Click here to read MassBudget’s in-depth analysis of the Governor’s budget proposal.
Today, Governor Maura Healey released her proposed budget for Fiscal Year 2026. This budget proposal starts the FY 2026 budget cycle and outlines the Governor’s plan to spend over $61.5 billion, including $1.95 billion in surtax spending, for the upcoming fiscal year beginning July 1. Additionally, the Governor has proposed a supplemental budget for the current fiscal year (FY 2025) with recommended uses for the $1.32 billion in above-threshold one-time Fair Share revenue.
“Thanks to the Fair Share surtax, we have vital education and transportation investments in the Governor’s FY 2026 budget proposal, following the voters’ intent for the use of this surtax.
We are excited to see the proposal to cap the state’s charitable deduction. MassBudget’s past analysis has shown that the majority of tax benefit from this deduction goes to households with incomes over $1 million. This improvement saves the Commonwealth $164 million while making our tax code more fair and allowing the state to better support essential programs. We are encouraged to see critical investments supported by those who can most afford it.
The FY 2026 proposal and FY 2025 supplemental proposal make transformational investments in our public education and transportation systems, yet, it falls short in funding other essential areas that support residents with the lowest incomes in the Commonwealth. These proposals don’t adequately fund housing programs in light of proposed restrictions on access to shelter and the continued housing crisis. The proposals also leave health and human service programs vulnerable.
Just as the wealthiest are starting to contribute their fair share to the state budget, global corporations doing business in MA need to as well. It is necessary to close loopholes for billionaire global corporations so we can begin to recover the additional revenue required to meet the basic needs of Massachusetts families in crisis.”
– Viviana Abreu-Hernández, PhD
President, MassBudget
Below, MassBudget provides a preliminary analysis of the Governor’s FY 2026 budget proposal. Click here for MassBudget’s follow up in-depth analysis.
Budget Successes are in Large Part Thanks to Fair Share, Other Revenue Improvements Help Shield Some Programs From Budget Strains
Revenue from Fair Share, a voter approved ballot initiative that enacted a surtax on higher-income earners, continues to substantially support improvements for the Commonwealth. With a $650 million increase in Fair Share revenue from the Fiscal Year 2025 budget, $1.95 billion in funding is available to invest in FY 2026 for important education and transportation programs.
Governor Maura Healey relies on revenues from the Fair Share Amendment in the FY2026 budget proposal to invest in critical programs, including a $765 million investment in the MBTA, $125 million in infrastructure spending for higher education, $170 million for universal free school meals, and the fifth year of implementation for the Student Opportunity Act. Fair Share revenue continues to fund free community college and will now fund the State University SUCCESS program.
An additional $1.32 billion in Fair Share funding is also being proposed in a supplemental budget to further support education and transportation programs using surtax revenue that was collected in 2024 above anticipated amounts. This Fair Share funding includes the Special Education Circuit Breaker Reserve, MBTA Supports, and the Commonwealth Preschool Partnership Initiative. The combination of the Governor’s FY 2026 budget recommendations and the proposed FY 2025 supplemental budget total $3.27 billion in Fair Share investments.
The Administration takes an aggressive approach to addressing issues with the state’s child care financial assistance (CCFA) system, appropriating $1.1 billion in total to state-subsidized care between the proposed FY 2026 budget and the proposed FY 2025 supplemental budget. This investment addresses two significant challenges facing CCFA: rising subsidized care costs and limited capacity at the Department of Early Education and Care (EEC) and its regional support offices to administer the program. The agency continues to approve annual increases to provider reimbursement rates and these increases must be annualized in subsequent years.
The reach of this budget proposal is also supported by other revenue changes and loophole closings that will mostly impact filers with very high incomes. For instance, the budget includes savings of $164 million from capping the deduction that can be taken on state income taxes for charitable deductions, limiting it to $10,000 for couples or $5,000 for individuals. Most middle- and low-income tax filers will not be affected, as past analysis has shown that the majority of tax benefit from the state’s charitable deduction accrues to households with incomes over $1 million.
The Budget Continues to Support Important Programs and Needs to Further Expand to Support Increased Demand
Fare-free buses in Regional Transit Authorities (RTAs) and the Commonwealth Cares For Children (C3) grants were both initially funded by federal pandemic dollars and then were funded by the Commonwealth through Fair Share funds and other state funds. These programs have been very successful. For instance, ridership on RTAs has increased rapidly and service hours improved, while public support for child care is stabilizing the sector. While these improvements are commendable, the Administration’s FY 2026 budget proposal does not address the increasing demand for these services.
The Governor’s budget funds operational grants to child care providers (C3 grants) at $475 million, which is equivalent to the FY 2025 funding level but does not keep up with inflation. The C3 grants are essential to the function of the child care sector and have supported wage increases for educators, while helping to prevent significant cost increases for families. Due to inflation and rising costs over the last few years, this appropriation level is unlikely to meet the needs of providers. Recent analysis of child care costs published by EEC shows that between 2022 and 2024, provider costs have risen between 12 percent and 26 percent, depending on the program’s location and the ages of children it serves.
Access to and Benefits for Critical Housing, Cash Assistance, and Health Programs for Families with the Lowest Incomes are at Risk
Housing, cash assistance, and health and human services programs are vital for many families and individuals, but they are at risk of being underfunded and/or becoming difficult to access in the proposals put forward by the Governor.
The FY 2026 budget takes steps towards reducing spending on the Commonwealth’s emergency shelter system. The Governor’s budget would slightly decrease (by $800,000) funding for emergency assistance family shelters. Several major housing programs received no increases or slight increases that do not keep pace with inflation. These include Rental Assistance for Families in Transition (RAFT), operating subsidies for public housing authorities, the HomeBASE program, and homeless individual shelters. The overall housing budget increased in real dollars, driven largely by increases to voucher programs including the Massachusetts Rental Voucher Program (MRVP) and the Alternative Housing Voucher Program (AHVP). This is chiefly because vouchers are used to pay rent on the private market, and rent growth in Massachusetts has significantly outpaced inflation in recent years. This funding increase will yield only 130 new vouchers.
Efforts to reduce shelter spending have been focused largely on restricting access and not on new investments designed to reduce need. Recent data from the Department of Housing and Urban Development (HUD) show that Massachusetts has experienced the third-highest increase in the country in its homeless population, illustrating that the level of unmet need remains high.
Federal Funding Uncertainty
Federal funding typically accounts for about a quarter of the Commonwealth’s budget, a large portion of which supports MassHealth. The Governor’s FY 2026 budget proposal comes at a time of great uncertainty around federal funding and potential funding cuts. If federal budget cuts materialize, the state will have to consider other funding sources to meet the needs of the Commonwealth.
