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Mamdani Gets a New York City Bailout, but Not the One He Wanted

Some of the city’s new aid will be canceled out by pension boosts.

Nick Garber · May 27, 2026

Photo collage of Governor Kathy Hochul in front of a yellow-tinted photo of New York City.

New York City Mayor Zohran Mamdani didn't get the major tax hikes he campaigned on, but he still got $28 billion in support from the state. | Photos: Mike Groll/Office of Governor Kathy Hochul; Cha_DZ/Getty Images | Illustration: Leor Stylar

Read the rest of our coverage of the final state budget.

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New York City Mayor Zohran Mamdani wanted a multibillion-dollar bailout from Albany this year, and he got one — but rather than a suite of big tax hikes, the final deal includes a mishmash of cost shifts, delayed pension payments and one notable new tax on pricey second homes.

The enacted state budget includes none of the corporate and personal income tax increases that Mamdani campaigned on. But it gives New York City more than $28 billion in support, according to Governor Kathy Hochul’s office, a nearly 50 percent increase from when she took office in 2021. That includes several late additions that helped Mamdani balance his latest budget plan despite inheriting a multibillion-dollar deficit.

The biggest impact comes from the state giving the city permission to delay making payments to several employee pension funds over the next five years. That “re-amortization” will save the city about $900 million next year and similar amounts through 2032, but will cost the city more in the long run, according to an analysis by Bill Hammond of the Empire Center for Public Policy.

The most attention-grabbing item is the new pied-à-terre tax on non-primary residences with sale values of $5 million or more. Homes worth between $5 million and $15 million will pay the equivalent of a 0.8 percent surcharge, climbing to 1.3 percent for properties above $25 million. To make things more complicated, the city’s convoluted assessment rules will force regulators to initially approximate the homes’ prices based on their listed assessed values, which tend to be lower than their sale values. After two years, the city and state will develop a new system to value the homes based on the sale prices of comparable properties instead.

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The city is counting on the tax to raise $500 million annually starting next year, although some experts caution it may be lower.

Other tax hikes that were floated in the midst of budget talks did not end up in the final deal, including Mamdani’s last-ditch proposal to reduce the so-called pass-through entity tax credit used by some business owners, or a tax on all-cash real estate purchases. Hochul stood firm against those hikes, even as the legislature allied with Mamdani in pushing for them.

And the state did not agree to send the city more money through the Aid and Incentives for Municipalities program, where Mamdani was hoping to get about $300 million annually to reverse a previous cut.

But the city won several non-flashy cost shifts that will save it money in the coming years. The state will stop withholding sales taxes to help shore up distressed hospitals, will raise the city’s reimbursement rate for public health services to match other localities, and will assume costs for line-of-duty deaths in the Fire Department.

The budget does not give the city any new flexibility in complying with the state’s school class size reduction mandate, although the issue could be addressed post-budget, lawmakers said. It does, however, delay a statewide mandate to start electrifying school buses from 2027 to 2032, which will save the city money in the short term.

Some of that new money will be canceled out by costs the state is imposing. Reforms to the “Tier Six” pension plan for government workers will cost the city $123 million next year, according to an analysis by the Citizens Budget Commission. And eliminating taxes on tipped wages up to $25,000 to align with a similar federal policy will cost the city an estimated $239 million over four years.

Outside of fiscal issues, Mamdani did not win approval to make buses fare-free but did receive the initial $73 million in state funding, promised by Hochul in January, to launch a free child care pilot for New York City 2-year-olds. He and Hochul have promised citywide 2-K by 2029.

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The budget also includes a provision that allows him to dissolve a Charter Revision Commission created by his predecessor, Eric Adams, in the waning days of his mayoralty last year. The commission wants to explore measures to combat antisemitism and create non-partisan primary elections, which could have posed political headaches for Mamdani. Assembly Speaker Carl Heastie said that Mamdani requested that bill; its approval is a sign of the goodwill that Mamdani, who spent four years in the Assembly, still enjoys from his former Albany colleagues.

And Mamdani’s administration strongly supported Hochul’s reforms to the State Environmental Quality Review Act, aimed at removing obstacles to building housing. The final deal, which closely resembles Hochul’s original plan, will exempt buildings of up to 250 units within New York City — and up to 500 units in higher-density areas — from the time-consuming environmental reviews, as long as they sit on previously disturbed land and are hooked up to water and sewer systems.

Mamdani’s office told New York Focus that more than 300 housing projects around the city could have been eligible for that streamlined review over the last decade. But City Hall expects that total to be higher in the coming decade, as developers make use of the new rules.