2025 Massachusetts Budget Showcases Accomplishments of Fair Share Amendment

As the budget making process for the current fiscal year finishes, Massachusetts would be in a very different place if voters hadn’t approved the Fair Share Amendment in late 2022 to support education and transportation.

Using funds from the Fair Share tax on incomes over $1 million, the Fiscal Year (FY) 2025 budget provides universal free meals in schools, free community college for all, and free and expanded bus service at regional transit authorities (RTAs). Massachusetts lawmakers made new investments to virtually all levels of education and all types of transportation, the two areas where Fair Share funds must be dedicated under law.

Fueled by Fair Share revenue, the FY 2025 budget shows what is possible when the Commonwealth brings together resources from those most able to contribute.

Transportation

Regional Transit Authorities Go Fare-Free

The most dramatic transportation gains in the Fiscal Year 2025 budget are those supporting the Commonwealth’s 15 regional transit authorities (RTAs), which operate bus service outside the MBTA service area. Buoyed by federal pandemic funds, several of these transit authorities have made great strides in recent years, especially those that have increased ridership by eliminating fares and improving service. The FY 2025 budget helps backfill depleted federal aid to continue with improvements. In addition to continuing last year’s $94 million in operating support using general revenue, the budget provides $110 million in Fair Share funds for a variety of important uses. 

Most notably, the RTA funding from Fair Share provides $30 million in grants for RTAs providing fare-free service. The economic and access benefits of free-fares will be important for RTA riders across the Commonwealth, who are more likely to be people of color and lower-income than other residents in each region. The new fare-free policies are popular across the Commonwealth, with a MassINC poll out last week showing three-quarters of Massachusetts residents support making regional bus service free.

New Provision Supports Capital Investment Needs

The largest new transportation item in the FY 2025 budget is a new provision that will direct $250 million in Fair Share revenue to the state’s Commonwealth Transportation Fund annually. This fund supports transportation across Massachusetts – roads, bridges, and transit systems. Codifying this annual transfer into law secures a reliable revenue stream that can be used to pay off future long-term borrowing for capital projects. For instance, MassDOT could use a portion of this revenue stream to finance a billion dollars worth of bridge repairs by selling bonds that promise to pay off that debt over the coming decades.

MBTA Sees Substantial Increase, But Gap Remains

The budget provides $314 million operating support for the MBTA, a much needed increase from $187 million in FY 2024. The legislation also instructs the MBTA to conduct a feasibility study and suggest a program design for a one year fare-free pilot.

In addition, Fair Share revenue will be used to provide:

• $20 million for discounted fares to low-income riders,
• $60 million for capital projects,
• $36 million for workers to improve and maintain safety, and
• $10 million to create an “MBTA Academy” to recruit and train future MBTA workers.

Nonetheless, according to the MBTA, the funds still leave the agency with a $307 million operating deficit for FY 2025.

Higher Education

The FY 2025 budget takes bold steps to advance higher education affordability, access, and infrastructure. This includes allocating $117.5 million of Fair Share revenue to support universal tuition-free community college. Using a new Free Community College spending line item and continuing the existing Fair-Share-funded MassReconnect initiative (focused specifically on students over 25 years old), lawmakers advanced access to higher education. These new resources – including up to $1,200 in general college expenses beyond tuition costs for low income students – will help close opportunity gaps and advance equity by supporting students of color who are more likely to attend public higher education, especially community colleges. New scholarships, such as MassReconnect, have already coincided with increased enrollment at community colleges.

With a combination of Fair Share revenue and general funds, the budget provides significant support for initiatives that enhance student wellness, mental health, and overall chances for college success. This includes over $28.7 million to continue the SUCCESS wraparound student support initiative at community colleges and now expand to include state universities.

The budget strongly supports higher education with funding increases of at least 10 percent for each higher education campus. These funds provide a solid foundation for advancing affordable, high-quality public education. More work remains to make the system truly public and affordable for all. Future investments are needed in campus infrastructure, the workers who power state universities and colleges, and scholarship expansion to cover all tuition, fees and living costs for low-and moderate-income students.

