NYS Budget: Housing, Medicaid, Taxes, and MTA Provisions

New York’s 2026-2027 state budget was signed into law on May 27, 2026, nearly two months after the April 1 deadline, and totals $268.5 billion in all-funds spending.¹ The plan raises school aid, expands Medicaid provider funding, overhauls auto insurance rules, loosens 2019 climate targets, exempts most new housing projects from state environmental review, restricts local cooperation with federal immigration agents, and adds a new surcharge on nonprimary residences in New York City. It also carries roughly $90 billion in federal funding that state officials flag as vulnerable to further cuts.²

Here is what the budget actually does, section by section.

What Changes for Drivers and Accident Claims

Auto insurance was one of the last pieces settled, and the reforms are among the most far-reaching in the budget. New Yorkers pay about 32 percent more than the national average for car insurance, and staged-crash fraud is estimated to add up to $300 per year to premiums.³

The state moves from a “pure” comparative negligence rule to a “modified” one: a driver found more at fault than the other party can no longer recover damages at all. The “90/180” path to meeting the serious injury threshold — which let claimants qualify by showing an impairment that prevented normal activities for 90 out of 180 days — is eliminated. Drivers convicted of impaired driving, a felony, or operating without required insurance face a $100,000 cap on non-economic damages. These changes apply to lawsuits filed on or after May 26, 2026.⁴

On the rate-setting side, insurers can no longer price policies based on zip code, occupation, education level, or homeownership status, and must get Department of Financial Services approval before raising rates.³ Insurance company profits are capped at 5 percent. The Citizens Budget Commission estimates the package will lower consumer rates by roughly 10 percent.⁵

Housing: Faster Approvals and Rent Relief

Under what the governor calls the “Let Them Build” agenda, most new housing projects are exempt from the State Environmental Quality Review Act (SEQRA), a review process critics say adds $82,000 per unit in costs and up to two years of delay in New York City.⁶ The exemption applies only on previously disturbed land with existing water and sewer connections, and caps out at 500 units in high-density parts of New York City, 300 units in urbanized areas outside the city, 100 units elsewhere, and 20 units in places without zoning. Projects on undeveloped or agricultural land still get full review.⁷ Developers must certify compliance with hazardous waste laws and conduct a Phase I environmental site assessment, and historic preservation, wetland, and environmental justice rules stay in place.⁸

For tenants, the budget puts $140 million into NYCHA, $85 million into Mitchell-Lama preservation, and expands the SCRIE and DRIE rent relief programs to households earning up to $75,000.⁹ The J-51 tax abatement for building improvements is extended for 10 years.¹⁰

Schools, Pre-K, and Childcare

Total school aid reaches $39 billion, with $27.4 billion in Foundation Aid — a $1 billion increase that now carries a guaranteed 2 percent annual floor. The formula is also updated to weight English language learners more heavily and to account for students in foster care or experiencing housing instability.¹¹

Universal full-day pre-kindergarten becomes a mandate for all four-year-olds by the 2028-29 school year, supported by $1.6 billion in total Universal Pre-K funding.⁹ A new $395 million universal school meals program provides free breakfast and lunch to all K-12 students.¹² Childcare subsidies total $3 billion, and after-school programs get $116 million. Mayoral control of New York City schools is extended two years, through June 30, 2028.¹¹ The zero-emission school bus purchase mandate is pushed back to 2032, and the full fleet transition deadline to 2040.¹⁰

SUNY and CUNY each receive $200 million for critical maintenance. A new Opportunity Promise Scholarship covers free community college for adults pursuing associate degrees in high-demand fields, with an extension to four-year institutions offering such degrees.¹³

Healthcare and Medicaid

State Medicaid spending is projected to reach $40 billion in FY 2027, a 16.2 percent increase driven by provider rate increases, capital grants, and facility subsidies.¹⁴ Hospitals receive $706 million in new funding, including $500 million in operating aid for financially distressed facilities. Nursing homes get $480 million, and federally qualified health centers get $80 million.¹⁰

Starting January 2027, the tax on managed care organizations is replaced by a flat 0.35 percent premium tax paid by all health plans. That new tax will produce roughly $165 million in its first year, far less than the $1.8 billion the old tax generated annually, and is designed to fund $1.5 billion in provider increases.¹⁴

Coverage tightens on one important front. Because the federal “One Big Beautiful Bill” enacted in 2025 eliminated Essential Plan eligibility for people earning between 200 and 250 percent of the federal poverty level, roughly 450,000 New Yorkers are expected to lose that coverage as of July 1, 2026. The final budget does not include funding to replace it.¹⁵ The budget also includes $20 million for abortion medication care grants and $10 million for reproductive health facility capital improvements.⁹ Contracted human services nonprofits get a 2.7 percent payment increase, a compromise between the governor’s 1.7 percent proposal and the 4 percent lawmakers sought.

