Cost to New York State of President Donald Trump's budget cuts will run into the billions

ALBANY — The new federal budget that President Donald Trump signed into law July 4 shifts more than $3 billion in costs to New York state taxpayers over the next two fiscal years, according to a preliminary estimate by state officials.

But those officials and independent analysts say the ultimate toll of this "restructuring" of the federal-state relationship will end up costing New York taxpayers billions more over the next several years, along with an untold "human toll" on families. The cuts in part pay for major tax cuts primarily aimed at the wealthy.   

"The impact will be vast," Blake Washington, the state budget director, told reporters Thursday. "There are going to be hard decisions."

State officials have outlined a long list of impacts from the budget that the Republican Congress adopted a week ago:

• The state loses $750 million in Medicaid funding already allocated for the current 2025-26 fiscal year.
• An additional $3 billion annually in Medicaid funding will go away for the fiscal year that begins April 1.
• As many as 1.5 million New Yorkers will lose health insurance under the Affordable Care Act, also known as Obamacare. That is expected to clog emergency rooms and threaten hospitals’ finances as they care for more uninsured New Yorkers.
• Some 750,000 immigrants lawfully in the United States could lose coverage under the state's Essential Plan, because the federal bill will cut $7.5 billion for the program over several years.
• There will be a loss of $100 million next year for the Supplemental Nutrition Assistance Program that provides food stamps for 3 million New Yorkers, and a loss of about $500 million over several years because of funding cuts and new restrictions. Some 300,000 households are projected to lose some or all of their SNAP benefits, which average $220 a month.

"No state can fully undo the damage in this bill or backfill cuts of this scale," Gov. Kathy Hochul said Friday. "I’m working with the Legislature to brace for the impact and protect as many New Yorkers as possible."

Hochul’s budget director said it’s not certain if the Legislature will need to hold a special session in the fall to make midyear cuts. He said the $750 million loss in federal aid this fiscal year may be "managed" within the budget and reserves.

In May, the Legislature granted Hochul the power to alter the budget if revenue drops by more than $2 billion, such as in a recession some economists predict. But legislative leaders would have recourse to block the changes.

"This critical juncture requires tough, smart choices," said Patrick Orecki of the independent Citizens Budget Commission, "While the largest direct impact will be in health programs, including Medicaid and the Essential Plan, the resulting financial plan pressures will put all spending on the table. New York State is not going to be able to backfill billions of dollars in federal cuts or tax its way out of this."

Cost to health care

The impact will be particularly sharp for the state's health care system. Hochul said the federal bill will "destabilize" care and cost public and private providers $13 billion a year, while making it harder for New Yorkers to get care.

State Health Commissioner Dr. James McDonald said the federal budget "poses a serious threat to the health and well-being of New Yorkers."

"A rollback of this magnitude jeopardizes the stability of health care facilities around the state, strips health insurance coverage from New Yorkers, and will have direct, harmful impacts on working families, children, older adults, and individuals with disabilities," McDonald said in a statement to Newsday.

The Health Department is continuing its analysis of the bill, but leaders in the health care industry are already predicting dire results.

The Greater New York Hospital Association’s Kenneth Raske warned the Medicaid cuts "could force some hospitals — particularly in rural locations — to close their doors, limit services and reduce staff."

David Jakubowicz of the Medical Society of the State of New York said the federal budget "will have devastating effects for maintaining an affordable and sustainable health care system in New York ... and strips away the safety net from millions of New Yorkers."

New state budget

The federal cuts come after the state adopted its own budget in May.

The state budget totals $254 billion and increases spending by 5.2% with an increase in Medicaid spending alone of $7.6 billion, or nearly 8%.

In the spring, as they worked out the budget, Hochul and Democratic leaders decided not to assume deep federal cuts. Instead, they tried to pressure New York Republicans in Congress to block Trump’s budget. None did.

State Senate Majority Leader Andrea Stewart-Cousins said Friday the state now faces a "cruel and dangerous agenda," while Assembly Speaker Carl Heastie said the measure will "devastate the lives of countless families across our state." Both are Democrats.

Not everyone is convinced the outlook is bleak. Bill Hammond of the Empire Center think tank in Albany said the concerns of state and industry officials may be overblown.

Hammond said the state may be able to manage some cuts within its budget because New York has "extraordinarily high" Medicaid spending as it offers some costly, optional benefits and has expanded coverage to more people.

"The impact likely need not be as catastrophic as state leaders and industry officials have portrayed," Hammond said in his analysis. New York "is better positioned than most to weather a loss of support from Washington."

Hammond said New York could manage the loss of as much as $7 billion from the federal government and still have the resources provided in the 2024-25 fiscal year, which ended March 31.

The federal budget passed this month along a narrow, party-line vote by Republicans who focused on the bill’s tax cuts. Supporters said their budget also cuts bloated state spending by big states like New York, headed by Democrats, by reducing the federal payments to programs that are funded jointly by the federal government and states. 

"This is a pro-worker, pro-family, pro-growth bill," Rep. Nick LaLota (R-Amityville) said. He focused on the bill’s tax cuts including a higher child tax credit and a temporary tax break for seniors.

"While not perfect," said Rep. Andrew Garbarino (R-Sayville), "this bill includes real wins for Long Island and for the American people. I was proud to cast my ‘Yes’ vote to pass the One Big Beautiful Bill."

Tallying the impact

Independent analysts, industry lobbyists and state officials are still analyzing the cost of the 940-page budget on New York. Some have offered preliminary findings.

The nonpartisan research organization KFF concluded that New York will lose $150 billion in federal Medicaid funds over the next 10 years.

The Fiscal Policy Institute presented its preliminary analysis on the federal budget last week, calling the Medicaid cuts part of the "biggest rollback in federal support for health care ever."

The Institute concluded that 1.6 million New Yorkers would lose health insurance under the state’s Essential Plan, which provides insurance for low-income residents and immigrants who can’t meet federal rules for Medicaid, according to the Fiscal Policy Institute.

It also estimated that federal Medicaid cuts will cost as many as 215,000 jobs because of reduced Medicaid funding for hospitals, some of which could close in rural and inner-city areas.

State Comptroller Thomas DiNapoli is also continuing his review of the bill.

"We are still trying to sort out the specifics," DiNapoli in an interview. "Some of this will be effective over time."

He said the federal budget represents not isolated cuts in aid, but "a restructuring of the federal-state relationship." DiNapoli said he expects further federal cuts beyond health care and social services in education, housing and the many other areas in which services are paid by federal and state funds.

"The other challenge for all this is there are more appropriation bills to come," DiNapoli said. "This is not the end of it. ... there is still a long way to go."

By Michael Gormley

michael.gormley@newsday.com@GormleyAlbany

Michael Gormley has worked for Newsday since 2013, covering state government, politics and issues. He has covered Albany since 2001.