Two months past deadline, Albany finally passed its FY 2027 state budget—and the single biggest decision was undoing Tier 6 pension reforms, a move that will cost New York upwards of $100 billion in total payouts over the coming years. Americans for Tax Reform published an analysis on June 5, 2026, breaking down the winners and losers of the budget, which passed along strict party lines with zero Republican support. The report finds that while Governor Hochul delivered tort reform that could save families thousands on car insurance, she caved to union demands on pensions and pushed through multiple tax hikes that will hit consumers and businesses hard.
The budget scraps Tier 6 pension reforms that were originally passed in 2012 to control skyrocketing costs—between 2000 and 2010, the annual cost of New York's pension system exploded from under $1 billion to nearly $10 billion. The budget includes $8 billion in state aid to New York City and allows the city to delay its overdue pension payments for a few years while it works through its $5.4 billion deficit. On the tax front, the budget decouples from President Trump's One Big Beautiful Bill provision allowing 100% business deduction of research and development costs, and will retroactively tax businesses who claimed those deductions in the 2025 tax year. A new tax targets properties not designated as primary residences: those valued over $5 million face a 0.8% charge, properties between $15–$25 million face 1.05%, and anything above $25 million gets hit with 1.3%. The budget also imposes a 75% wholesale tax on nicotine pouch products like ZYNs. New Yorkers already pay the highest auto insurance rates in the country, averaging $4,000 a year.
According to the report, "skyrocketing costs were the entire reason this reform was passed in the first place back in 2012." The analysis states that scrapping Tier 6 "will cause New York's budget to balloon exponentially in the coming years" and warns that "this was done purely to play politics and pander to union bosses, rather than serve the needs of everyday New Yorkers." On the secondary homes tax, the report describes it as setting "the stage for future expansion" since it's set to expire in five years, giving Albany Democrats the opportunity to broaden the rates and types of property it applies to. The report notes that nicotine pouches have been treated as a less harmful alternative to cigarettes, arguing that "taxing them at this rate contradicts that entirely and could drive users back to more harmful options."
The report explains that by undoing Tier 6, Hochul's budget actually undermines the very relief it offers New York City—with the pension reform guardrail now removed, the cost of the city's delayed pension payment will grow much larger, much faster. The retroactive business tax on R&D deductions is characterized as "a gut punch to businesses that made investment decisions in good faith" under federal law. The analysis warns that once politicians "turn on a money faucet, they only ever increase the flow," suggesting the property tax will likely expand beyond its current scope. On the positive side, Hochul's tort reform survived aggressive lobbying from trial lawyers and will crack down on abusive lawsuits, bringing transparency and accountability to the state's legal system—saving families thousands of dollars that were previously going straight into trial lawyers' pockets.
The report concludes that taxpayers will be footing the bill for the pension decision for years to come, and it won't just hit state taxpayers—local governments will feel it too, driving up property taxes across the board. New Yorkers should start feeling the benefits of tort reform quickly, with lower car insurance premiums expected soon. The bottom line: Hochul got New York City an $8 billion bailout and delivered real savings on auto insurance, but she handed union bosses a $100 billion victory that will haunt state and local budgets for decades.