The state budget Governor Maura Healey signed on July 4th for Fiscal Year (FY) 2026 reflects both caution in the face of federal funding threats and the new possibilities for investment in education and transportation made viable by surging revenue from the Fair Share surtax. The FY 2026 General Appropriations Act (GAA) budget consists of over $60 billion in line item spending and $7.8 billion in pre-budget transfers, funding that does not go through the budget process but is statutorily transferred to various funds. The combination of line items and pre-budget transfers total $67.9 billion for the FY 2026 GAA. Accounting for inflation, the FY 2026 GAA is a one percent increase over FY 2025 GAA funding levels.
The FY 2026 budget includes $2.4 billion from Fair Share revenue, a surtax on incomes over $1.08 million1. The budget allocates $712 million to transportation programs, including a $550 million transfer to the Commonwealth Transportation Fund, and $1.7 billion to education programs. In addition to this Fair Share funding in the FY 2026 GAA budget, a Fair Share supplemental budget, totaling $1.3 billion, designates $551 million and $759 million for one-time investments in education and transportation, respectively. This additional budget was possible due to revenue collections from the surtax outpacing initial estimates.
Fair Share has been critical for Massachusetts as it has enabled the state to make investments in transportation and education services that, while acknowledged to be crucial for socioeconomic development, are only possible due to revenue from the surtax. The Massachusetts Bay Transportation Authority (MBTA) has been able to make improvements and invest in reduced fare programs, Regional Transit Authorities (RTAs) are flourishing with free fare buses, and other transportation programs around the Commonwealth are launching improvements due to new financing mechanisms through the Commonwealth Transportation Fund. On the education side, Massachusetts has been able to continue to fund free school meals and child care operational grants (programs initially funded by federal pandemic dollars) and invest in K-12 and Higher Education. The infusion of Fair Share funding not only increased investment in education and transportation, but also helped to prevent cuts, or deeper cuts, in other areas of the budget.
With the recent passage of the federal budget reconciliation bill, planning for our state budget has become increasingly precarious. Other federal policy changes are anticipated to have substantial economic impacts, such as the cancellation of research grants, rescission of student loan forgiveness programs, defunding of diversity, equity, and inclusion programs, and the ever-changing landscape around tariffs. The national economic picture will have a major impact on revenue available for the state’s FY 2026 budget. While state lawmakers have crafted a balanced FY 2026 budget based on current revenue projections, there is a great deal of uncertainty around revenue collections in the FY 2026 budget cycle.
As lawmakers prepare for potential revenue shortfalls during FY 2026, Legislators and the Governor have attempted to build leeway into the FY 2026 budget. The Conference budget – and, by consequence, the GAA – left about $800 million in anticipated revenue unappropriated. The Governor took this a step further, vetoing another $130 million in appropriations when she signed the GAA into law. Together, these reductions in budgetary investments provide fiscal “headroom” to absorb close to a billion dollars of FY 2026 revenue shortfalls and/or federal cuts before additional budget balancing measures – for example, 9C2 cuts and/or use of Stabilization Fund dollars – would become necessary. Additionally, the Governor put forward an FY 2026 supplemental budget with the FY 2026 GAA to move $100 million of unappropriated dollars into a “flexible reserve account” that would allow the administration to act quickly should various programs require additional funding.
The following analysis discusses spending from the FY 2026 GAA in tandem with the FY 2025 Fair Share supplemental budget signed in late June. It assumes that the $1.3 billion appropriated in the supplemental budget will be almost entirely carried over into FY 2026, which began July 1. This analysis includes vetoes that were made when the Governor signed the budget on July 4th and was written before any potential legislative overrides of these vetoes.
Growing Uncertainty Due to Federal Actions
Despite uncertainty on the revenue front, the FY 2026 budget contains no new taxes or fees. It is built on the unrevised January 2025 Consensus Revenue Estimate (CRE) of $43.614 billion, plus a large infusion of Fair Share surtax dollars. Though Fair Share surtax revenues have consistently outperformed expectations, non-surtax revenue during FY 2026 is less certain. Changes in federal policies, from tariffs to immigration to Medicaid, food assistance, and other federal program cuts, may have significant negative impacts on the national economy. This, in turn, will likely impact state tax collections. Additionally, as this summer’s federal budget reconciliation bill begins to be implemented, federal reimbursements for state programs such as MassHealth and the Supplemental Nutrition Assistance Program (SNAP) may fall short of expectations during FY 2026.
