Gov. Kathy Hochul released a $252 billion budget proposal Tuesday to extend a higher tax rate for New York millionaires for five years and give school districts funding to regulate student cell phone use.

Hochul's fourth executive budget proposal increases spending 3.6% and has a total state operating funds of $143.8 billion, which reflect a 7.9% increase, budget officials said.

The governor wants New Yorkers who make over $1.1 million annually to continue to pay a higher income tax rate through 2032 — or an extension of five more years to help close outyear spending gaps. The higher tax rate for millionaires first imposed in 2021 was set to expire in 2027.

"We're extending the high-income surcharge," state Budget Director Blake Washington told Spectrum News 1. "If you were looking at our financial plan in October, you would see a cliff. That cliff is no longer there for 2028 and those resources carry forward and that, too, bolsters the financial plan."

Meanwhile, a higher tax rate for corporations with over $5 million in profits will expire next year, because the state didn't want to create volatility with the sector, Washington said.

"It made corporations that would otherwise pay the tax, it gave them angst," the budget director said. "We don't want to promote angst. In the state of New York, we want corporations to stay here."

But new taxes remain on the negotiating table after Hochul declined to fill a $33 million hole in the Metropolitan Transportation Authority’s capital plan and amid uncertainty around federal cuts to health care, education and other aid New York relies on under President Donald Trump.

"I suspect any proposals for new taxes or changes in taxes is all part of a mix of what happens in budget negotations in order to accomplish the much broader goals of do we have the adequate revenue to cover the critical issues for New Yorkers?" Senate Finance Committee chair Liz Krueger told reporters Tuesday.

Legislative leaders are keeping their cards for new taxes or revenue raisers close to the vest, but said they will review how much the state should spend next year before each chamber releases a counter proposal in March.

"I can't comment on how much we have to raise in terms of revenue until I see how much we need to spend," Assembly Speaker Carl Heastie said after Hochul's budget address.

The governor's budget includes $13.5 milion to reimburse school districts for costs to implement rules to limit cell phone use during the school day. 

The state has estimated budget gaps of $6.5 billion in 2027, $9.8 billion in 2028 and $11 billion in 2029 under Hochul's spending plan.

It includes:

• $1 billion tax cut to the middle class for joint filers making $323,000 or less
• One-time $3B inflation rebate check of $300 for single taxpayers earning up to $150,000 annually; $500 for joint filers making up to $300,000
• $800 million expanded child tax credit capped at $1,000 per child under age 4, up from $300 per child
• $120M more for free school lunches for districts not already eligible

The state's $3.5 billion surplus was boosted by higher-than-expected peronal income tax receipts largely funds the governor's tax proposals and strong performance on Wall Street.

"Every month, working New Yorkers face difficult choices about how to stretch every dollar," Hochul said Tuesday. "That’s why this budget is laser-focused on putting money back in New Yorkers’ pockets."

School aid

• Grows $1.7B, or 4.7%
• Changes data driving school Foundation Aid, or the state's direct funding formula for districts, to use data from the latest 2020 Census, and amends the free and reduced price lunch metric to target economically disadvantaged students.

Hochul wants at least a 2% increase for the 311 school districts that would not get an increase in aid under her formula proposal.

"Everybody gets something and I think that we're responding to some of the Rockefeller report," Budget Director Washington said. "I know that this will be a discussion with the Legislature, but we feel like this is a place of minimum disruption but also providing for the current law level of school aid across the board."

Medicaid spending

• Grows ~13.7%, with ~900,000 more New Yorkers on Medicaid rolls post-pandemic
• Keeps plan to transition Consumer Directed Personal Assistance Program, or CDPAP, for home care to one fiscal intermediary by April 1.
• N.Y. to get $3.7 billion over two years, spend it over three, from federally approved tax on Managed Care Organizations

"A handful of other states have pursued this financial mechanism, so we're consciously optimistic that it goes forward," Washington said.

It's unclear how much funding the state will see from the temporary tax under President Donald Trump, who took office Monday.

Washington said the state's planned changes to CDPAP will save $500 million once fully implemented.

Mental health

• Fund half of $154 million in overtime costs for 750 NYPD officers deployed for new overnight subway train patrols
• Funding to create 100 beds for forensic inpatient psychiatric care on Randalls Island and Wards Island
• $16 million for counties to strengthen assisted outpatient treatment programs to direct people in mental crises to be hospitalized for care
• $10 million to build clubhouses, or safe place for people to get support for mental illness
• Additional funding for welcome centers and other peer-led services

Higher education

• Increase SUNY and CUNY operating aid ~$210 million, with $90 million to prevent tuition increases
• Additional $450 million to prevent closure of SUNY Downstate University Hospital and Medical Center as community board determines next steps