MID-HUDSON – State legislators representing Orange County are taking an all-hands-on-deck approach to passing a law that would restore the County’s additional sales tax revenue with its municipalities.
Last week, it was revealed that the county had improperly overdistributed sales tax revenue to municipalities. The county has been sharing 3.75 percent of its sales tax revenue for more than a decade, though it is authorized to share only 3 percent. This oversight could cost municipalities at least $20 million in 2026.
The passed a resolution to submit a home rule request to the State Legislature, seeking approval of special legislation to retroactively authorize the additional 0.75 percent. The legislation would need to pass both the Assembly and the Senate before being signed by Kathy Hochul, who is struggling to pass a state budget.
“As a former village mayor and town supervisor, Assemblyman (Brian) Maher understands the catastrophic impact this could have on every municipality if Orange County is not able to continue providing sales tax revenue at the rate of 3.75 percent,” said Maher’s Chief of Staff, Meghan Hurlburt. Maher (R,C-Walden) is currently deployed overseas as a U.S. Navy reservist.
“We are also cognizant of the fact that any legislation must also include language that ensures municipalities would be able to keep the revenues they have already collected for more than a decade,” Hurlburt added. “Once a bill is drafted, the assemblyman will become a co-sponsor, and at that point the county would be asked to adopt a home-rule request to ensure we can get this done before the session ends in early June.”
The County only learned of its decade-long sales tax error in early April when County Attorney Rick Golden’s second-in-charge, Carol Pierce, was informed of the error by the State Comptroller’s Office. If the legislation is passed, the County’s towns, villages, and cities will be reimbursed the full amount they have lost in the first quarter of the year ($5 million total) retroactively to January 1, 2026.
Meanwhile, municipalities are making contingency plans, such as potential hiring freezes, budget cuts, and other cost-cutting measures, which they hope will not have to be implemented. Assemblyman Jonathan Jacobson (D, Newburgh) said that residents in Orange County “can rest assured that the State Legislature will clean up the county’s mess.”
“It’s incredible that for more than 20 years, no attorney from the County Attorney’s Office or the County Legislature has read the relevant legislation,” Jacobson said.
The bill will be carried by Assemblyman Chris Eachus (D, New Windsor) and Senator Skoufis (D, Orange County).
According to David Rabbitts, Chief of Staff for Assemblyman Chris Eachus, said a state law was passed that allowed Orange County to impose sales taxes at 0.75 percent above the 3 percent rate. However, each bill that passed to authorize and extend this authorization also states that it can only be used “solely for county purposes and shall not be subject to any revenue distribution agreement.”
Rabbitts said if the legislation is not changed, the County will have to stop distributing the extra 0.75 percent. He added that there is also concern that claw-backs could occur because the Neuhaus administration was never authorized to distribute the funds. Eachus and Skoufis must now introduce state legislation to amend this section of the law, removing the restriction that limits the funds to county use. It would potentially include retroactive language to clear the historical record of prior unauthorized distributions, as well as prevent related legal action.
The bills will be introduced and given respective bill numbers, and the County will need to pass a home rule resolution for those bills.
“All municipalities have already adopted their budgets and are relying on the county’s miscalculated money for necessary services,” Skoufis said. “With many constituents struggling to pay their bills, afford groceries, and keep gas in their tanks, the last thing Orange County residents need is an enormous property tax increase. Working with colleagues, I will do everything in my power to expeditiously pass the legislation, protecting taxpayers from service cuts and tax hikes.”
“While unfortunate that it took a decade to recognize this error, I am proud to carry legislation that will fix this serious oversight,” Eachus added. “Our local governments have already incorporated this funding into their budgets, and without this fix, they will almost certainly face a fiscal crisis. I will not let that happen and will work tirelessly to get this done before the end of the session in June.”
Stephen R. Rolandi, an adjunct professor in Pace University’s Public Administration Department, said that County Executive Neuhaus should conduct a thorough internal review to determine what caused the oversight and believes that the Comptroller’s Office will audit the County.
A spokesperson for the Comptroller’s Office said it is considering the recent developments in Orange County as it prepares audit plans. However, there is no audit planned for the County at this time.
“I could understand if this oversight occurred for one or two years, but for more than 10 years. You have to wonder what happened,” said Rolandi, who previously served as Deputy Commissioner for Finance and Administration for the state’s Division of Human Rights, and spent two decades working in New York City for four different mayors.
“There is the potential for political fallout here,” Rolandi added. “Taxpayers are probably thinking, ‘this is what you are doing with my tax dollars?” There are pressure points here. This could negatively impact the municipalities, but also the County’s bond rating. I think what happened in Orange County is a wake-up call for counties around the state.”