Hochul gets bill to fix Orange County sales-tax mistake

Orange County towns, villages and cities were facing a possible $19.8 million hit to their 2026 budgets unless Gov. Kathy Hochul signed a bill now on her desk. About $5 million had already been withheld in the first quarter, leaving local officials scrambling over contingency plans that could include hiring freezes, budget cuts and other emergency moves.

The mistake traces back to how Orange County had been sharing sales-tax revenue. County officials said the county had been distributing 3.75 percent of sales-tax receipts to municipalities since 2014, even though only 3 percent was authorized. The Office of the State Comptroller said the 2004 law that let Orange County impose the extra 0.75 percent specifically barred the county from sharing that additional money with municipalities, and that special state legislation was required to go above the cap.

The fix moved quickly through Albany. Orange County sent a home-rule request to the legislature, and matching bills, Senate bill S10188 and Assembly bill A11249, were introduced to correct the error. The Senate passed the measure on May 28, and the Assembly approved it in early June before it went to Hochul. If she signs it, the law would take effect immediately and be deemed in force on and after Jan. 1, 2026, retroactively reimbursing municipalities for the lost revenue.

The stakes are local and immediate across all 42 cities, towns and villages affected by the mistake. The first public warning showed the damage already taking shape: the City of Middletown was projected to lose about $721,000 in the first quarter of 2026, while the Town of Wallkill was facing a loss of more than $300,000 over the same period. Town of Chester Supervisor Brandon Holdridge said the problem would be devastating to municipal budgets, and Middletown Mayor Joe DeStefano said state lawmakers needed to get answers and pass home-rule legislation that protects taxpayers.

The political fallout has centered on how long county leaders knew about the problem and who should have raised the alarm. The county learned of the error in early April, when the comptroller’s office informed County Attorney Rick Golden’s deputy, Carol Pierce. Senator James Skoufis said the county executive’s office failed to warn lawmakers early and said he learned of the issue second-hand. County and state officials had also publicly disagreed over fault, with county leaders initially blaming a defect in state legislation while the comptroller’s office said the 2004 law already prohibited the extra sharing. For Orange County’s local governments, the bill on Hochul’s desk is now the difference between a retroactive rescue and a round of painful budget cuts.