New York's budget gap now 'manageable' next year, Hochul's office says

And the All-Electric Buildings Act will be delayed per an agreement from the state.

Good afternoon — It’s Wednesday and Happy Hour Day.

In today’s CapCon:

• New York’s budget outlook has improved from bleak to “manageable,” state Budget Director Blake Washington said Wednesday.

• Here’s how the state Division of Budget’s projections on revenue and spending for the next state budget compare to the Legislature’s view.

• New York has agreed to delay implementation of the All-Electric Buildings Act in a new court filing.

• A new bill would seek to create a new research initiative in SUNY on New York’s rise in problem gambling.

Names in today’s CapCon: Blake Washington, Phil Fields, Chris Friend, Kathy Hochul

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Hochul and State Budget Director Blake Washington (Lori Van Buren/Times Union)

💰 New York’s financial outlook ‘is brighter than initially expected,’ Blake Washington says

When Gov. Kathy Hochul and Democrats in the state Legislature struck a deal on the state budget in May, they expected doom and gloom for the current fiscal year.

There were significant risks to the $254 billion spending plan. That list was long, ranging from the impact of tariffs to cuts in funding from the federal government.

That risk became tangible when Republicans in Congress approved the “One Big Beautiful Bill,” which did not extend premium health care tax credits and other subsidies that had been allowed for lawfully present migrants in the U.S.

That, and other changes from the bill, blew a $3 billion hole in next year’s state budget, the Hochul administration has projected. The doom and gloom had arrived.

But in the background of all of that, something else was happening that the state hadn’t expected and was pleasantly surprised to learn.

Tax receipts had come in higher than projected — by billions of dollars, as I told you on Halloween when I laid out the state Division of Budget’s mid-year update published the night before.

The Hochul administration is now expecting tax receipts to be $2.6 billion higher for the current fiscal year, ending in March, and $5.3 billion in the next fiscal year. That’s largely due to higher-than-expected income tax receipts.

State Budget Director Blake Washington laid out the rest of the numbers Wednesday at the annual “Quick Start” meeting at the state Capitol.

It’s the first step toward next year’s state budget. Washington shares his team’s projections on revenue and spending for the upcoming state budget and representatives from both chambers of the state Legislature bring their own for comparison.

(CFOTO/Future Publishing via Getty Images)

💵 What the new revenue projections mean for next year’s state budget

The rosier revenue results have now made next year’s state budget gap — revised down to $4.2 billion from $7.5 billion — easier to resolve, Washington said.

“We see this number as one that’s completely manageable,” he said.

The new $4.2 billion gap is not a small amount of money. It’s more than what Hochul and lawmakers had to come up with to fund the MTA’s five-year capital plan in the most recent state budget.

I followed up with Washington after the meeting to ask what he meant by “manageable.”