Gotham Gazette

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6 State Budget Proposals Where Hochul and Adams are At Odds

Gov. Hochul and Mayor Adams (photo: Ed Reed/Mayoral Photography Office)

Governor Kathy Hochul and Mayor Eric Adams have a strong working relationship, one that they have repeatedly emphasized at joint announcements, news conferences, and speeches. It’s in clear contrast to their predecessors, who spent years squabbling over many issues, both parochial and consequential to New Yorkers. But with the recent release of the governor’s budget plan, the two first-term Democrats find themselves at odds over various cuts, cost shifts, and unfunded mandates for New York City that the mayor is none too pleased about. 

In his February 15 budget testimony before the State Legislature, Mayor Adams had several words of praise for Governor Hochul and her $227 billion budget proposal. He pointed to items in her housing agenda, investments in mental health, proposed changes to capital construction process reforms and M/WBE procurement, and more. He also cited boons the city got from last year’s budget including expanded child care, a new funding mechanism for the New York City Housing Authority (NYCHA), an expansion of the Earned Income Tax Credit, and a broadening of the city’s speed camera program. 

“Governor Hochul and leaders in the Senate and Assembly have been excellent partners to the city and our administration,” he said in Albany. “My hope, and my belief, is that we’ll be able to sort out our differences and work together to build a budget that works for all New Yorkers.”

Following his testimony, in a brief question-and-answer session with reporters in New York City, the governor echoed his sentiments. “We've been partners,” she said, “and this is still sort of a new era that people aren't quite used to, seeing the two of us really joined together in furtherance of lifting up the City of New York.”

Nonetheless, the mayor had several gripes about the governor’s budget, including inadequate funding for the migrant asylum-seeker crisis in the city; a proposal to increase the city’s contribution to the MTA; needed funding associated with her plan to lift the charter school cap in the city; lack of additional funding for a class size reduction mandate that is about to go into effect; hundreds of millions in cuts to Medicaid support; and a continuing sales tax intercept that saps $150 million from the city each year. 

[READ: In Albany, Mayor Adams Testifies on Governor Hochul's Budget, State Priorities]

Adams repeatedly emphasized that the additional costs the city estimates would result if Hochul’s budget passed would strain the city’s coffers. Adams recently proposed a $102.7 billion budget for the city’s next fiscal year, which begins July 1 and will take the next state budget into account. The mayor said his administration would have to cut basic services if the governor’s plan proceeds on those various fronts as-is.

According to his prepared testimony, the mayor intended to present that scenario as a warning to legislators who will negotiate the budget with the executive branch. “The city cannot possibly carry the weight of such big commitments without cutting essential programs that support New Yorkers,” said the mayor’s prepared remarks, which were provided to the media. “This is not a threat. This is math.” (Adams did not end up speaking the words in front of the Legislature.)

Asylum-Seeker Funding
The Adams administration has been struggling to manage the ongoing arrival of tens of thousands of migrant asylum-seekers from southern border states. According to the administration’s estimates, about 47,000 migrants have come to the city in the last year, which has tested the limits of the shelter system and strained the city budget. 

Adams has estimated that it will cost the city about $4 billion between the current and next fiscal years to shelter and provide services to the migrants, and he has repeatedly urged the federal and state governments to provide greater assistance. 

The governor’s budget allocates about $1 billion to the city for that purpose over two years – $767 million to reimburse the city for 29% of shelter costs (in line with other shelter cost-sharing); $162 million in operational and logistical support through the State National Guard; $137 million for health care costs; a $25 million resettlement fund for nonprofit groups; $10 million for legal assistance; $6 million for the city’s new shelter site at the Brooklyn Cruise Terminal; and $5 million for other resettlement assistance. Hochul’s budget also creates a framework that would split the costs of overall services evenly between the city, state and federal government. 

Adams has requested $1 billion to start from the federal government but so far the city has only been able to secure a paltry $8 million from the Federal Emergency Management Agency, leaving major costs unfunded. In a spending package passed in December, Democrats who controlled the federal government allocated about $800 million for assistance on the topic, much of which is expected to go to New York City through FEMA but has not yet arrived.

MTA Funding
In her budget proposal, Hochul presented a plan to address the MTA’s ongoing financial struggles. Though the transit authority has survived the pandemic with the help of federal aid, it currently has a $600 million structural deficit, which will increase to $1.2 billion in the 2024 fiscal year and $1.6 billion by the 2026 fiscal year.

Though Hochul advanced several measures to bolster the MTA, which runs the city’s buses and subways as well as the commuter rails – $300 million in one-time state aid, $800 million in additional revenue by increasing the Payroll Mobility Tax, and between $462 and $826 million from a share of licensing fees from new downstate casinos – she also proposed that the city should cough up an additional $500 million annually directly into the MTA’s operating budget.

The MTA is also planning to raise fares and tolls, which were scheduled for last year but postponed in partnership with Hochul and other state leaders in order to encourage a return of ridership to the system. 

“We are being told to add a half-a-billion dollars on to our budget for eternity,” Mayor Adams said at the legislative budget hearing. “That is just unfair. No other municipality has been asked to do this…We should spread the pain throughout the entire state because we realize the MTA is a statewide entity.”

The city already contributes $2.4 billion annually to the MTA’s operating budget, the mayor said, while estimating that the actual cost of the governor’s proposal would be about $526 million in the next fiscal year and above $540 million annually in the years that follow.

According to the governor’s office, the $500 million would cover the state’s current payments for the city’s paratransit program and discounted MetroCard program for students. In response to a Gotham Gazette inquiry about Adams’ testimony, a spokesperson for the governor noted that MTA New York City Transit accounts for 71% of the MTA's annual deficit.

The spokesperson also pointed out that the MTA pays half of the city’s paratransit costs, while other counties served by the agency – Nassau, Suffolk, and Westchester – each pay entirely for their own paratransit programs. The MTA also pays for 58% of the city’s student MetroCard program, while all other local governments in the state pay for costs of student transportation.

Additionally, the spokesperson pointed to the city’s own projections of billions in surplus revenues in the current and upcoming fiscal years. Those projections have only grown recently and appear in part to be at the root of the governor’s budgeting on the MTA and beyond.

Education Funding
At the legislative budget hearing, Adams reiterated prior complaints about a class size reduction mandate for city schools that was approved last year – part of the legislation to extend mayoral control of city schools – and goes into effect this year. Adams has said it comes without additional dedicated funding, but the governor and state lawmakers have pushed back on that assertion, noting large increases in state education aid to the city that they say can pay for the class size reductions.

Adams has estimated it will soon ramp up to cost the city $1.3 billion annually beginning in the fifth year of implementation; largely due to personnel and space costs.

The governor also proposed a new measure in her budget this year to eliminate the cap on charter schools in New York City. The city currently has 275 charter schools with 142,500 students, about 15% of the city’s schoolchildren. 

Adams said that lifting the cap, which he supports, could add another $1 billion in annual costs to the city, largely for school siting. Due to a state law passed under Governor Andrew Cuomo a number of years ago, the city government must either provide school real estate to charter schools or pay for them to rent other space.

Adams was somewhat evasive about the larger question of raising the cap on charter schools in the city, but explicitly reiterated that he supports the re-issuing of about 20 “zombie charters” that were issued but whose schools since closed.

The governor’s office has, in response, noted that the state is proposing to give New York City $13 billion in formula-based School Aid, up by $594 million or 4.8% — the highest amount ever proposed — which accounts for charter school students. Charter advocates have also noted that when students are educated by charter schools, per-pupil funding goes with the students and they are not students that traditional district schools must pay to educate.

Medicaid Funding
Governor Hochul’s budget proposes that the state will hold on to 100% of enhanced Federal Medical Assistance Percentage (eFMAP) funding to localities. That funding supplements local spending on Medicaid, without which localities will have to either absorb increased costs or cut services. Adams has said the city could lose up to $343 million from that proposal. 

The proposal is also setting up a fight with localities across the state, and the New York State Association of Counties has estimated that it will cost counties outside New York City about $281 million in the first year. Over a three-year period, it could cost $2.5 billion to all local taxpayers.

“Not only does this proposal harm New York's local taxpayers, but it also subverts Congress' intent for this funding to be shared with the local governments that contribute to the state's Medicaid program,” said Michael Zurlo, Clinton County Administrator and president of the New York State Association of Counties, in a statement after delivering testimony to the State Legislature last week. “At $7.6 billion a year, counties in New York contribute more than all other counties in the nation combined.”

Public Defender Funding
Hochul has said she wants to increase resources for both district attorneys and public defenders to tackle the increasing backlog of criminal cases in the state court system. It’s a call that’s been echoed by Mayor Adams as well. But Hochul’s budget doesn’t give New York City enough to fulfill that goal, Adams said, while imposing a new cost on the city’s coffers. 

As part of the budget, the governor has proposed wage increases for ‘18-B’ assigned counsel attorneys, private attorneys appointed by courts to defend indigent clients under Article 18-B of County Law. But she has only proposed about $44 million in additional funding to pay for raises, and only for 18-B attorneys under the Attorney for Child Representation program. That would leave the city with additional costs of about $18 million a year, Adams said in his testimony.

[READ: As Prosecutors Get Budget Boost, Public Defenders Seek More Funding Too]

Sales Tax Intercept
The governor’s budget continues intercepting about $150 million annually in sales tax from the city for the state’s distressed hospitals fund, a recurring money grab that has sapped hundreds of millions from the city over the last several years. “$150 million of the city’s tax revenues are intercepted yearly for this fund, and New York City is the only locality paying,” Adams said. “Despite this, not a single [NYC Health + Hospitals] hospital has received a dollar of support.”

by Samar Khurshid, senior reporter, Gotham Gazette

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