to help pay for the MTA.  

Mayor Adams praised the budget deal, particularly measures on public safety that he prioritized, but has had little to say so far of the many items on his agenda that weren’t approved. He has also continued to emphasize his strong partnership with Governor Kathy Hochul, a fellow Democrat who has delivered several victories for the mayor in the two budgets she has overseen. 

On Wednesday, Adams heaped praise on Hochul at a news conference where she touted the various public safety measures in the state budget, most notably additional changes to the state’s bail law that Adams supported in their efforts to jail more defendants pre-trial.

“We started out this session in Albany focused on communication, and I just cannot say enough about the governor and what she has done from day one,” Adams said, pointing to their collaboration on successive subway safety plans and funding for services for asylum-seekers. 

“Governor, job well done. I cannot thank you enough from the beginning of this process. And you are right, it was not about a deadline, it was about making sure that we do it right and you did it right. Thank you, governor,” he added, referring to the fact that the state budget was about a month late. In several cases, the Legislature helped Adams achieve alterations to Hochul’s proposed budget that would have hurt the city’s bottom line, in part responding to testimony the mayor delivered at a legislative budget hearing earlier this year.

In response to an inquiry about how the mayor’s state agenda fared in the budget, Fabien Levy, Adams’ chief spokesperson, highlighted the many areas where the city will benefit from the budget and pointed to items that remain on the mayor’s agenda for the post-budget session.

“The budget will put more money in the pockets of working families, provide rent relief for NYCHA tenants, and invest in our public transit without unfairly burdening New Yorkers. And it will allow for improved enforcement against unlicensed cannabis sales so we can grow a safe and equitable industry. These are all priorities we fought hard for, and we are grateful they were included,” Levy said in a statement. “We remain disappointed that more progress was not made on affordable housing and discovery reform. We will continue to make housing and public safety top priorities during the remaining weeks of the state legislative session.” 

The passage of the state budget will now also help define negotiations over the mayor’s $106.7 billion executive budget proposal for the city’s 2024 fiscal year, which begins July 1. Though the proposed budget is about $5.7 billion higher than the budget adopted last June, the mayor has come under fire from the City Council for successive rounds of agency savings plans that could affect certain city services. 

The executive budget was released before the state budget was finally approved, so there are likely to be significant changes to the city’s spending plan. While the state budget delivered more funding on certain fronts, there are also cuts and cost shifts that the city will have to bear. The City Council will soon examine the mayor’s spending plan and other fiscal dynamics in a series of May hearings.

“The State budget was a mixed bag for New York City, although it is certainly better than the sum of proposals in the Executive Budget,” said Patrick Orecki, director of state studies at Citizens Budget Commission, a nonprofit fiscal watchdog. 

“On the plus side, the State is going to deliver some fiscal support to accommodate asylum seekers, and put forth a plan to provide recurring resources to the MTA with fewer cost shifts onto New York City directly,” Orecki said in an email. “However, the MTA plan levies a payroll mobility tax increase solely on businesses in New York City. The approach should have been regional. New York City taxpayers already provide a vast majority of operating support to the MTA, directly and indirectly.”

Migrant Funding
The mayor’s main budget priority has been to secure more funding for the city to handle the ongoing arrival of thousands of migrant asylum-seekers. In the last year, according to his administration, more than 57,000 migrants have arrived in the city, with a majority of them living in city shelters and unallowed to work, leading to ballooning costs of providing city services to them. The administration has spent more than $800 million already and estimates that it will spend $4.3 billion in sum by the end of next fiscal year (though that estimate has been challenged as too high or at least not fully supported).

The state budget delivered $1 billion to aid with migrant spending, which would cover roughly one-third of the city’s shelter costs, but Adams has said that will not be enough to avoid cuts in the city’s own budget. He continues to push for more aid from the federal government as well, which has been slow to materialize though money was appropriated for the overall situation late last year.

The situation is expected to become more challenging as the federal government is expected to soon lift Title 42, a covid-era policy that expelled more than 2 million migrants at the border over health concerns. 

Public Safety
The budget was largely delayed because of the governor’s insistence on changes to bail laws, specifically removing the “least restrictive standard” that judges use while determining whether to set bail or remand a defendant into custody. It was necessary, she argued, to give judges more discretion and keep repeat offenders, particularly those with a history of violence, off the streets. The proposal was ultimately approved by the Legislature. 