Should substantial revenue shortfalls materialize, either in tax revenue or federal funding, lawmakers will need to find ways to close the resulting budget gap. While lawmakers have included close to a billion dollars of fiscal “headroom” in the FY 2026 GAA (see discussion above), it is possible that additional revenue will be required. Progressive revenue options, including requiring multinational corporations to pay their fair share of state taxes, would be an appropriate and important part of addressing FY 2026 budget gaps that may emerge.
Shifts to Free up More Money for Budget Appropriations
An important way that the FY 2026 GAA makes additional revenue available is by making use of above-threshold capital gains revenue.3 Instead of depositing all above-threshold capital gains revenue into the Stabilization Fund, lawmakers redirect $632 million to various pension and related funds. In effect, this frees up $632 million in the General Fund, from which these pension and other obligations otherwise would be funded. This allows for greater investments in programs and services funded through FY 2026 budget appropriations, and helps to create the fiscal “headroom” discussed above. The GAA still deposits $33 million in excess capital gains revenue into the state’s Stabilization Fund, which currently holds over $8 billion.
Housing Safety Net Remains Under Stress Due to Rapidly Rising Rents
High housing costs continue to be an emergency across the Commonwealth, placing housing assistance programs under increased stress. To be effective, these housing affordability initiatives must keep up with rapidly rising rents, so even consistent funding increases do not necessarily enable them to serve the growing number of people in need of assistance. Over the last four fiscal years, most of the Commonwealth’s core housing safety net programs have seen increased funding, and if not for these increases many more people would have suffered housing insecurity and homelessness. However, despite the state’s investments, the impact of additional funds is eroded by the high cost of rents in the private market.
Final FY 2026 funding for particular programs may be affected by a supplemental budget that was passed in February 2025, which appropriated an additional $425 million for the emergency shelter system. The supplemental budget also contained language allowing some of the funds to be used for housing safety net programs that were on pace to run out of money before the end of FY 2025.
RAFT Funding Struggles To Keep Up with Housing Instability
From FY 2023-2026, Residential Assistance for Families in Transition (RAFT) funding, which provides short-term assistance to residents facing eviction, foreclosure, or other housing emergencies, has increased by 12.9 percent after accounting for inflation. These increases appear to keep up with the pace of housing costs according to the most recent available Census data, although the FY 2026 appropriation barely surpasses anticipated inflation compared to FY 2025. Due to the high rate of housing instability across the Commonwealth, RAFT was on pace to run out of funds before the end of FY 2025. This, combined with the relatively small increase from FY 2025 to FY 2026, suggests that the need for housing assistance is still greater than the resources allocated.
Lack of Funding for HomeBASE Can Lead to Program Interruption
From FY 2023-2026, initial appropriations for HomeBASE, which helps families in shelter to afford stable housing, have decreased overall. However, according to the most recent state data, HomeBASE received an additional $48 million during FY 2025 as a supplemental appropriation, for a total of $105.3 million that year. This money has been almost entirely spent, with only $1.3 million left unspent as of this writing. As shown by the fact that HomeBASE required nearly $104 million during FY 2025, the need for HomeBASE assistance is significant and the initial appropriation of $57.3 million for FY 2026 is likely insufficient.
Even with the additional appropriation, a lack of HomeBASE funding has led to program interruptions. HomeBASE has typically allowed for a third year of assistance based on need, but the Commonwealth recently paused these extensions. In combination with new restrictions on shelter access, as well as federal cuts to health care and food assistance programs, people who depend on HomeBASE are in a more tenuous position overall. The table below illustrates that, when adjusted for inflation, the budget for the HomeBASE program is 12.98 percent less than the appropriations allocated for it in FY 2023.
