Governor Kathy Hochul has delivered her budget address outlining her priorities for her 2026 – 2027 proposed budget. Building on the themes from her State of the State address last week, she continued to focus on making New York a more affordable place to live, despite uncertainty in federal funding.
With that as her goal, the Governor is proposing a $260 billion budget, which is a $6 billion, or 2.4%, increase over the fiscal year 2025 – 2026 budget. This year’s budget proposal includes $10.3 billion less in federal funding to New York following the passage of H.R. 1 in July of 2025 and the expiration of pandemic-era healthcare funding to the State. This is an 11.4% decrease from last year. However, the State received higher-than-anticipated tax returns thanks to Wall Street’s performance in the past year, which has helped create some breathing room in the drafting of the proposed budget.
The proposed spending plan does not include any income tax increases, but it does include a three-year extension on the current New York corporate tax rate, which was set to expire at the end of this year and applies to businesses that net over $5 million in profits. The plan also includes a 75% tax on tobacco-free nicotine pouches, like ZYN. This tax is estimated to bring in around $54 million annually to the State.
The Governor’s highest-profile proposal, which was included in her State of the State, is the creation of a statewide universal childcare program. The Governor previously announced this proposal with New York City Mayor Zohran Mamdani, who included universal child care as one of his major campaign proposals. Mayor Mamdani proposed paying for universal child care by increasing taxes on New Yorkers who earn more than $1 million a year. However, the Governor did not include this tax increase in her budget proposal, stating, “I don’t support raising taxes just for the sake of raising taxes.” The Governor’s proposed budget would provide close to $1 billion this year and another $425 million next year to implement universal childcare in New York City, with future funding to be determined.
As always, the two biggest cost drivers in spending for the proposed budget are education and healthcare, which represent about 60% of the total budget. In the education space, the Governor is proposing $39.3 billion, which is a 4.3% increase over last year. Last year’s budget included free breakfast and lunch for all students in the State. This year’s budget would expand this program, adding $50 million to the program to meet the demand. In the healthcare space, Medicaid spending would increase to $48.5 billion, which is an increase 11.4% from last year, in large part to make up for the federal cuts that will take effect on April 1.
The Governor also highlighted some of her other priorities in her budget address and accompanying budget book, which includes easing restrictions to make it easier to build houses more quickly, addressing soaring auto insurance premiums by including $2 million for the State Police to investigate auto insurance fraud and scammers and establishing criminal penalties for those who stage auto accidents.
The full detail of all the proposals that will be included in the Governor’s proposed budget will not be known until we see the budget bills themselves. The budget bills will be released at some point today. We will be reading through, and flagging issues of importance, as they become available and will update you on your issues of importance.
As a reminder, now that the Governor has released her 2026 – 2027 proposed budget, the Senate Finance Committee and the Assembly Ways and Means Committee will begin to hold their joint budget hearings, where they will hear from interested parties about what was in, and in some cases, what was not in the Governor’s proposed budget. The hearings will last until the end of February, and in mid-March, both houses will release their proposed one-house budget bills, which will accept or reject the Governor’s proposals as well include the priorities for each house. Once all three budgets have been released, negotiations between the Governor, Senate and Assembly will commence with the hope of having a final budget deal in place by the State Constitutionally mandated deadline of April 1.
As always, we will be sending updates as the session advances. Please let us know if you have any questions.