Climate Law Changes

The 2019 Climate Leadership and Community Protection Act is significantly altered. The 2030 target of cutting greenhouse gas emissions 40 percent from 1990 levels is effectively scrapped. In its place is a 2040 interim goal of a 60 percent reduction, qualified by the phrase “to the maximum extent feasible and cost effective.” The binding 2050 target of 85 percent reduction stays.¹⁶

The state also shifts its emissions accounting from a 20-year to a 100-year timeframe. The change dilutes methane’s measured impact, because the 20-year window captured methane’s short-term warming effects more aggressively.¹⁷¹⁸

On the spending side, $1 billion goes through the Sustainable Future Program for climate mitigation and green jobs, $200 million to the Empower+ energy efficiency program, and $450 million to the Environmental Protection Fund.⁹ A separate $1 billion funds “Protecting Our Wallets” utility rebate checks of $100 to $200 for about 8.2 million New Yorkers.¹⁰

Limits on Immigration Enforcement

The budget bars local governments and police from entering into 287(g) agreements or similar arrangements for civil immigration enforcement, and bans informal information-sharing agreements with ICE and Customs and Border Protection.¹⁹ Federal immigration agents may not enter non-public areas of schools, hospitals, libraries, shelters, childcare centers, parks, and polling places without a judicial warrant. Private institutions, including houses of worship, may deny access on the same basis.²⁰

Government employees are prohibited from disclosing personal information to immigration authorities or using immigration officers as interpreters. A new state civil rights cause of action lets New Yorkers sue government officials for constitutional violations. A mask ban forbids law enforcement officers from wearing face coverings during public interactions.²¹ Sponsors acknowledged the package does not explicitly forbid all informal cooperation, and negotiations to require “probable cause” for any cooperation did not reach agreement.¹⁹

New and Extended Taxes

The most-discussed new revenue source is the pied-à-terre tax on nonprimary residences in New York City. In an initial two-year phase starting July 1, 2026, condos and co-ops with assessed values above $1 million face rates of 4 to 6.5 percent, and one-to-three-family homes valued at $5 million or more face rates of 0.8 to 1.3 percent. Starting in FY 2029, the threshold rises to $5 million for all property types and rates drop to the 0.8 to 1.3 percent range under a new valuation method based on comparable sales. The tax sunsets June 30, 2031.²²²³

Other tax changes:

Existing Article 9-A corporate franchise tax rates, including the top rate of 7.25 percent, are extended through 2030 rather than being allowed to decrease after 2027.²⁴
Starting in 2026, New York conforms to the federal exclusion of up to $25,000 in tip income from gross income.²⁴
A 75 percent wholesale excise tax now applies to tobacco-free nicotine pouches, projected to raise about $50 million a year.²⁵
A refundable POWER credit of $100 to $300 is available to 2024 tax year filers earning below $300,000 (joint) or $150,000 (single).²⁴
The state decoupled from parts of the 2025 federal tax law, reversing the federal restoration of immediate expensing for research costs and bonus depreciation, to protect state revenue.²⁶

Proposals for higher tax rates on top earners, a large-corporation surcharge, and a digital asset mining excise tax were not adopted.²⁶

Transit and the MTA

The budget commits $2.2 billion in new investment for the Metropolitan Transportation Authority and provides $8 billion in total operating aid.⁹ Those figures follow a prior-year budget that fully funded the MTA’s $68.4 billion 2025-2029 capital plan through a $3 billion state appropriation, a matching $3 billion city contribution, and $3 billion in MTA efficiencies.²⁷

The MTA’s longer-term picture is less settled. Congestion pricing tolls, a key funding source for the capital plan, remain the subject of active litigation between the MTA and the federal government; if the tolling program is terminated, the authority loses revenue expected to support $15 billion in capital borrowing. Operating budget gaps are projected to reach $1.1 billion by 2029, and the MTA relies on $2.1 billion in one-time resources, including FEMA reimbursements and casino license fees, over the next four years.²⁸

