Monday Morning Memo – May 1

Good Morning from Albany, NY…

The good news? Governor Kathy Hochul announced a “conceptual agreement” has been reached on a budget framework. The final price tag, $229 billion, comes in $2 billion higher than the Governor’s original proposal. 

As far as actual budget bill text, things are moving. Bills are going to print for votes this week. Specifically, the “Revenue”, Health & Mental Hygiene, and Public Protection and General Government Article VII Bills were posted Sunday night. However, all three were slimmed down and as of Sunday night, we were still waiting on the “Big Ugly.” What is the Big Ugly? More on that here.

As of Sunday night, we were also still waiting on final Appropriations bills and a couple more Article VII bills (Transportation, Economic Development and Environmental Conservation (TED); and Education, Labor, and Family Assistance (ELFA)… one of which will be this year’s Big Ugly)—but that could change slightly before you read this.

Here’s what we know: 

• Public Safety: Hochul got changes to the state’s bail laws—her top priority in negotiations—removing the “least restrictive” language that some said restricted or confused some judges. The final compromise includes emphasis that the purpose of bail is to ensure the attendance of defendants at trial, a key demand of the Legislature. A proposal to reform the discovery process was cut from the final budget, according to Hochul, because district attorneys chose increased resources rather than a change to the law (some DAs also thought the language didn’t go far enough). Those resources include $347 million in evidence-based gun violence prevention initiatives, $92 million in aid for prosecution and defense funding, and $66 million to increase the number of State Police Academy classes. The state will also direct funding to ramp up enforcement of illegal cannabis shops, the details of which are thorny/undetermined. 
• Public Transit: New York City will be responsible for $165 million of funding to subsidize the MTA, compared to the $500 million that was initially proposed by the state. A more limited MTA commuter tax will be paid only by “large, NYC employers” but at a slightly higher rate that projects to raise $1.1 billion.  The budget also creates a pilot program of five free bus lines in the 5 Boroughs. 
• Healthcare: Hochul announced an expansion of Medicaid services to cover nearly 8 million additional New Yorkers and $1 billion in capital funding for the state’s healthcare systems. The deal also includes a $1 billion investment in mental health care to expand in-patient psychiatric beds and adequate staffing. On reproductive health, the plan will expand abortion access for SUNY and CUNY students, increase the Medicaid reimbursement rate for reproductive health, and further fund over-the-counter contraceptives. The final budget does not include any repeal or replacement of NYRx, the highly controversial Fee-for-Service Carveout of the Medicaid Drug Benefit that we have discussed over the past few MMMs. Rather, it will include appropriations for the reinvestment of 340B revenue lost by Federally Qualified Health Centers/Diagnostic and Treatment Centers and Ryan White Clinics, and rate increases for hospitals, both proposals have received enormous criticism by covered entities losing 340B revenues and community health advocates.
• Minimum Wage: The budget will increase the minimum wage to $17 over the next three years, starting with an increase to $16 next year in New York City. The state’s minimum wage will then be indexed to inflation at a rate determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). 
• Education: Hochul was successful in reactivating 22 of the state’s “zombie charters,” 14 of which are within New York City. The plan also provides $34.5 billion in state School Aid for P-12 institutions and allocates $2.4 billion in capital funding for maintenance and preservation projects at SUNY and CUNY campuses. 
• Economic Development: Despite some concerns from watchdog groups over the efficacy of the program, the New York Film Tax Credit will be expanded to further attempt to attract directors and production companies to New York. The budget will expand the Child Tax Credit to children under four years old and will also include $500 million for a Workforce Retention Grant Program. Hochul announced funding totals for some specific projects, including $1.7 billion for a new state Department of Health Research Lab (Wadsworth), $446 million for Phase Three of the Hunts Point Interstate Access Improvement Project, $105 million to upgrade the State Emergency Operations Center, $51 million for Hudson Valley Bridge Rehabilitation and Replacement.
• Climate: The Governor announced an expansion of the New York Power Authority to better support the state’s energy goals, but the major climate component from the Governor was confirmation of zero-emissions standards for new construction, the first statewide policy of its kind in the nation. 

The full details of the plan will not be known until the actual proposal is posted and in print. However, the details about the proposal that have circulated thus far include: it will ban fossil fuel hookups for new buildings under seven stories starting in 2026 and larger buildings in 2029. The measure will not apply to existing buildings or homes and there will reportedly be exemptions for buildings such as hospitals and laboratories to utilize fossil fuels as a backup power source. The Governor’s office shut down any rumors of a provision that would have allowed municipalities to sidestep the ban, with spokeswoman Katy Zielinski saying, “The new law will not have any loopholes that will undermine the intent of this measure, there will not be any option for municipalities to opt-out.” 

The bad news? So far, the Governor has not received rave reviews and it was not lost on anyone that she was making the budget announcement solo, without leadership from the Senate or Assembly. Her major policy initiative, an 800,000-unit state housing compact, failed to gain any traction in negotiations. Furthermore, if passed this week, the budget will be one month late. At her news conference, Hochul insisted she maintained strong relationships with leadership in the Legislature, but added, “I will never shy away from a fight. You’re not always going to win. This state requires a leader who is not afraid to get knocked down once in a while. Because I always get back up.” While bail reform was a win for Hochul, Senator Brad Hoylman-Sigal believes the focus on the issue took up too much bandwidth, saying “In effect, bail was a blockade: to the flow of information, to the flow of deal-making, to the flow of collaboration, the conversations around bail prevented a lot of other good goals from advancing — namely her housing plan.” 