K-12 Education

The FY 2025 budget meets the obligations of the 2019 Student Opportunity Act (SOA) K-12 funding law by providing $6.9 billion in Chapter 70 aid for the fourth year of the plan.

Using Fair Share funds, the Legislature’s budget makes additional important investments to improve K-12 education across the Commonwealth. This includes free meals to all students, clean energy projects in school buildings, mental health support for students, proven reading programs for young children, and early college programs for teenagers.

Unfortunately, the Legislature did not address the inflation glitch that eroded the value of the SOA. If left uncorrected, this will permanently depress state funding  for school districts. This issue is contributing to significant budget challenges and dozens of educator positions being cut, especially in low-income communities that depend more on Chapter 70 aid. Because each year’s formula is based on the previous year’s funding, the gap will grow and continue to negatively impact schools and students until it is addressed. To fully fund SOA in a way that would keep up with inflation, the legislature would need to have allocated an additional $465 million for FY 2025.

Early Education

The COVID pandemic exposed the woeful inadequacy of America’s early education and child care system. Unprecedented federal funds poured in to ameliorate the crisis; but most states have been unable to fill in after federal aid ended. Massachusetts is one of the few states that have stepped up to backfill those federal dollars and take major steps to shore up early education and child care. Last year’s budget provided a patchwork of temporary funds to keep child care providers afloat. Massachusetts labor shortages have provided motivation for business groups to embrace these changes and the Fair Share amendment has provided crucial funding. This year’s budget further builds on those advances by shifting to more ongoing dedicated funding and putting long-term rules into statute.

The FY 2025 budget creates, in statute, a new Early Education and Care Operational Grant Fund and directs three sources of funding to maintain last year’s $475 million for the popular Commonwealth Cares for Children (C3) grants. The Legislature’s budget codifies these operational grants, created in 2021, into law for the first time. Initially fully-funded by state dollars in FY 2024, these grants have been critical for recovering, sustaining, and now growing child care supply beyond pre-pandemic capacity. In addition to funding the grants through $175 million in Fair Share revenue, the FY 2025 budget provides $100 million from a new Early Education and Care Operational Grant Fund that will receive a portion of revenue from an online / app-based state lottery system newly established in the budget. Lastly, the C3 grants are also funded through $200 million from the High Quality Early Education and Care Affordability Fund, which was created in FY 2023 with one-time federal COVID funds. This outlay would leave about $65 million remaining in this trust fund. The legislature has not proposed nor identified a source for replenishing this trust fund.

For distributing this $475 million in grants, the budget also creates a new formula based on the children providers enroll. Just over half (50.5 percent) of the funds are reserved for providers whose enrollment is at least one-quarter children receiving child care financial assistance (CCFA) or who are otherwise deemed to have high needs. Another 28.4 percent of funds will be granted to providers enrolling between 1 percent and 25 percent CCFA and/or high needs children. The remaining 21.1 percent of funds will be granted to providers who do not enroll any children receiving CCFA. As part of the statutory change, providers are only eligible to receive these grants if they demonstrate a willingness to enroll children receiving CCFA. This means that they must enter into a contract with the state to reserve spots for children with CCFA or they must sign a voucher agreement.

The new formula reinforces a connection between early education and care providers’ receipt of public funds and their enrollment of children whose care is subsidized by the state or who are deemed to have high needs. The new rules would apply equity-focused restrictions to the use of all grant funds, including those that come from non-Fair Share revenue sources.

Housing

Investments for housing in the budget had several improvements over the status quo, though only incremental increases that are not up to scale with the deep problems in our housing market. Many Massachusetts families need greater support to afford stable housing.

