New York is facing its biggest budget gaps since the Great Recession
And Hochul defends Tish James after Trump's DOJ sends subpoenas.
Good afternoon — it’s Friday, and Pickleball Day.
In today’s CapCon:
The U.S. Department of Justice has reportedly subpoenaed Attorney General Letitia James as part of a civil rights probe.
Hochul came to James’ defense Friday while her likely 2026 opponent Rep. Elise Stefanik said Tish had dug her own grave.
New York is facing outyear budget gaps not seen in nearly two decades, a new state report found Friday.
Candidates have started lining up to replace Assemblyman Billy Jones, a Democrat who’s resigning from office this month.
Todd Howe, a longtime Albany power player, has died.
Names in today’s CapCon: Tish James, Donald J. Trump, Kathy Hochul, Elise Stefanik, Tom DiNapoli, Todd Howe, Andrea Dumas, Bridie Farrell, Michael Cashman
⚖️ Hochul says Tish James ‘should be left alone’ after reports of Trump subpoena
The U.S. Department of Justice has subpoenaed state Attorney General Letitia James as part of a civil rights investigation, the Associated Press and others reported Friday.
The probe reportedly has to do with a civil fraud lawsuit brought against President Donald J. Trump by James’ office in 2022. The litigation alleged that Trump had inflated the value of his business assets to secure more favorable financing for his company.
Trump and other defendants in the case were ultimately ordered to pay more than $450 million after the judge in the case sided with the state. An appeal of that penalty is pending.
James’ office declined to confirm the subpoenas, but spokesman Geoff Burgan said it “stand(s) strongly behind our successful litigation against the Trump Organization,” according to the AP.
The development should be a surprise to no one who has followed the fight between James and Trump, which really began as soon as she became attorney general in 2019.
That’s when her office began investigating Trump’s business dealings. That led to subpoenas seeking information from the Trump Organization in 2020, months before he would lose reelection.
After years of intervening litigation and investigation, the case went to trial in late 2023 and concluded in early 2024 with the judgment against Trump. This time around, Trump won the election and vowed revenge.
Like so many matters, that case was personal for Trump: James has also filed dozens of civil lawsuits against his administration over executive orders, funding decisions and policy changes. Many are ongoing considering his second term started in January.
The Justice Department is also looking into New York’s investigation and litigation against the National Rifle Association, which James’ office sued over alleged violations of state law on financial management of charitable funds.
Trump and James have traded barbs for years. This was less of a surprise and more inevitable.
Gov. Kathy Hochul and Democrats in the state Legislature predicted this as well. They ended up earmarking $10 million in this year’s state budget for legal expenses associated with litigation against state officials.
State law requires that public employees, including elected officials, be reimbursed for legal expenses when litigation is brought against them over actions taken as part of their official duties. Those bills can rack up quickly.
Hochul came to James’ defense Friday while speaking with reporters in Monroe County.
“This just shows how far they’re willing to go to disrupt all of the foundations of our democracy,” Hochul said. “She’s simply doing her job. She’s elected. She’s the attorney general. She has the right to pursue cases where the evidence leads to this.”
“She can secure convictions or dismissals or acquittals. She’s simply doing a job. She should be left alone,” she added.
Trump isn’t the only elected official who has targeted James. Rep. Elise Stefanik, a close Trump ally, filed a complaint last year with the state seeking to have her disbarred.
Stefanik is the leading Republican voice in New York right now and will likely maintain that position for the next several months. She’s widely expected to challenge Hochul in next year’s race for governor.
“As James famously said, ‘No one is above the law.’ That standard also applies to her. She is going to find out how true her own words are now that the DOJ opened a grand jury investigation into her abuse of power,” Stefanik said Friday.
“The DOJ's investigation into Letitia James is a vital step toward justice. I will continue to fight to expose NY corruption, protect constitutional rights, and hold these failed Democrat leaders in NY accountable,” she added.
💰 New York facing budget gaps not seen since Great Recession
New York is facing a cumulative budget gap of $34.3 billion through fiscal year 2029, which ends in 2030.
That is not new information: It was included in the financial plan for the current state budget. The gap is largely because the state is projecting to spend significantly more through fiscal year 2029 than it collects in revenue.
New York is also projecting a weaker economic forecast than what was recorded in recent years, meaning revenue was already at risk.
That was before the new federal spending bill was approved by Congress and signed into law by Trump in July. As you know, the state is now on the hook for more if it wants to replace expected cuts in federal funding.
The state doesn’t have to fill most of the gaps caused by that bill. It could choose to change state policies for Medicaid to cut costs — but that would likely lead to some residents losing coverage.
Democrats expect to try to soften the blow next year but we have no idea what’s on their menu of options. (They don’t either, to be frank.)
But a report from state Comptroller Thomas P. DiNapoli’s office released Friday provides some new context to those numbers.
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