Kathy Hochul Plots N.Y. Comeback in First State Address as Governor

(Bloomberg) -- New York Governor Kathy Hochul on Wednesday proposed policies touching on health, middle-class taxes and infrastructure that were designed to be immediately useful for a state emerging from a pandemic that scarred its citizens and economy.

The plan, outlined in Hochul's first State of the State speech since succeeding Andrew Cuomo, put health at the top of the to-do list, including $10 billion to increase the medical workforce by 20%, improve its training and help students and immigrants enter the field.

The governor, a Democrat, said she wants to accelerate tax cuts instituted under her predecessor in 2016. Instead of middle-class families receiving a yearly break through 2025, 6 million New Yorkers would get full, phased-in credits amounting to $1.2 billion as early as 2023.

Hochul, 63, also put forward a proposal to replace a property-tax abatement, known as 421-a, that saves real-estate developers billions a year, and to build rental housing across New York City. Hochul would improve subways and commuter rail for the nation's largest city, whose teetering economy depends on them.

The vast majority of changes will need approval by lawmakers, with whom she vowed to work, a break with her predecessor's combative style.

“What I am proposing is a whole new era for New York,” she said from the podium of the Capitol's Assembly Chamber in Albany, the location a nod to her vows of cooperation. “The days of governors disregarding the rightful role of this legislature are over. The days of the governor of New York and mayor of New York City wasting time on petty rivalries are over. The days of New Yorkers questioning whether their government is actually working for them are over.”

Bite-Sized Pieces

Hochul's 224-page plan is sprawling. It includes goals as specific as allowing bar-goers to take drinks to-go and as broad as protecting abortion access and civil liberties. The program, whose priorities must be fleshed out in a budget due in weeks, lacked a towering centerpiece: Many proposals were amplifications or extensions of existing efforts. But it seemed designed to be achievable in the statehouse and to position her as a solver of practical problems ahead of the November election.

Hochul made health provisions the first item and emphasized a “strong, stable, and equitable healthcare system.”

“We must stop the current hemorrhaging of health-care workers, and we are going to do it not just by saying we owe them a debt of gratitude, but actually paying them the debt we owe,” she said.

The plan would permanently relax some licensing rules and regulations for health-care workers that were suspended during the pandemic emergency to make it easier to treat people, and expand insurance coverage for the poor.

The plan calls for $6 billion for wage supports, worker-retention bonuses, and capital infrastructure like lab facilities. The state is seeking an additional $2.2 billion in federal aid for home health workers, as well as $500 million in spending on cost-of-living adjustments for human-services workers.

Pocketbook Issues

Hochul's plan also aims to help New Yorkers directly by easing their tax burdens, years sooner than planned.

“That original timeline did not take into account the economic devastation brought on by the pandemic, and the many people who need help now in the face of rising inflation,” according to the governor's briefing book.

The governor also would provide property tax relief to more than 2 million eligible homeowners, particularly low-income and seniors, with rebates totalling nearly $1 billion. Plans included allowing homeowners to build “granny flats” in backyards, attics, and basements to ease the affordable housing shortage.

One controversial part of her plan is to alter the 421-a tax loophole, which could end tax policies that have enriched developers for years and provide money for other priorities. Changes could anger the city and state's powerful real estate interests, which have benefited from a system of uneven tax payments for high and low-income homeowners and renters. Still, Hochul shied away from issuing specifics.

With the credit set to end this year, “there is an opportunity to enact a different kind of abatement program that can continue to incentivize rental housing construction across New York City while creating permanent and deeper affordability and spending taxpayer money more efficiently,” according to her briefing book.

Hurdles Ahead

Hochul struck an optimistic tone, but remained realistic. She told New Yorkers that “we need to take a hard look in that mirror and deal with harsh realities like the fact that 300,000 New Yorkers left our state last year,” noting it was steepest population drop of any U.S. state.

She called the exodus “an alarm bell that cannot be ignored” and asked those who left to come back. “You do not want to miss what's going to happen next,” she said.

Hochul now has to deliver a $200 billion budget proposal by Jan. 18 and is already gearing up for a Democratic primary contest in June. While she plots the state's economic comeback, she also has to contend with the continuing assault by a virus that has infected nearly a fifth of state residents since it hit New York in March 2020. With Covid-19 cases again surging, there are long lines for testing, and staff shortages at hospitals, schools and transit operators.

The speech drew some early praise from corporate leaders, unions and lawmakers. Kathy Wylde, chief executive officer of the Partnership for New York City, a powerful business group, called Hochul's message a “practical and smart approach to addressing the challenges ahead as we strive to maintain our state's competitive advantage in the global economy.” The Real Estate Board of New York called her proposals “sensible” and pledged to work with her to bring more affordable housing to the state.

Criticism arrived from both ends of the political spectrum. Progressives said she didn't go far enough on things like childcare and ethics reform, while Republicans like state Assemblyman Edward Ra said the address fell short of providing “tangible solutions to real issues,” and called Hochul's plans “reckless government spending.”