Adams has also repeatedly called for the bail laws to be tightened, and he hailed the governor for making those changes. “This budget is a budget that clearly will make our city and our communities safer,” he said Wednesday.

The budget did not include rollbacks of sweeping discovery reforms, which both Adams and Hochul had wanted, though it did add $170 million to support the implementation of discovery reforms, including $50 million in capital funding for discovery technology improvements in the city.

The mayor had also pushed for additional funding for prosecutors and public defenders, and the state budget delivers on both fronts. It provides $100 million in aid for prosecution and defense funding across the state, though it's unclear how much of that will be delivered to the city. The budget also allocates $92 million to offset the costs of increasing rates paid to lawyers assigned by courts to represent low-income New Yorkers.  

The governor also signed legislation to curb the illegal sale of marijuana at retail stores across the state by increasing tax and civil penalties and criminalizing sales without a license. Illicit marijuana sales have skyrocketed, particularly in the city, as hundreds of unlicensed dispensaries have proliferated since marijuana was legalized in the state. While the city has been slow to use the enforcement mechanisms at its disposal to slow the proliferation of illegal retail sales, Adams has also pointed the finger at the state, looking for the types of changes that are now law.

NYCHA Rent Relief
As NYCHA struggles with a major rent arrears crisis that has threatened its financial footing, the state budget delivered much needed relief. It allocates $391 million for the state’s Emergency Rental Assistance Program to provide aid to tenants at NYCHA as well as those receiving federal Section 8 vouchers. 

That funding still falls short of what the city requires – NYCHA tenants owe more than $466 million in arrears – and has not been specifically dedicated to NYCHA as advocates and some lawmakers wanted. 

The MTA
The MTA has been facing a major structural deficit and has lost millions in fare revenue as ridership plummeted during the pandemic and has yet to fully recover. 

The state budget created a plan to rescue the MTA and avoid service cuts, which includes $400 million in reduced costs through efficiencies, providing $300 million in one-time state aid, $35 million to improve subway service, $65 million to reduce a proposed fare increase from 5.5% to 4%, and $35 million for MTA safety improvements.

It would also dedicate $1.5 billion to the MTA from licensing fees from three downstate casino licenses when they are awarded, and a share of annual tax revenues from those casinos, which are estimated at between $231 to $413 million.

It also provides $15 million for a pilot program in New York City to provide one fare-free bus route in every borough, and significantly expands the city’s Automated Bus Lane Enforcement program.

But the plan also marginally raises the Payroll Mobility Tax for New York City’s largest businesses, bringing in an additional $1.1 billion annually, while letting suburbanites off the hook, despite the fact that they are served by the commuter rails and subways.

“The approach should have been regional. New York City taxpayers already provide a vast majority of operating support to the MTA, directly and indirectly,” Orecki said. 

It also requires an additional $165 million annually from the city over the next two years to cover the costs of paratransit services. That was a partial victory for the mayor, as he had pushed back against the governor’s initial proposal that would have required $500 million from the city for the MTA every year.

“The budget is good for riders, and given that riders are a majority of people in the city, it’s good for the city,” said Danny Pearlstein, policy and communications director of Riders Alliance, an advocacy group.

Charter Schools
The governor had proposed lifting the charter school cap for New York City, which the city estimated could cost up to $1 billion annually over time. But the proposal did not make it into the final budget. Instead, the budget reauthorizes 14 so-called “zombie charters” in the city that were issued but whose schools have since closed.

Under state law, the city must either give school space to charters or pay their rent for other spaces, but the state budget will cover those rent costs for the zombie charters so the city may be spared any additional burden. Adams, a charter school supporter, had raised questions about the funding for that space and the budget agreement is a victory for the city.

Housing Policy
One of the bigger disappointments for the Adams administration was the complete exclusion of the governor’s “New York Housing Compact” from the state budget. The governor had proposed a plan that would build an estimated 800,000 units of housing over the next decade through the use of mandated growth targets, overrides of local zoning where targets aren’t met, mandating rezonings to create more density around mass transit stops throughout the MTA region, and several other mechanisms. 