New utility regulation provisions limit rate increases to the rate of inflation, with exceptions, and prohibit utilities from passing lobbying and public relations costs on to ratepayers.⁹

Other Notable Provisions

The budget bans the manufacture of 3D-printed firearm components and creates 50-foot buffer zones around religious sites for demonstrations.¹⁰ Food and nutrition programs receive $72.8 million for the Hunger Prevention and Nutrition Assistance Program, $55 million for Nourish NY, and $8.7 million for a new network of community navigators to help residents apply for SNAP benefits.¹⁵ Municipalities outside New York City receive over $1 billion in unrestricted aid.⁹

Why the Budget Was 57 Days Late

The fiscal year began April 1 without a deal. To keep government operating, lawmakers passed 13 temporary spending bills over the following weeks, together appropriating $31.7 billion, which included $8.2 billion in school aid payments districts were counting on.²⁹

On May 7, Governor Hochul announced a “general agreement” on a framework. Assembly Speaker Carl Heastie publicly contradicted her the same day, telling reporters “There is no budget deal” and calling the announcement “premature.” Senate Majority Leader Andrea Stewart-Cousins described leaders as “nearing the beginning of the end.”³⁰ The remaining sticking points — auto insurance, climate law changes, the pied-à-terre tax, and immigration protections — were policy-heavy items well beyond dollar figures.³¹ Six budget bills passed on May 27, and the governor signed everything into law that same day, 57 days late.¹⁰

Heastie’s public frustration was with using the budget as a vehicle for major policy: “Budgets are supposed to be about money, not policy. I’m never doing this again.”³²

Fiscal Outlook

The budget is balanced for FY 2027, but projected gaps grow quickly in later years: $6.4 billion in FY 2028, $10.5 billion in FY 2029, and $14.7 billion in FY 2030.³³ The Citizens Budget Commission puts the structural gap between recurring spending and recurring revenue at roughly $18 billion.³⁴

Reserves stand at $14.6 billion, up from $3 billion in FY 2021, but no new deposits are planned through FY 2030.³⁵ Outstanding state debt is projected to approach $94 billion by the end of the decade, up from about $60 billion today.³⁴ The budget also grants the state budget director sweeping authority to unilaterally reduce appropriations to restore balance if a deficit of $2 billion or more is anticipated, a power aimed at sudden federal funding disruptions.³⁶ Given that about $90 billion of state spending comes from federal sources, that authority may matter more than usual in the years ahead.²

1
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Citizens Budget Commission. NYS FY 2027 Budget
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New York State Governor. Governor Hochul Secures Reforms to Lower Auto Insurance Premiums
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Spectrum News. New York Budget Car Insurance
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Nixon Peabody. New York SEQRA Changes – Eligibility for Affordable Housing Projects
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Empire Center. Healthcare Highlights in the New State Budget
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New York Focus. Essential Plan COLA Social Services SNAP
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City & State NY. Hochul Got Most Climate Rollbacks She Wanted
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News10. NY CLCPA Climate Budget Change
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New York Focus. CLCPA Climate Change Rollbacks
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City & State NY. Expected Budget Immigration Protections Fall Short
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New York State Governor. Governor Hochul Signs Comprehensive Immigration Plan
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NBC New York. Hochul Anti-ICE Protections Law New York
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Holland & Knight. New York State Enacts Pied-a-Terre Tax
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CNBC. New York Mamdani Pied-a-Terre Tax Passes
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Tobacco Reporter. New York Taxes Nicotine Pouches at 75 Under Enacted Budget
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EY Tax News. New York Legislature Approves Budget Bill
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New York State Governor. Governor Hochul Signs Legislation to Fully Fund Improvements for Transit Riders
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Citizens Budget Commission. MTA Operating Budget Outlook Short-Term Stability Long-Term Risks
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News10. New York 13th Budget Extender
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News10. FY 2027 Enacted Budget Financial Plan
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News10. NY 2027 Financial Plan
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New York State Comptroller. DiNapoli Releases Report on FY 2027 Proposed Executive Budget
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New York State Division of the Budget. FY 2027 Enacted Budget Financial Plan