| HomeBASE Receives Mid-Year Funding Boost, but FY 2026 Amount is Less than FY 2023 | ||
|---|---|---|
| Unadjusted | Adjusted (FY 2026 dollars) | |
| FY 2026 Appropriations | $57,322,002 | $57,322,002 |
| FY 2025 Appropriations* | $105,322,001 | $109,997,482 |
| FY 2024 Appropriations | $37,070,445 | $39,786,231 |
| FY 2023 Appropriations | $59,411,201 | $65,873,682 |
| Change from FY 2023 to FY 2026 | -12.98% | |
| *FY 2025 appropriations include a mid-year transfer of $48 million from the FY 2025 Supplemental Budget. | ||
MRVP Is Being Stressed by the Housing Crisis
The Massachusetts Rental Voucher Program (MRVP), which provides rental vouchers to residents in need of housing assistance, has seen consistent funding increases. Nevertheless, these increases in funding are barely enough to keep up with the cost to the state of supporting its existing vouchers. Voucher cost increases are driven by multiple factors that include regular updates to fair market rents, as well as more new leases, which tend to cost more than older leases. Additionally, because of the Commonwealth’s high housing costs, MRVP updated its guidelines last year to allow vouchers to cover up to 110 percent of the local fair market rent, instead of 100 percent. This is a welcome change that will allow more voucher holders to actually use their voucher, rather than receiving one and being unable to find a suitable and affordable unit.
According to state data, the estimated cost of a voucher, which is meant to bridge the difference between a recipient’s income and the cost of rent, increased by more than 39 percent from January 2023 to January 2025. From FY 2023 to FY 2025, MRVP funding increased by 42 percent (not adjusted for inflation). MRVP funding for FY 2026 increased by approximately 10.6 percent from FY 2025 appropriations. The administration estimates that this increase will allow for 130 additional project-based vouchers (a subsidized unit in a specific location), as well as sustaining approximately 10,400 existing vouchers. To ensure the sustainability of MRVP and allow it to serve more people, state leaders will need to pursue a range of interventions to rein in housing costs.
Public Housing Subsidies Have Increased Over Time, but Fail to Keep Up With Inflation for FY 2026
Operating subsidies to public housing authorities make up a significant portion of the Commonwealth’s housing budget. These subsidies have increased over the last four fiscal years, but FY 2026 is a slight departure from that progress. Public housing operating subsidies saw an effective cut of approximately $2.4 million after accounting for inflation. As one of the only states with a state-funded public housing system, Massachusetts is a leader in this space. However, continued investment is essential.4 The table below shows the appropriations for Public Housing Authorities from FY 2023 to FY 2026 and, when adjusted for inflation, FY 2026 funding has increased 13.33 percent when compared to FY 2023.
| Subsidies to Public Housing Authorities Expected to Lag Behind Inflation | ||
|---|---|---|
| Unadjusted | Adjusted (FY 2026 dollars) | |
| FY 2026 Appropriations | $115,600,000 | $115,600,000 |
| FY 2025 Appropriations | $113,000,000 | $118,016,324 |
| FY 2024 Appropriations | $107,000,000 | $114,838,835 |
| FY 2023 Appropriations | $92,000,000 | $102,007,342 |
| FY 2026 increase from FY 2023 | 13.33% | |
New Revenue Sources for Housing Absent from Budget
The budget did not contain new revenue sources that would support additional investment in affordable housing or investment in the housing safety net. While the Affordable Homes Act did increase some housing investments, and recent legislation increased the state Low Income Housing Tax Credit (LIHTC), neither of these created new revenue which remains an urgent need.
Progress on Tenant Protections Will Save Renters Money
The FY 2026 budget contained a ban on the practice of forcing tenants to pay the fees of real estate brokers hired by their landlord. This is an important protection, and for most tenants will reduce their up-front rental costs by 25 percent, eliminating a significant and non-refundable fee.
Fair Share Prevents Big Funding Shortfall at the MBTA
Fair Share revenue made it possible to achieve several transportation advances and avert severe service cuts at the MBTA. The surtax provides $712 million in funding for transportation through the current 2026 budget as well as $759 million in one-time funding from the FY 2025 Fair Share supplemental budget (enacted a week before the end of FY 2025 that will get carried into the FY 2026 fiscal year).
In the FY 2026 budget, the MBTA receives the largest portion of Fair Share transportation funds. In June, when the MBTA passed its $3.24 billion operating budget, the transit authority anticipated that the Commonwealth’s FY 2026 budget would provide $687 million to the transit agency from the Commonwealth Transportation Fund, but the Legislature ultimately agreed on $470 million of such support. Combined with additional operating support from the FY 2025 Fair Share supplemental budget, this leaves the MBTA’s projected revenue somewhat short of its enacted budget. Rather than adding to its reserves towards FY 2027, the transit authority may be forced to draw them down, defer some planned improvements, or find other mid-year savings or cuts.
The June 2025 Fair Share supplemental budget provides $548 million towards the MBTA: $20 million to implement a low-income fares program, $40 million for physical infrastructure, $175 million for workforce and safety, $300 million to replenish its deficiency fund, and $13 million to improve ferry service.