Mayor Adams had advocated for a few of the measures and given nominal support to the overall plan to accomplish his own housing program, which targets 500,000 new homes over the next ten years.

Among the items the Adams administration was focused on were eliminating the floor-area ratio (FAR) cap in the city to allow denser buildings, easing conversions of office space to housing, new regulations for basement and cellar apartments, and extending and replacing the expired 421-a affordable housing tax credit and the J-51 tax credit for renovations in exchange for converting to affordable housing.

None of those policies were included in the budget, and the governor’s housing plan failed altogether. Hochul and Adams will continue to fight for some of the proposals to pass in the legislative session that runs into June, while Hochul has pledged to pursue other policies by executive action and said she will come back next year with another go at a sweeping housing plan.

Rachel Fee, executive director of nonprofit New York Housing Conference, expressed broad disappointment with the failure on housing. She said a new regulatory structure for office and basement conversions would be a significant step in quickly creating new housing. 

Fee also said the lack of a replacement for 421-a threatens the city’s own housing program. “Mandatory Inclusionary Housing is one of the city's only tools to produce affordable housing in high income neighborhoods. And if there's not a tax incentive to be paired with mandatory inclusionary housing, we're never going to see the full benefits of that program,” she said. “And we're only going to be building low-income housing in low-income neighborhoods where land costs are cheapest.”

“Authorizing transit-oriented development, increasing the floor area ratio cap, and extending and replacing 421-a would've been a start to addressing the housing crises in New York City and surrounding areas,” said Orecki of Citizens Budget Commission. “Absent these and other policies to produce housing production, those crises will continue snowballing.”

Capital Construction and Procurement Reforms
The Adams administration has launched a major effort to reform the city’s antiquated and cumbersome capital construction processes. But it required approval on several pieces of legislation at the state level to approve alternate project delivery methods, allow progressive design-build, change procurement rules, and more. The Adams administration had also wanted state approval to change the Department of Design and Construction into a public authority.  

None of those measures seem to have made it into the state budget. The mayor’s office did not respond to an inquiry about these proposals.  

Medicaid Funding
The budget will also push about $300 million in annual Medicaid costs onto the city, and a similar amount to the other 57 counties across the state. 

“This is a significant disappointment in the State budget,” Orecki said. “The 2015 Medicaid local share freeze is one of the State’s most significant fiscal policy achievements in recent years, and now they are partially reversing that.”

Community Hiring Legislation
Adams advocated for the state to approve a community hiring bill, which would have allowed the city to require local community hiring by companies that get city contracts. The bill was not included in the budget.  

Income Disregard
The mayor was also pushing for an “income disregard” bill that would allow low-income New Yorkers to continue receiving state public benefits for six months after they obtain new employment if they have already completed a job training program recognized by the state or federal government. The bill aims to tackle the “benefits cliff” where individuals lose public assistance as their income increases past the qualifying threshold. 

The state budget did not include the proposal. 

Expanding Tax Credits
The mayor called on the state to enhance the Earned Income Tax Credit and the Child Tax Credit again this year, after improvements to both were included in last year’s budget. Adams had pushed for expanding eligibility for the benefits to hundreds of thousands of immigrants, including the undocumented. Though undocumented immigrants weren’t added to eligibility for either credit, the child tax credit was expanded to children under the age of four, which is expected to benefit more than 1 million children and their families. 

Health Care for Undocumented Immigrants
Immigrant advocates, many legislators, and Mayor Adams called on the governor to support the “Coverage for All” proposal, which would have expanded the state’s Essential Plan and provided health coverage to those making up to 250% of the Federal Poverty Level, including undocumented immigrants. Their advocacy was unsuccessful and the proposal did not make it into the budget. 

“The state budget was deeply disappointing and a slap in the face for working families and immigrants across the state, including in New York City,” said Jose Lopez, Co-Executive Director of Make the Road New York, an immigrant community-focused nonprofit group. “The budget failed to ensure access to basic health coverage and unemployment insurance, and advance any tenant protections whatsoever. As Albany continues to fail our communities, it's alarming to see Mayor Adams double down on his attempts to further cut schools, health care, and housing services—and blaming families who’ve come seeking asylum for it. The Mayor should stop his dangerous rhetoric and refocus on delivering solutions that treat asylum seekers, and all New Yorkers, with the respect and dignity they deserve.”