Executive Summary

The Fiscal Year 2027 state budget is being negotiated in the wake of one of the most severe cuts to the social safety net seen in our country’s history. In July 2025, the Trump administration and congressional Republicans signed the “One Big Beautiful Bill Act” (OBBBA), imposing draconian cuts on healthcare and food assistance for low-income people, while delivering major tax cuts for the wealthy and corporations. These funding cuts have major implications for New York residents and the New York State budget. However, rather than committing to preserve essential services, New York State policymakers have repeatedly claimed that they cannot possibly backfill federal cuts.

This claim is wrong. The State continues to benefit from robust tax revenue and strong reserves. Its wealthiest residents continue to enjoy strong income growth, bolstered my massive federal tax cuts. New York is in a position to maintain these essential services; declining to do so is a political choice. Thus, while this year’s executive budget proposal makes significant and welcome investments in expanding childcare access, the proposal as a whole is defined primarily by what it does not accomplish: It fails to protect the one million New Yorkers at risk of losing health insurance due to Essential Plan and Medicaid cuts and does not support the two hundred thousand New Yorkers at risk of losing nutrition assistance.

Things do not have to be this way. New York—the most unequal state in the nation—has the resources to provide essential services to low- and middle-income New Yorkers in need. Despite pessimistic revenue projections at the start of fiscal year 2026, the State took in strong revenue, accruing surplus revenue of $17 billion across FY 2026 and FY 2027. Accounting for in-year reserves and chronically pessimistic revenue projections, New York is not facing significant fiscal gaps in the outyears. And in the case of emergency, New York has $30 billion in reserves—far more than the state has maintained in its history and enough to meet emergency funding needs in the near- and medium-term.

On the spending side, too, the State’s outlook is positive. After years of rapid growth, New York’s largest fiscal responsibility, Medicaid, has stabilized. Enrollment in the State’s largest Medicaid program, Mainstream Managed Care, has returned to pre-pandemic levels, while the Managed Long-Term Care (MLTC) program, whose double-digit growth rates drove Medicaid spending growth between 2022 and 2024, in fact shrank in 2025. While the executive budget continues to report rapid headline Department of Health Medicaid growth, this is largely attributable to opaque accounting related to the Managed Care Organization tax and the State’s contingency plan to absorb five hundred thousand Essential Plan enrollees into state-funded Medicaid if it fails to receive federal approval for a restructuring of the Essential Plan. Spending on current programs and populations grew just 3.6 percent, most of which was driven by provider rate increases.

Given the state’s solid fiscal footing, it is well-positioned to fund ambitious expansions of public services that will make New York more affordable for families. First and foremost, the executive budget proposes a historic step towards achieving universal childcare. When fully implemented, the executive budget programs will support about 110,000 children under 5. New York already supports 40 percent of children under 5 who would be enrolled in a truly universal system, and the executive proposals will bring in an additional 18 percent. Nevertheless, a universal system must support an additional 250,000 children, the remaining 42 percent of children under 5 for whom childcare assistance is not yet provided. This will cost $6 billion per year beyond the executive budget proposals.

Further, the state must ensure that New York City is on solid footing to invest in its affordability agenda. New York City Mayor Mamdani’s recent preliminary budget revealed a grim fiscal shortfall facing the city. Mismanagement by the prior administration has created significant underfunded spending needs. At the same time, the City’s inability to control its own tax system has constrained its revenue. While the executive budget includes modest, mostly one-off aid, putting the city budget on solid ground for the long run requires the State to reverse recent cost shifting and allow the City to raise its own revenue.

In sum, New York State has a number of steep fiscal needs. Fortunately, because of the state’s fiscal strength—both its historic fiscal reserves and ongoing revenue growth—it is well positioned to maintain essential services and expand programs core to its affordability agenda. Lawmakers must address these needs by leveraging new revenue and building a New York where our state’s great wealth is widely shared.