Officials talk FY 2026 Budget: Rising Medicaid costs and revenue growth
ALBANY, N.Y. (NEXSTAR) — State officials met publicly on November 15 to discuss the foundation of New York's 2026 fiscal year (FY) budget. Their Quick Start Budget presentation showed the state's economy growing faster than previously predicted, with increased tax revenue driven by higher-than-expected wages and bonuses.
Still, the experts—representing the Division of the Budget (DOB), the Assembly Ways and Means Committee, and the Senate Finance Committee—predict slower growth next year and in the years following. Budget Director Blake Washington said that they had to plan carefully and make hard decisions to balance investments with upcoming monetary challenges.
You can take a look at the report at the bottom of this story.
The next budget process technically kicked off on October 29, when the DOB released the Mid-Year Financial Plan with updates on revenue collections, economic projections, and spending trends. It highlighted persistent inflation, slow job growth, and weak corporate tax receipts as threats to financial stability.
The labor and stock markets funded personal taxes and pass-through entity taxes, according to the report, yielding an extra $2.1 billion in state money beyond what had been predicted for the last fiscal year. Yet, despite such strong revenues, growth should decline, and deficits could reach $6.2 billion in 2026 and $7.1 billion in 2027.
The state's $21.6 billion reserves—covering 16% of projected spending—represent a financial cushion. However, old debts, pensions, and healthcare for retirees will likely drag down the budget for years to come.
Other geopolitical issues—like supply chain disruptions or policy changes from the incoming Trump administration—could further impact revenues from corporate and income tax collections. Labor disputes, fuel price spikes, or federal cuts to public health and housing would pose more risks, as would more New Yorkers leaving the state or businesses hiring more remote workers from out-of-state.
As more New Yorkers live longer, Medicaid remains a massive and ongoing budget consideration. Forecasts connected rising Medicaid costs—set to rise 12% annually—to higher enrollment and more caseloads, inflation in the healthcare industry, and aging demographics. State spending on Medicaid could grow by $23 million this year and reach $35 billion by 2026, passing its statutory cap by $2.2 billion that year.
Between Medicaid and school aid, "The two programs comprise roughly 83% of growth in the upcoming year," Washington said.
Wages are also growing slower than in previous years. While employment went up in healthcare and technology, jobs in finance and retail declined.
Take a look at the report below:
