On January 21st, Governor Kathy Hochul announced highlights from her fourth Executive Budget, covering New York State Fiscal Year (FY) 2026, which will run from April 1, 2025 to March 31, 2026. SPG’s full summary of the budget proposal is available here. Where available, legislative sources are marked in [brackets].
This year, the Division of the Budget (DOB) notes that overall, New York’s financial position “remains strong,” with favorable operating results during FY 2025 and projections of a continuing strong economy. There is a current year surplus of $5.3 billion, which the Governor proposes to use to support various new investments and proposals. However, DOB also says that “uncertainty looms” due to many factors, including “the new Federal administration” and “sustained trends of rising enrollment and costs in public health insurance programs.” The Budget therefore seeks to continue to maintain or increase the level of state reserves.
Overall, the Executive Budget proposes total spending of $252 billion in FY 2026, an increase of $8.6 billion or 3.6% from revised FY 2025 estimates. The Budget now includes outyear gaps totaling $27.3 billion over the next three years (FY 2027 through 2029), cumulatively about $4 billion greater than the Mid-Year projections (and about $7 billion higher than the original Executive Budget). DOB highlights that “spending growth is largely driven by continued high levels of enrollment in the Medicaid program,” and that “State spending for Medicaid has tripled over the past 15 years.” The original Executive Budget projection for total state Medicaid spending in FY 2025 was $35.5 billion but has since been revised upwards to $37.7 billion.
For the new FY 2026, DOB is projecting a 17% overall increase to $44.1 billion in total state Medicaid spending, although about $1.2 billion of this is virtual spending due to the new managed care organization (MCO) tax which is revenue-neutral. The MCO tax will bring in $3.7 billion in resources, of which $1 billion will be used to offset Global Cap cost growth and $2.7 billion used for investments in the health care system. DOB notes that it will seek to achieve “recurring savings in future budgets to ensure long-term Medicaid spending levels are sustainable.”
The Budget also proposes a number of other major policies, including a $300 direct payment to taxpayers with income of up to $150,000 ($500 for joint filers up to $300,000), which will cost $3 billion. Some items proposed in the State of the State are not included in the budget but may be implemented through administrative authority.
SPG’s full summary of the budget proposal is available here. The full Budget materials are available here.