New York State Budget Passed: Winners and Losers

Two months past deadline, Albany finally passed their FY 2027 State Budget. Here’s the bottom line: Mamdani got New York City bailed out to the tune of $8 billion in state aid, Hochul caved to the unions on Tier 6 pensions, but she held her ground against trial lawyers with solid tort reform. The budget was organized into ten bills, five appropriations and five articles, all of which passed along party lines with zero Republican support.

Tier 6 Pension Reform Undone

Hochul and Albany Democrats folded to union demands and scrapped Tier 6 pension reforms in the FY 2027 budget. The unions didn’t get everything they asked for, but union bosses still walked away with a major win. As ATR has previously reported scrapping this reform will cause New York’s budget to balloon exponentially in the coming years. It will cost the state upwards of $100 billion in total payouts. Skyrocketing costs were the entire reason this reform was passed in the first place back in 2012: between 2000 and 2010, the annual cost of the state’s pension system exploded from under $1 billion to nearly $10 billion.

The irony here is hard to miss. By undoing Tier 6, Hochul’s budget actually does Mamdani more harm than good. The budget includes a provision allowing New York City to delay its overdue pension payments for a few years while it works through its $5.4 billion deficit. But with Tier 6 gone, the cost of that delayed payment is going to grow much larger, much faster.

With its only guardrail now removed, New York State needs to brace for the financial crisis it has imposed on itself. This was done purely to play politics and pander to union bosses, rather than serve the needs of everyday New Yorkers. Taxpayers will be footing the bill for this mistake for years to come. And it won’t just hit state taxpayers, local governments will feel this too. These pension changes affect their workers and drive up property taxes across the board.

Tax Hikes: Decoupling from the One Big Beautiful Bill, Secondary Homes, and ZYNs

Hochul also managed to push through a series of tax hikes on consumers and businesses. Under President Trump’s One Big Beautiful Bill, businesses could deduct 100% of their research and development costs. New York’s new budget officially decouples from that provision and will retroactively tax businesses who claimed those deductions in the 2025 tax year. That’s a gut punch to businesses that made investment decisions in good faith.

The second major tax hike targets any property not designated as a primary residence. Properties valued over $5 million will face a 0.8% charge, those between $15–$25 million will face 1.05%, and anything above $25 million gets hit with 1.3%. Hochul and Albany Democrats are calling this a tax on the “ultra wealthy,” but this sets the stage for future expansion. The tax is set to expire in five years, giving Albany Democrats the opportunity to broaden the rates and the types of property it applies to. Once politicians turn on a money faucet, they only ever increase the flow.

The third tax hike is a 75% wholesale tax on nicotine pouch products like ZYNs. While Albany claims this will raise revenue, it will primarily make these products unaffordable for legal age adults and push them toward unsafe, black-market alternatives. As ATR has noted, nicotine pouches have been treated as a less harmful alternative to cigarettes. Taxing them at this rate contradicts that entirely and could drive users back to more harmful options. 

Other Tax Threats

ATR flagged a variety of other taxes which faltered: The gold bullion tax (SB7875), crypto mining tax (A8800-B), yacht tax (S3874), and the personal and corporate income tax surcharges (SB9009/SB9009-A). All failed to clear their respective committees, while the noisy helicopter tax (S1140-A) stalled after passing only the Senate, and the NYC mansion tax increase (SB8300-B) was excluded from the final state budget in favor of the “pied-a-terre” tax.

Every tax in this budget takes money directly out of the pockets of families and small business owners. In an era of increasing unaffordability, the last thing New Yorkers need is Albany making things more expensive.

A Silver Lining: Tort Reform and Lower Car Insurance

The one clear win for New York taxpayers is Governor Hochul’s tort reform. New Yorkers already pay the highest auto insurance rates in the country, averaging $4,000 a year. This reform cracks down on abusive lawsuits and brings much needed transparency and accountability to the state’s legal system. The reform will save families thousands of dollars that were previously going straight into trial lawyers’ pockets. Despite an aggressive lobbying effort from those trial lawyers, Hochul’s reforms made it through, and New Yorkers should start feeling the benefits quickly.