New York Gov. Andrew Cuomo unveiled a $178 billion state budget proposal Tuesday that includes a plan to create a team tasked with reining in spending on Medicaid.

The Medicaid Redesign Team will be asked to find ways to trim $2.5 billion in spending from the program, Cuomo said.

Cuomo said one out of three New Yorkers — 6 million people — are on Medicaid, the government health care program for people with low incomes.

“And this is something to be proud of,” he said. “But the Medicaid system has to be fiscally sustainable.”

Cuomo, a Democrat, didn’t spell out exactly where he expected those savings to come from, but he hinted that the healthcare industry — which has feared an increase in taxes on health insurance — may have to provide “new resources” or eliminate inefficiencies.

Cuomo said the savings must have “zero impact” on Medicaid beneficiaries. He also promised the state wouldn’t sock local governments with a higher share of program costs, as long as they could keep cost increases to 3% per year or less. Municipalities now have some of their Medicaid costs covered by the state under a deal cut years ago to limit property tax increases.

The redesign team will report its recommendations before the April 1 deadline to pass the budget.

The Medicaid proposal was part of an overall spending plan that would increase state spending by 1.9%. In his budget proposal, Cuomo also outlined a five-year plan that would spend $33 billion fighting climate change or preserving the environment.

Cuomo said his budget would increase spending on infrastructure by $25 billion, to what he said were state-record levels.

The release of Cuomo’s proposal launches a process that includes hearings, legislative spending proposals and tweaks from the governor ahead of a March 31 deadline. The governor has wide influence on the state budget, which has increasingly included policy proposals on top of spending.

Cuomo said his administration will also close the budget gap with over $1 billion in higher-than-expected tax revenues and $1.8 billion in local assistance savings.

Advocacy groups from across the state that point to signs of a growing New York economy are calling for increased spending on schools, mental health programs, anti-poverty efforts, substance abuse prevention, environmental protection and infrastructure projects. Some liberal groups are calling for higher taxes on the wealthy to help address a looming $6 billion budget deficit.

Cuomo had warned of a tough budgetary season and said he won’t support new taxes to help close a budgetary gap.

Higher-than-expected Medicaid spending had been one reason for the budget shortfall.

Leaders of nursing homes and hospitals warn further cuts will harm vulnerable New Yorkers and are calling on the state to work with providers to find possible savings. His administration has previously announced 1% cuts in payments to health care providers this year under the program.

The comptroller announced Friday that the state could save nearly $800 million by eliminating unnecessary payments and collecting rebates from drug makers.

Sales to retail dispensaries will be taxed at 20% under the governor’s proposal to legalize marijuana, which he called for in his 2020 State of the State address. Sales to retail dispensaries will be taxed at 20% under the governor’s proposal, which would also tax the cultivation of cannabis at $1 per gram of dry weight cannabis flower and 25 cents per gram of dry weight cannabis trim.

Cuomo’s 2019 budget proposal included legalization of recreational marijuana, but it didn’t end up in the final budget over disagreements on where an estimated $300 million in annual revenues from marijuana sales should go.

Lawmakers instead reduced criminal penalties for possessing small amounts of marijuana.

Cuomo, who has expressed concern over vaping-related illnesses, is calling for a new state university center to study cannabis and hemp. He also wants to work with neighboring states that are also considering legalization.

The governor’s proposal would ban selling tobacco products in all pharmacies, including e-cigarettes.

Cuomo proposed a $176 billion budget last year, a 2% increase over the previous fiscal year.

Cuomo’s budget proposal also includes the creation of a new crime that targets domestic terrorism and includes $2 million for the state police’s Hate Crimes Task Force. The governor also proposes a 3% — or $826 million — increase in school aid largely aimed at school districts with high needs.

(AP)