ALBANY Next year’s New York state budget may be a difficult one to balance, and state officials are already preparing for lower tax revenues and higher costs for social services programs in the upcoming 2026-27 state spending plan.

On Thursday, the state Division of the Budget sent out a ‘call letter’ telling the leaders of the various state agencies run by the Governor to start preparing their next budget requests. The message was clear: department heads should not request increases in their operating budgets, and the overall goal is to match long-term spending with long-term revenues over the next few years.

The state budget is facing a total budget gap of $34.3 billion through 2029, before considering any future federal funding cuts.

“Agency budget requests for state fiscal year 2027 should not exceed the total state fiscal year 2026 enacted budget agency funding levels,” the letter from DoB director Blake G. Washington reads. “As always, the effectiveness of all agency functions, programs and services should be reviewed and all expenditures should be examined. Unnecessary duplication or overlaps should be eliminated.”

Washington’s letter warns of a fear that state officials have entertained since President Donald J. Trump won back the White House, that Republican-led legislation in Washington poses a serious threat to the state’s finances. Washington blamed the ‘One Big Beautiful Bill Act,’ which enacted the top-line Republican agenda and made a wide range of cuts to social services programs, as a point of particular pain.

“While revenues remain strong over the first half of the fiscal year, the forecasted growth will not be adequate to address structural gaps exacerbated by H.R. 1,” he wrote, referencing the ‘One Big Beautiful Bill Act’ by its formal House title.

He said that the current federal leadership has made clear that state and federal financing agreements are subject to new rules and even previously promised federal dollars are no longer guaranteed. He said that the state can’t simply backfill the dollars the federal government is taking away without sacrificing future advancements. He also said there are likely more federal funding cuts coming for New York in the future.

Washington said that agencies should take another step as they prepare for next year, and start reviewing agency rules, regulations or public policies and identify obsolete or outdated rules that could be undone.

“We need to work to alleviate the regulatory burdens we impose upon individuals, businesses and nonprofits that serve to further exacerbate New York’s affordability crisis,” his letter reads.

Budget requests and regulatory review reports will be due October 24. Washington and the governor’s budget team will then craft a proposal to present to the state legislature early next year, kickstarting negotiations. The final state budget is due April 1 of next year, although lawmakers regularly miss that deadline.