What Trump's ‘Big Beautiful' Bill Means For NYC

By Richard Kim, The City

July 7, 2025, 5:00 a.m.

New York’s political leaders denounced the Republican tax and spending bill but did little to prepare for the potential loss of billions of dollars in federal aid. Now that President Donald Trump has signed the plan into law, state and city officials will have to deal with the consequences.

The law punches a multi-billion dollar hole in the current state budget by reducing federal Medicaid funding, a blow that will almost certainly require Gov. Kathy Hochul to call a special legislative session in the coming months.

The hole gets much bigger in next year’s budget, which needs to be adopted by March 31, as the governor and legislators prepare for their reelection campaigns.

State officials will have to build a system to implement the work and other eligibility rules required by the federal law and decide whether to keep as many people as possible on Medicaid and Snap food benefits — or allow enrollment to decline to reduce pressure on the budget.

The immediate impact on the city will be less severe, but Mayor Eric Adams and the City Council will eventually be confronted with choices on whether to fill in some of the safety net gaps created by the GOP bill — or reduce aid to poor New Yorkers.

Gov. Hochul, Mayor Adams and other top officials have given little indication about what they think the state and city should do now. But others are already taking sides.

The progressive Fiscal Policy Institute is already calling for tax increases.

“The new federal budget legislation signals a paradigm shift in fiscal policy where states are going to become responsible for a much larger share of social spending,” said Executive Director Nathan Gusdorf. “State lawmakers will need to think creatively about how to finance an expanded public health insurance scheme and safety-net programs to prevent food and housing insecurity — all of which will require additional revenues raising measures.”

There is another way, says the conservative Empire Center.

“New York has the most richly financed health care system in the U.S. — and therefore worldwide —which saw its overall government support jump $36 billion in the last four years alone,” said health care expert Bill Hammond. “Although it stands to lose billions in future funding from Washington, New York should be well positioned to absorb that blow through better management of its existing resources — and without the catastrophic consequences that Hochul and others are portraying.”

The situation is particularly difficult because the state and city both increased spending far more than the rate of inflation in current budgets without setting aside any money to offset cuts in federal aid.

The final budget signed by Gov. Hochul increased overall spending by 12% excluding federal aid, the Citizens Budget Commission calculated, the most in recent years and three times the rate of inflation. Hochul also agreed to spend $7 billion to wipe out a debt the state owed the federal government for unemployment insurance, which lowered taxes for employers and allowed the state to raise jobless benefits but reduced the state’s reserves by a third.

The city budget adopted at the end of the month increases spending by almost 8% when adjusted for various financial gimmicks, the Citizens Budget Commission said, twice the rate of inflation. The mayor and Council also rejected numerous pleas to increase reserves from the current level of $8.5 billion, an amount that has remained the same for several years.

The state’s biggest problem is the way it uses federal money to pay for Medicaid and the state’s Essential Plan, which covers people who make slightly too much money to qualify for the Affordable Care Act.

Under the Republican law, New York will lose $7.5 billion used to cover legal immigrants in the Essential Plan, which is almost entirely paid for by the federal government. The state will then have to transfer many of those people to Medicaid, which will cost an additional $2.7 billion, since federal aid for Medicaid only covers about 56% of the actual costs.

Since the state’s fiscal year goes to the end of March, the cost in the current budget will be about $2.5 billion. But for the 2027 fiscal year, the cost will be slightly more than $10 billion.

Over the next several years, the law phases in a provision that will eventually cost the state another $1.5 billion by eliminating a complicated maneuver that taxes health care providers to generate more federal funds.

Federal aid for food called SNAP had been expected to decline by almost $3 billion for New York state. But a last-minute maneuver to win the vote of Alaskan Republican Sen. Lisa Murkowski could result in those cuts being delayed.

New York will also immediately need to build a system to verify twice a year that Medicaid and SNAP recipients remain eligible by meeting new work requirements. The Hochul Administration estimates the cost at $500 million a year.

The more important question is what will be the goal of the system. Republican assumptions about savings are based on the theory that the result will be a decline in recipients, increasing the number of uninsured New York state by 1.5 million, according to Hochul.

But organizations like Public Health Systems, a non-profit which helps people sign up for Medicaid among other services, will be working to make sure as many people remain qualified as possible, said Zach Hennessey, chief strategy officer.

The stakes are high. A survey Public Health Systems conducted of New Yorkers with a household income of less than $60,000 found that 71% would be unable to keep insurance, and 64% said they would be unable to maintain their doctor visits.

Because of the last-minute change on SNAP benefits, the city may not need to immediately decide if it is going to increase food assistance, although other Trump budget cuts have added burdens to the city’s food banks.

The threat to the city lies in the next budget proposal for the fiscal year beginning Oct. 1 which would reduce housing aid by 43% or almost half the $13 billion the state receives annually–virtually all of which is passed along to local governments. It would also put a two-year time limit on the use of vouchers used by 125,000 householders in the city. The city government will come under tremendous pressure to cover those costs if the Trump plan is enacted.

The nine New York Republican representatives in the House all voted in favor of both the original House legislation and the Senate version that became law, calculating that they will be able to argue that the tax cuts benefit far more New Yorkers than those who might lose benefits.

“Today, we delivered on our promise — to stop the single largest tax hike in American history and put more money back in the pockets of Americans,” said suburban Rep. Mike Lawler (R-Rockland County), regarded as one of the most vulnerable Republicans. “We secured meaningful SALT relief, locked in tax cuts for families and small businesses, and restored fairness for hardworking

The new law preserves tax cuts originally enacted in Trump’s first term and adds new ones for overtime, tips and seniors. Those increases, however, expire in 2028 at the end of Trump’s current term.

The biggest victory for New York state Republicans was securing an increase to the cap on deducting state and local taxes (SALT), from $10,000 to $40,000, although it phases out for anyone with income over $500,000. The most likely winners are suburban upper middle class couples with high property taxes and mortgage interest deductions.

But the bill will raise taxes for some New York business executives by an additional $2.7 billion, according to a study from city Comptroller Brad Lander by outlawing a “pass through” maneuver that effectively restored SALT deductions for business owners and partners.

An early analysis of the Senate bill from the left-leaning Institute on Taxation and Economic Policy said the law will reduce federal income taxes for New Yorkers by $30 billion a year, with 70% of the savings going to the top 20% of New Yorkers by income.

That’s why the state can increase taxes, said Gusdorf, since federal tax cuts will offset any increase in state or local levies.

It may be months before the full scope of the law is clear with its scores of provisions including $2 billion to hire and train more immigration enforcement agents, new Trump accounts where the federal government will deposit $1,000 in an account for every newborn and a $10,000 deduction for interest paid on loans to purchase American-make cars, to name just three.

But there is no time to lose, say those who watch state and city budgets.

“Since these cuts will phase in over time, the smart choice is to take the time to assess the impact, prioritize programs based on impact, scope, and New Yorkers’ needs, and reallocate money to preserve the most critical programs,” said Ana Champeny, research director of the Citizens Budget Commission.

And she adds a warning: “This is not the last of the cuts. More will come in next year’s federal discretionary budget starting October.”

This press release was produced by The City. The views expressed here are the author’s own.