The success of Fair Share in recent years has taught the Legislature to increase its surtax revenue projections. The additional $450 million added in the Conference Report to FY 2026 surtax revenue projections helps make possible the robust transportation investments in this budget. As a result, however, there is likely to be far less unspent surtax collections available for the next Fair Share supplemental budget. Next year, less supplemental surtax revenue will likely be available to support the MBTA at a time when the authority is also likely to have few reserves to navigate the FY 2027 budget.
Fare-Free Bus Service at Regional Transit Authorities Made Permanent
For Massachusetts’s 15 Regional Transit Authorities (RTAs) that operate bus service outside the MBTA service area, the FY 2026 budget provides $209 million in operating support, $162 million (about 77.5 percent) of which is funded by Fair Share. The total represents a 122 percent increase over FY 2025, with much of the money dedicated to particular kinds of service improvements, such as $35 million for RTAs to provide fare-free service. A policy section of the budget solidifies this change by mandating that RTAs not charge fares in the future, subject to appropriation. Meanwhile, the supplemental budget provides the RTAs with $25 million in additional support for workforce development and training and $25 million to support capital investments.
Funding for Roads, Bridges, and Other One-Time Transportation Made Possible by the Fair Share Supplemental Budget
A variety of other one-time transportation improvements were made possible by the supplemental Fair Share spending budget. It provides $80 million to support municipalities with upkeep of local roads, $16.5 million to modernize and repair small bridges and culverts around the state, $10 million for capital grants to support microtransit, and a $7 million program for municipalities to improve and maintain roads that are meant to stay unpaved.
The FY 2026 budget transfers $550 million in Fair Share funds to the Commonwealth Transportation Trust Fund (CTF). This fund receives revenue from a wide variety of sources and helps support the Massachusetts Department of Transportation, the MBTA, and RTAs. Recurring Fair Share transfers to the CTF are also meant to provide a steady revenue source to finance bonds to support long-term capital investments. The FY 2026 budget contains a new policy that requires MassDOT to disclose regular information about how it uses this increased borrowing capacity. MassDOT is required to maintain an online dashboard tracking the new investments in transportation capital projects that are supported by dedicated Fair Share revenues transferred into the CTF.
Significant Increases in Child Care Subsidy Investment Will Support the Rising Costs of Maintaining Caseload
Funding for the state’s Child Care Financial Assistance program (CCFA) exceeds $1 billion in the final budget (see chart below). Most of this funding will support the maintenance of current CCFA caseload, which is nearly 66,000 children as of May 2025. The cost for maintaining the CCFA program has grown significantly over the past few fiscal years, primarily due to consistent increases to educator reimbursement rates and increases in overall need for child care assistance.
The final budget contains about $15 million less than the Governor’s FY 2026 proposal to maintain child care access for children currently enrolled and projected to be enrolled in the new fiscal year. The Governor’s proposal accounted for anticipated growth in the supportive care caseload, which is an entitlement that provides care for children who are involved with the Department of Children and Families, and children whose families receive Transitional Aid to Families with Dependent Children. Despite the discrepancy, the Administration does not believe that this funding level will result in any immediate interruption in care for children currently enrolled in income-eligible CCFA.
Total caseload, ultimately, depends on many factors, including some outside of the Commonwealth’s control, like the number of children entitled to CCFA through supportive care. The funding that is required to fund CCFA in FY 2026 will not be solidified until later in the fiscal year. Still, a funding amount that is lower than what the Department of Early Education and Care projects it will need raises significant concern for how families currently receiving CCFA will be able to continue to receive assistance through the end of the fiscal year.
| Child Care Financial Assistance is Funded Through Multiple Sources in FY 2026 Budget | |
|---|---|
| Income Eligible Waitlist | $10,700,000 |
| Child Care Supports | $83,000,000 |
| Supportive Child Care (DCF and DTA-related) | $448,211,115 |
| Income Eligible Child Care (Child Care Access) | $517,637,865 |
| Total | $1,059,548,980 |
Fair Share Allows for Vital Early Education Investments, Creates Flexibility Elsewhere
FY 2026 marks the first fiscal year in which the Legislature used Fair Share revenue to support the primary CCFA line items (3000-3060 and 3000-4060). Of the $966 million included in these two line items, the Fair Share surtax provides for about 20 percent. This decision reflects the Legislature’s concern over looming cuts to federal funding, and frees up nearly $200 million of General Fund resources. Our ability to maintain a vital early education program while guarding against threats from the federal government demonstrates Fair Share’s significant positive impact on the Commonwealth.