The worse news? Only some of the budget language is available (or at least publicly available—listed above) and there is reason to believe some issues may still be open. More language was trickling out last night and this point may be moot by the time you read this. 

Furthermore, members were also on their way home from Albany when Governor Hochul made the announcement, meaning they have been back in their districts hearing input from constituents on details of the budget that had been reported over the weekend. Assembly Speaker Carl Beastie confirmed the “conceptual agreement” via a statement, but noted that “some issues” still need to be worked out. 

Among the issues that we are awaiting further details on are final numbers on State Mass Transit Operating Assistance (STOA) and potential dedicated revenues for non-MTA authorities, which had both been priorities for transit systems across the State. No details have been released on the “Cap and Invest” program proposed by the Governor, another major policy plan aimed at bringing down the state’s greenhouse gas emissions. On Thursday, Hochul said, “We’ll be working out the details on Cap-and-Invest, which will literally generate billions of dollars to help New Yorkers offset the costs of transitioning to a new form of energy, which when it happens, ultimately the cost of energy will be less.”

Republicans in the Legislature are hoping that the Governor will give them and their Democratic colleagues sufficient time to review the budget bills. Normally, there is a three-day waiting period between a bill being introduced and being voted on. If the Governor issued a “message of necessity” when submitting budget language, it would waive the three-day waiting period and would allow voting to begin almost immediately. Republican Senator Tom O’Mara offered, “We’re willing to wait the three extra days to give us the ability to review the bills, but more importantly give our constituents and the citizens of New York State the ability to review these bills and give us some input on whether it’s a thumbs up or thumbs down on this budget.” 

Also worth noting….

A major PAC that supported Lee Zeldin in his 2022 bid for Governor, Save Our State, continues to face legal troubles stemming from an inquiry into the group’s fundraising practices. Thomas Dunham, an attorney associated with the group, is now fighting a subpoena to try and keep the contents of his personal email account from the Board of Elections as it looks into potential coordination between outside PACs and the formal campaign. 

A potential Democratic primary for a New York congressional seat could result in a former congressman running against the sister of a highly popular Democratic Governor. Former Rep. Mondaire Jones was left on the outside looking in after NY’s redistricting saga last year, but is looking to challenge Rep. Mike Lawler in New York’s 17th Congressional District in 2024. The only problem? Liz Whitmer Gereghty, the sister of Michigan Governor Gretchen Whitmer, is also preparing to run. 

Adam Sullivan, a top political adviser to Governor Kathy Hochul, resigned Sunday evening citing the widely-circulated New York Times report questioning his political counsel and the toxic work environment under him.

In Washington, D.C., House Speaker Kevin McCarthy spent the last week taking a victory lap after his conference was able to pass his debt ceiling proposal. McCarthy suffered defections from far-right members Andy Biggs, Ken Buck, Tim Burchett, and Matt Gaetz in the 217-215 vote, but Democratic absences from the Chamber meant it was enough. The bill, which proposes a one-year debt ceiling increase in exchange for drastic spending cuts during the budget process, has no chance in the Senate and President Biden has repeatedly told McCarthy he is willing to discuss spending cuts, but only after the debt ceiling is dealt with. The White House said in a statement, “The President has been clear that he will not accept such attempts at hostage-taking. House Republicans must take default off the table and address the debt limit without demands and conditions.” 

Initial estimates of when the U.S. would default without a debt ceiling increase ranged from July to September, but with lower-than-expected tax revenue and political gridlock, a general default could be looming sooner rather than later. An updated financial forecast with a new “X date” is expected to be released from Treasury Secretary Janet Yellen in the near future. In the meantime, it is up to lawmakers to find a viable path forward. For McCarthy deputy, Rep. Garret Graves (R-La.), the path forward is quite simple, “Our job is to pass something, the Senate’s job is to pass something, the White House’s job is to either sign it or to negotiate, and so I’m not sure what else we can do, other than do our job, send them a bill, and now it’s 100 percent in their lap.” Democratic Senator Chris Coons of Delaware, a close ally of President Biden, contests that using the full faith and credit of the United States as leverage to extract political wins is dangerous and misguided offering, “Any negotiation, quote-unquote, about the debt ceiling is a negotiation about whether we should default. The answer is simple, and the answer is no.”

Speaking of President Biden, it turns out he IS running for reelection. In his campaign kickoff video, the President emphasized the progress he has made while acknowledging there is still work to be done. Biden also drew a contrast between himself and national Republicans, highlighting their plans of “cutting Social Security that you’ve paid for your entire life while cutting taxes for the very wealthy. Dictating what health care decisions women can make, banning books, and telling people who they can love. All while making it more difficult for you to be able to vote.” The President is not expected to hold formal campaign events for a while— both to give his campaign a chance to staff up and to maintain the appearance of a President rather than a candidate as long as he can. While there is a long way to go before November 2024, current polling shows that the most likely 2024 matchup is Joe Biden v. Donald Trump, both of whom would be the oldest President in American history.

With the budget closing down this week, you might be tempted to crack a cold one this weekend. You should be careful what you call it; Belgian customs crushed 2,000 cans of Miller High Life last week after Champagne producers in Northeastern France said the popular Miller High Life slogan “Champagne of Beers” endangered their craft.

-Jack O’Donnell

 

 

 

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