Trump tax and spending bill blows $3 billion hole in New York state budget, official says

New York’s state budget will take a $3 billion hit next year from President Donald Trump’s tax and spending bill, a top state official said Thursday.

Budget Director Blake Washington said the One Big Beautiful Bill's effects will be phased in over several years. But some New Yorkers will notice changes to eligibility for Medicaid and other health care programs starting in January.

Washington said changes could be in store for the state’s $254 billion annual budget. He said Gov. Kathy Hochul is set to discuss how to address the new law with fellow Democrats in the state Legislature.

“We are prepared as a state to weather the storms that we can, within reason,” Washington said. “Nobody is prepared to backfill $3 billion in cuts from Congress.”

New York’s most recent financial plan already estimates a $7.5 billion deficit for the next fiscal year. The federal cuts will increase pressure from progressives to raise taxes to maintain spending on social services programs like Medicaid, which provides health care for low-income and disabled people. The Democratic governor has said she opposes raising state income taxes.

The Hochul administration has estimated that 1.5 million people would lose state-backed health insurance. Hospital groups estimate they will eventually lose $8 billion in funding as a result of the bill. That will have a secondary effect on the health care sector. Hospitals estimate the legislation will result in 34,000 job losses.

“The word that comes to mind is just destabilization,” Washington said. “It’s a systemwide impact to the provider network.”

The state budget was adopted in May, before the federal bill's full effects were known, but certainly amid the looming specter of cuts. The budget assumed roughly $93 billion in federal aid for various programs. Medicaid is the biggest funding stream.

Hochul pushed to include roughly $2 billion for inflation rebate checks of up to $400 for families. Both Republicans and Democrats criticized the one-time expenditure as a gimmick.

Washington insisted the checks will still go out this fall.

“I don't think we view it as a mistake. I think that we are viewing it as meeting taxpayers where they are,” he said.

The budget also gives the Hochul administration discretion to handle unexpected mid-year changes. Washington said it was likely the governor’s team could manage the current-year shortfall, which is estimated at $750 million, but that a special session of the Legislature is still possible.

“It remains to be seen,” he said. “If the problem becomes even greater, if there's more unknowns that come to the fore, obviously we'll keep you posted.”