Income-Based Subsidy Access Should Increase, But Unmet Need Will Remain High
The FY 2026 budget includes $10.7 million for the Department of Early Education and Care (EEC) to procure new contract child care slots in FY 2026. Assuming that the agency maintains roughly the number of contract slots from FY 2025, this funding amount could add about 600 income-eligible CCFA seats. The income-eligible CCFA waitlist currently exceeds 31,000 children and, due to funding constraints, EEC has not been able to award new income-eligible vouchers since March 2024. The exact impact of this funding will not be solidified until the new contracts are procured, likely in the late summer or fall of 2025. Regardless of the exact growth in capacity, we can expect FY 2026 to be a challenging year for low-income families who need child care or after-school care and cannot afford it without CCFA.
Subsidy Reimbursement Rates Will Continue to Rise In FY 2026
In the FY 2025 Fair Share supplemental budget, which was signed into law days before the FY 2026 budget, the Legislature included $20 million to increase CCFA reimbursement rates for participating programs in FY 2026, continuing a trend of annual rate increases. The Legislature made a similar investment in reimbursement rates in the FY 2025 budget ($20 million, not adjusted for inflation), while also including funding to annualize reimbursement rates from the prior year. By making this investment for FY 2026, the Legislature will need to find a way to annualize these increased rates in the FY 2027 budget.
Fair Share Revenue Continues to Buoy Our Recently Codified C3 Operational Grant Program
Commonwealth Cares for Children (C3) grants, which provide operational funding to EEC licensed providers, are funded at $475 million in FY 2026, a nearly five percent decrease compared to FY 2025, accounting for inflation. For the first time, the grant program is funded entirely by revenue generated from the Fair Share surtax. In the FY 2025 budget, the Legislature approved the creation of an online lottery platform, with a portion of the generated revenue dedicated to C3 grants. As of the passage of the FY 2026 budget, the online lottery system is not yet operational. If the system is not active in time for the FY 2027 budget debates, the Legislature will have to, once again, identify an alternative source for the approximately $100 million that the lottery is supposed to generate for C3.
Reduction in the Early Education and Care’s Administrative Budget
The FY 2026 budget reduces the EEC’s administrative line item significantly compared to the FY 2025 budget. Accounting for earmarks, EEC’s operating budget decreased from over $12 million in FY 2025 to about $6 million for FY 2026, not adjusting for inflation. As of July 2025, the exact impact of this reduction is unknown.
Commonwealth Preschool Partnership Initiative Funding Decrease
Funding for the Commonwealth Preschool Partnership Initiative (CPPI) program, which supports access to high-quality early education through partnerships between school districts and child care programs, was reduced in the FY 2026 budget compared to FY 2025. CPPI is funded at $20.5 million for FY 2026, and, adjusted for inflation, this represents a 27 percent decrease in funding compared to FY 2025. According to EEC, the cost of maintaining the current function of CPPI is about $23 million annually, so the agency will likely need to adjust their delivery model and/or reduce the program’s capacity for the coming fiscal year.
Funding the Fifth Year of the Student Opportunity Act
A major accomplishment of the FY 2026 budget is that it meets the obligations of the fifth year of the Student Opportunity Act (SOA). This is part of a six-year commitment to ramp up state support for local school districts to better serve students and provide more equitable funding to lower-income schools and communities. The budget does this by adding $460 million statewide over current levels. Due to the use of the $2.4 billion estimated FY 2026 Fair Share surtax revenue, the state increase to local “Chapter 70”5 aid was entirely supported by surtax revenue. This is different from previous years when only a small amount of formula aid came from Fair Share.
Additional Support for K-12 Schools Helps Cities and Towns
Even with the significant progress on Chapter 70 aid, over the past years, many school districts have struggled to adjust to a barrage of difficult budgetary pressures. This includes historically high levels of inflation, cuts or phase-outs of federal funding, as well as constraints on municipalities to raise the resources they want to contribute to high-quality schools. These challenges have arisen in several communities facing budget cuts, school closures, and difficult local property tax votes.