• A new line item providing access to legal representation for tenants and owner-occupants with low-incomes during eviction proceedings. Typically landlords have legal representation at these proceedings while tenants do not. The pilot program is only a $2.5 million investment, though it creates an important precedent towards leveling the playing field in the eviction process.
•  A $20 million increase to the HomeBASE program, which provides short-term housing assistance to families eligible for shelter. The program provides recipients with up to $30,000 over 2 years with the possibility of a third year of support.  At $57.3 million, the funding is a 55 percent boost over FY 2024, but still less than the $59.4 million provided in the FY 2023 budget.
• Funding for the Massachusetts Rental Voucher Program (MRVP) is $219 million in FY 2025, an increase over the $200 million in FY 2024. When the Administration proposed this increase in January they reported that it would support 810 new MRVP vouchers with 10,490 vouchers leased in total by the end of June 2025.
• Emergency Assistance Family Shelter, which gives families with children and pregnant women who are experiencing homelessness a place to live while they look for safe and affordable housing, was funded at $326 million.  This is in addition to the $175 million put in transitional escrow account in an earlier supplementary budget (that could be made available for FY 2025 to support the Commonwealth’s response to the ongoing humanitarian crisis and influx of families seeking shelter). Together the total is substantially less than the FY 2024 cost of providing shelter. But the administration, with the support of Legislative leadership, has since started to step back from the state’s 40 year-old right-to-shelter law by placing stringent new limits on the eligibility and the duration of shelter that will be provided to families in an effort to reduce costs.

Exceedingly Cautious?

The FY 2025 budget leaves substantial funds growing in reserve that could have been invested to build a stronger Commonwealth. While it is prudent to have substantial reserves, especially in uncertain times, it also makes sense to invest in the future when resources are exceeding expectations.

Revenue for the budget is made available, in part, by choosing to forgo $375 million worth of an anticipated $513 million of above-threshold capital gains tax collection that would otherwise be deposited into the Stabilization Fund (also known as the “Rainy Day Fund”). By instead using these funds for current investments, the budget recognizes that additional deposits to the $8.4 billion Rainy Day Fund under current circumstances are less of a priority.

In past decades, lawmakers aspired for the Rainy Day Fund to one day reach 10 percent of the state budget to ensure an adequate cushion against economic downturns and other unforeseen events. Today, it has swelled to exceed 14.5 percent of the FY 2025 budget from a steady stream of capital gains tax revenues (aided by a booming stock market), hundreds of millions in annual interest gained, and other inflows, such as from a portion of casino profits. The Rainy Day Fund  has seen no withdrawals for a decade.

Meanwhile revenues collected by the Fair Share tax on incomes over $1 million have outpaced the official FY 2024 estimate of $1 billion by a wide margin, bringing in at least $1.838 billion in the first ten months of the fiscal year. This strongly suggests that projections made back in December that Fair Share would raise $1.3 billion in FY 2025 were also far too low. Based on the updated information, lawmakers could have officially revised that FY 2025 estimate, enabling them to invest hundreds of millions of dollars more in transportation and education initiatives than the separate chambers had proposed earlier.

Lawmakers chose not to do so. As a result, the House and Senate each had to accept cuts to their respective proposals for Fair Share investments as part of their compromise agreement. Most notably, the FY 2025 budget provides little more than half the Fair Share funding for MBTA initiatives as proposed by the House. The budget similarly provides only about a third as much supplemental aid to municipalities for roads and bridges as proposed by the Senate. Instead of updating the projected Fair Share revenue amount for FY 2025 closer to the actual collections in FY 2024, the lawmakers will invest the “excess” revenue collected above the old projection for education and transportation at some undetermined time outside the normal budget making process. Regardless of the timing, these additional investments will represent further achievements made possible by the Fair Share Amendment.

The FY 2025 budget also includes modest improvements in areas that are not funded by Fair Share revenue, such as housing. However, more could have been done if lawmakers had more boldly leveraged the Commonwealth’s reserves and adjusted Fair Share spending limits after this spring’s higher than anticipated revenue estimate.

After many years of economic uncertainty over recovery from the pandemic, revenue from Fair Share has enabled Massachusetts to put forward a budget that takes great strides toward growth and prosperity for all.

For searchable information on every line item in the House and Senate budgets, as well as past spending back to 2001 that can be adjusted for inflation, check out MassBudget’s Budget Browser: https://massbudget.org/budget-browser/.