New York State’s newly enacted $254 billion budget for fiscal year 2025-26 reflects significant spending growth—but comes with major warnings. State Comptroller Tom DiNapoli says federal policy shifts may threaten the stability of the budget in the months ahead.
The budget includes increases for key programs like Medicaid and public education, but federal cuts already underway—and more potentially on the way—could result in billions in lost revenue and new state costs.
Budget grows amid economic headwinds
Spending in the new budget is up 5.2% from the previous year. All Funds spending is projected to rise from $241.5 billion to $254 billion, while State Operating Fund spending is expected to grow by 9.3%.
Key areas of growth include:
- School Aid: $37.4 billion allocated, a $1.7 billion increase over last year
- Medicaid: $109.6 billion in funding, up $7.7 billion from last year
The budget also includes authorization to repay up to $8 billion in federal unemployment insurance debt. If repaid, small businesses could see a drop in their federal unemployment tax rate from 1.5% to 0.6%.
Revenue concerns on the horizon
All Funds revenue is projected to total $248.9 billion, nearly flat compared to the previous year. Tax collections are expected to decline slightly, down $474 million from the year prior.
Economic warning signs include:
- Slowing sales tax growth due to inflation and tariff impacts
- Continued decline in tourism affecting sales and income tax revenue
- Job losses in the hospitality sector—down 11,200 jobs since January
These economic pressures are colliding with uncertainty from Washington, where several federal funding cuts are already impacting New York.
Federal threats to funding and health coverage
Federal receipts make up nearly 39% of New York’s total budget. According to DiNapoli’s report:
- $1.3 billion in cuts have already affected programs including food aid, resiliency efforts, and higher education
- Future risks include:
- Loss of $10.1 billion in federal funding
- $3.3 billion in new state Medicaid costs
- Up to 1.5 million more uninsured New Yorkers
The DOH estimates the uninsured rate could more than double, rising from 4.8% to 12%, if proposed federal changes move forward.
Stability measures and future action
The enacted budget does contain some built-in protections:
- Authorization to withhold funds if a $2 billion imbalance appears in quarterly updates
- Nearly $8.8 billion in statutory rainy day reserves
However, DiNapoli warns that New York needs a more structured plan to handle sudden financial shifts. He recommends:
- Building additional reserves
- Auditing and improving service efficiency
- Establishing a clear strategy for responding to federal funding changes
Legislative leaders may convene a special session if the situation worsens. For now, the budget stands—but its long-term viability may depend on actions taken in both Albany and Washington.
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