The $254 billion budget deal reached Monday between Gov. Kathy Hochul and legislative leaders appears to be a cautious one. It increases spending from the governor’s initial proposal by only $2 billion, small compared with previous budgets, and trimmed the governor’s proposed $3 billion tax rebate by a third.

But fiscal experts — ranging from conservative, business-backed groups like the Citizens Budget Commission to progressive organizations like the Fiscal Policy Institute — slammed the deal as irresponsible as Republicans in Washington plot steps that could drastically slash the more than $90 billion in federal funds, primarily for health care and education, that the budget depends on.

“The month-late state general budget agreement fails to address the imminent threat facing New York: looming federal budget cuts,” the CBC said in a statement immediately after Hochul’s announcement.

“The deal commits serious fiscal missteps,” the Institute said moments later, “that will undermine the state’s ability to weather anticipated federal funding cuts.”

Meanwhile, the budget spotlight will switch to City Hall on Thursday when Mayor Eric Adams outlines his final budget proposal for the fiscal year beginning July 1 — scrutinized over what steps, if any, he will take to prepare for reductions in federal aid.

Many details about the state’s plan will come to light in the coming days as the legislature approves specific budget bills. But the governor already its the budget is unlikely to remain intact during the state’s fiscal year, which began April 1, both because of federal aid cuts and because the economy could be headed into a recession.

“We can only devise a budget based on the information we have at this time,” Hochul said, adding: “There’s a possibility that we’ll have to come back later this year and update our budget in response to federal actions.”

The $254 billion plan may be close to Hochul’s original proposal, but it is still a record number and at least 5% higher than the previous year, according to calculations by the CBC.

In recognition of the riskier outlook, the governor agreed to scale back a tax rebate plan she had proposed in January to address voter concern about affordability. That plan aimed to compensate voters for the higher sales taxes they paid as inflation pushed up prices. She reduced the amount to $2 billion from $3 billion, with individuals receiving $200 rather than $250 and families getting $400 instead of $500. 

The proposal has been widely panned.

“It’s a small amount of money to individual households but it is also $2 billion being spent ineffectively that could be used to prepare for federal aid cuts,” said Ana Champeny, research director of the CBC.

Hochul said Monday aid reductions already total $1.3 billion. She didn’t detail the reductions or specify which fiscal year they affected.

The budget deal is also expected to include a small middle-income tax cut and a reduction in the corporate tax rate, which drew the ire of the Fiscal Policy Institute.

“The income tax and corporate tax cut was always bad policy when they were announced, and now that it is few months later and we are going to lose upwards of upwards of $10 billion in federal funding and Trump is pursuing policies to provoke a recession,” said Nathan Gusdorf, executive director of the Institute. “We should be using that money to prepare.”

Hochul rebuffed suggestions that she increase the state’s reserves, which stand at $20 billion, although she also didn’t suggest they be used to offset cuts.

One deal winning applause from budget watchers will fund the MTA’s $68 billion five-year capital plan with a small payroll tax increase on downstate companies that have more than $10 million in payroll while lowering the tax on smaller companies. It also requires the MTA, state and city to contribute $3 billion each. 

“It’s a pretty fair plan,” said Kathy Wylde, CEO of the Partnership for New York City, which represents large companies. Full capital plan funding also depends on the continuation of congestion pricing, which the Trump istration has been repeatedly trying to kill.

Meanwhile, the mayor is making a series of announcements of new spending he plans to include in his executive budget to be unveiled Thursday. On Monday, he announced $46 million in new money to help create or preserve ive housing. On Tuesday, he trumpeted $331 million for after-school care.

The mayor’s preliminary budget released in January called for spending $114.5 billion in the next year. The City Council then responded that the city has billions of dollars more available from tax revenues for the current year, above projections.

The mayor’s budget is likely to sharply increase his planned spending in key areas such as early childhood education, said Justin Brannan, chair of the finance committee and a candidate for comptroller, acceding to the Council’s wishes.

That will not sit well with fiscal conservatives. With federal aid cuts and the possibility of a recession, the city should be restraining spending, said Champeny.

“It’s like knowing you are going to get a pay cut next year, but renting a more expensive apartment anyway,” she said.

The city’s operating budget includes $7.4 billion in money from Washington. State Comptroller Tom DiNapoli this week said that the city has already been hit with $400 million in reductions in the current year, with much larger cuts possible for next year.

One key issue will be whether revenue estimates for the next fiscal year should be reduced given uncertainty. Brannan said that’s an issue that needs to be addressed before the budget is adopted in June.

Another is whether the city should increase its $8 billion in reserves. The CBC is arguing for at least $1 billion being added and city Comptroller Brad Lander, who is running for mayor, has suggested as much as $2 billion. While the $8 billion is a record dollar amount, it is a far lower percentage of total spending than the state.

But Brannan remains skeptical of that approach.

“I’d rather have that money deployed into communities that are under attack from the Trump istration than just sitting there,” he said.