Gov. Kathy Hochul will spend the next 10 weeks pushing back on calls to put a tax increase on the rich, even though her election-year budget lacks some of the fights of recent years.
Plans to change the school funding formula to reduce aid to shrinking districts? This year, everybody gets an increase. Changes to criminal justice laws that provoked fights between prosecutors and legislators? Absent.
But the Democratic governor buttressed her Tuesday presentation of a $260 billion spending plan with a defense against the expected lobbying for tax hikes on the rich. And she insisted there are still difficult items in the spending plan that will stir a flurry of lobbying before the March 31 deadline.
“We have tackled so much,” Hochul said. “A lot of our programs continue those investments and now we're taking on the high cost of utility bills and the cost of car insurance and child care. I think those are very ambitious programs.”
Here are four of the biggest fights coming up:
Taxing the rich
The moderate governor insisted that better-than-expected tax collections, mostly from Wall Street bonuses, give New York the revenue needed to increase funding for schools and child care while also making up for federal Medicaid cuts.
Allies in making those investments have said they’re happy but not fully satisfied.
“This is a strong foundation — but there’s more we must do,” said Rebecca Bailin, executive director of the New Yorkers United for Child Care Campaign. “We risk building on shaky ground. We’ll keep pushing until this program is built to last.”
Polls have shown a strong majority of New Yorkers favor taxing the rich to pay for child care and other social service programs. Opponents noted that New York City already has the highest combined state and local tax rate in the country and worry that people will leave.
The number of millionaires in the state increased after it hiked income taxes on top earners in 2021, according to the left-leaning Fiscal Policy Institute, and the wealthy are leaving the state at a lower rate than middle-class people.
But the Citizens Budget Commission noted that the state’s share of millionaires decreased relative to lower-tax states like Texas and Florida over the last 15 years. The group warns against raising taxes further.
Hochul said the current bump in revenues gives the state more than $17 billion in the next two years. She also pointed out that a small tax cut for middle-class filers took effect Jan. 1.
“We have this moment in time where, because we're being smart and Wall Street is doing well, and we have the high-net-worth people living here in this state, we're benefiting from that,” she said.
Protest buffer zones
Last year, Hochul pushed for additional restrictions on people wearing masks in public, a response to aggressive protests of Israel’s military campaign in Gaza. This year, she’s proposing to create a 25-foot protest-free buffer zone around houses of worship.
Similar to the masking restrictions, the current proposal has support from Jewish leaders and legislators. But it raises First Amendment concerns, said Justin Harrison, a senior policy counsel for the New York Civil Liberties Union.
“I'm not sure we want to give the police yet another tool to single out protestors for the offensive things that they may say,” he said. “And that's exactly what a buffer zone law like this would do.”
Hochul said it would help combat antisemitism.
“Protestors led pro-Hamas chants outside of synagogue in Kew Gardens Hills. That's not free expression, that's harassment,” she said in last week’s State of the State address. “Those who simply want to pray … can do so without fear or harassment.”
Auto insurance changes
Hochul said one of the biggest fights she expects in this year’s budget talks will involve wonky car insurance standards. She’s proposing to “tighten up” the definition of a “serious physical injury” under state law — a designation that allows someone involved in an auto crash to win damages for pain and suffering in addition to their medical expenses.
The governor said it is driving up premiums.
Andrew Finkelstein, president of the New York State Trial Lawyers Association, said Hochul has no evidence to back up the claim. He said her proposal would just make it harder for injured people — who his members represent — to get compensation.
“You are going to hear from victims who would be harmed,” he said. “What the governor's proposals seem to be doing is blaming policyholders who have already paid their full premiums … and not to the insurance companies who have collected the premiums.”
Finkelstein noted that the state must pre-approve insurance rate increases, so Hochul’s own regulators are at fault.
Insurers, meanwhile, pointed their finger back at the trial lawyers. New York Insurance Association President Cassandra Anderson said her group would look for “solutions that prioritize consumer choice and accessibility.”
“The major cost drivers of fraud, abuse and excessive litigation need to be addressed,” Anderson said. “New Yorkers want more affordable insurance, and it is proven that insurance can be more affordable when fraud and litigation are appropriately constrained.”
Both insurance companies and trial lawyers are big spenders on political campaigns and elections — a fact that Hochul acknowledged.
“That is not going to be an easy lift,” she said.
Done by April?
The state budget has been late for each of the past years of Hochul’s gubernatorial tenure.
Late budgets have been a feature of New York politics for decades. Negotiations stretched into August during Gov. George Pataki’s last term. But the delayed budget became a proxy for government function during the tenures of Govs. Eliot Spitzer and Andrew Cuomo.
Cuomo gave out tchotchkes, including hockey pucks, to mark his third on-time budget. But by the end of his tenure, he, too, was settling for “timely.”
Hochul on Tuesday said that the timeline for proposals and counter-proposals makes it hard to meet the April 1 deadline.
“It is January 20th. We're presenting our budget,” she said. “We don't get [the Legislature’s] version of the budget till two weeks before it's due. So, I don't know how anybody ever thinks it can be done on time.”
There could be hope this year. State Sen. Liz Krueger, a Democrat from Manhattan, said she didn’t anticipate any major roadblocks for negotiators.
“I don't see big fights here,” she said. “I think this is going to be a pretty smooth budget, and it's the last one we probably see in a while that we're not walking into giant holes.”
