New York State Budget New York City

Mamdani Declares Victory As Hochul Helps City Close Budget Gap

New York City’s $125 billion executive budget hinges on taxes and cuts whose details are still being worked out in Albany.

Nick Garber · May 12, 2026

Governor Kathy Hochul and Mayor Zohran Mamdani struck a delicate alliance to close New York City's budget gap. | Photo: Susan Watts/Office of Governor Kathy Hochul | Modified by New York Focus

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A final cash infusion from Albany will help New York City close its multibillion-dollar budget gap — allowing Mayor Zohran Mamdani to declare victory on Tuesday, though he didn’t get anything close to the full tax-the-rich agenda he campaigned on.

Mamdani’s new $125 billion executive budget hinges on a number of state policies that remain up in the air, like the pied-à-terre tax on expensive second homes and a delay in the city’s class-size reduction mandate — both of which are still being hashed out in Albany as part of the weeks-late state budget. City officials said Tuesday that they still could not share any details about how the tax will be assessed and what the rates will be, nor how long the mandate will be delayed.

The city will close its $5.4 billion two-year gap thanks to some new revenue streams: $500 million next year from the pied-à-terre tax and $68 million through a reduction to a city tax credit for unincorporated business owners. Governor Kathy Hochul will also approve a plan to delay payments to the city’s pension fund, saving $1.6 billion next year.

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The state will approve several of the cost shifts that Mamdani had requested, including by restoring money from city sales taxes that the state had been intercepting. The funding allowed Mamdani to officially drop his threat to raise property taxes and raid the city’s reserves to close the gap.

The plan bears little resemblance to Mamdani’s initial wishlist, which called for raising $5.5 billion by hiking taxes on wealthy individuals and big corporations. But the mayor said Tuesday that he’s satisfied.

“I see this as a win, a win to ensure that the city is back on firm financial footing,” Mamdani said. “And it’s doing so by taxing the rich, by creating a fair relationship with Albany, by finally accounting for the mismanagement we’ve seen in prior years.”

In exchange, Hochul successfully pushed the city to make significant cuts to fast-growing programs like CityFHEPS housing vouchers and tuition reimbursement for special education students. Changes to those programs will save nearly $700 million next year, although Mamdani emphasized that the moves would “not cut [rental] vouchers” and will instead come from reducing other costs borne by the city, such as broker fees.

Another $1.5 billion in cuts were found by the “chief savings officers” that Mamdani installed within each agency earlier this year, charged with finding a combined 4 percent in savings over two years. Some of the cuts announced Tuesday included giving up unused office space and consolidating city agency leases — saving $24 million — and canceling ex-Mayor Eric Adams’s MyCity chatbot, which will save the Office of Technology and Innovation a modest $2.3 million over five years.

Budget watchdogs gave mixed reviews. The fiscally conservative Citizens Budget Commission criticized the delayed payments to the pension fund as a “gimmick” that balances the current budget “on the backs of future New Yorkers.”

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City Comptroller Mark Levine praised Mamdani for being “conservative” by adding only a small amount of new spending, although he faulted the plan for relying on one-time funding without doing more to cut long-term spending. The left-leaning Fiscal Policy Institute credited the mayor for “prudent steps to moderate spending growth.”

Amit Singh Bagga, a progressive strategist and former Hochul staffer, said the outcome was a testament to the delicate alliance that the democratic socialist mayor forged with the moderate governor.

“State dollars were always the only way to close the city’s deficit,” Bagga said. “It’s clear that the mayor and his team understood that and thus adopted a careful approach with the governor, all while progressives and the left forcefully championed taxing the rich.”

Hochul celebrated the deal. “This is what a results-driven, responsible partnership looks like and I’m proud to work with Mayor Mamdani to deliver for working New Yorkers,” she said in a statement.

The full picture of what the city is getting from Albany will not be known until the state passes its budget in the coming days. Even Senate Majority Leader Andrea Stewart-Cousins said Tuesday that she had not seen details about the latest aid that the state was committing to the city, though she signaled that she’s on board with the broad strokes.

“I don’t think there is a disagreement with the path that has been laid forward to help the city,” she said, according to the New York Post. “Without specific details, the package, as it’s being relayed, I believe is something that we will support.”

The city projects large deficits in fiscal years 2028 and 2029, meaning that Mamdani may be back at Albany’s trough next year.