The FY 2026 GAA, along with the recently enacted FY 2025 Fair Share supplemental budget, alleviates these tensions by providing significant extra support to K-12 schools across the state. The funding matches significant programs and infrastructure needs including school buildings, student transportation, and special education. Overall the FY 2026 GAA provides $811 million in funding to cover growing costs in K-12 education, including $366 million in supplemental Fair Share support (see table below). Due to the Fair Share supplemental budget enactment at the end of FY 2025, this analysis assumes these funds are fully carried over into FY 2026.
| Most but Not All Programs to Address K-12 Cost Growth Increased in FY 2026 | |||||
|---|---|---|---|---|---|
| Official Title | FY 2025 GAA | Fair Share Supplemental (H. 4227) | FY 2026 GAA | FY 2026 GAA and Fair Share Supplemental | FY 2026 GAA and Fair Share Supplemental Increase Over FY25 GAA |
| Chapter 70 Line Items | 6,901,918,685 | 0 | 7,361,864,553 | 7,361,968,717 | 459,945,868 |
| Charter School Reimbursement | 198,988,065 | 0 | 179,089,258 | 179,089,258 | -19,898,807 |
| Circuit Breaker SPED Line Items | 493,177,484 | 248,250,000 | 484,927,484 | 733,177,484 | 240,000,000 |
| School Building Grants Line Items | 10,000,000 | 110,000,000 | 10,000,000 | 120,000,000 | 110,000,000 |
| School Meals | 170,000,000 | 0 | 180,000,000 | 180,000,000 | 10,000,000 |
| School Transportation Line Items | 129,128,628 | 8,132,500 | 132,439,587 | 140,572,087 | 11,443,459 |
| TOTAL | 7,903,212,862 | 366,382,500 | 8,348,320,882 | 8,724,675,943 | 811,490,520 |
Funding Falls Short to Reimburse School Districts for Funds Lost to Charter Schools
Charter school reimbursements will receive $179 million after the Governor’s veto, a nearly $20 million cut from current levels. This underfunding is particularly problematic due to recent Department of Elementary and Secondary Education (DESE) projections showing that nearly $216 million will be necessary to fund these critical grants for districts’ charter schools in FY 2026. This gap of roughly $36 million in lost reimbursements to cities and towns should be promptly addressed by the Legislature.
New Commission to Study Funding Challenges Faced by Districts
The FY 2026 GAA does not make large structural changes to K-12 funding formulas, such as addressing the deficit of roughly $465 million dollars needed to fully adjust for the high inflation of the past several years. However, the budget does take a very positive step towards consideration of future structural changes by including $200,000 and language directing DESE to study funding challenges faced by districts and come up with recommendations, particularly relating to how city and town contributions for their school districts are determined.
Funding Increases for UMass, State Universities, and Community Colleges Support Access to Higher Education
The FY 2026 budget provides a robust increase of $126 million to the standard operating budgets of UMass, state universities, and community college campuses. This includes $68 million (54 percent of the total) to UMass campuses, $30 million (24 percent) to state universities, and $28 million (22 percent) to community colleges. In the years to come, budget writers should consider equitable distribution of increases to each sector of public higher education to ensure our most under-resourced students and institutions have the funding needed to thrive.
The FY 2026 budget relies heavily on Fair Share dollars to continue positive new investments in higher education programs such as free community college, state financial aid increases, and academic and career advising and support services through the State University SUCCESS program. Additionally, the recently enacted Fair Share supplemental budget provided $20 million in support to campus operations as well as $115 million in pivotal capital funds. The use of Fair Share to support rebuilding campus facilities will likely be a cornerstone of the plan from the Administration and higher education leaders to invest $2.5 billion in campus infrastructure over the next decade.
Cuts to Federal Higher Education Funding Could Harm MA’s Progress on Affordability
A major challenge in coming years will be addressing reductions to federal support for higher education accessibility for low-income families and campus initiatives. Improvements to higher education affordability in recent years, such as MassGrant Plus and free community college have been built upon long-established federal grants for families of limited means. State programs have targeted the remaining gap between federal grant assistance and true affordability. With major cuts expected to federal aid programs like Pell Grants, it will require additional investment by the Commonwealth to make up for lost Pell Grant funds.
Decreases to Tax Prep Assistance Funding Will Harm Lower-Income Tax Filers
The FY 2026 budget decreased funding for Volunteer Income Tax Assistance (VITA) sites, which were funded at $500,000. This is a further reduction from FY 2025 when VITA funding decreased from $1.5 million to $820,000. VITA sites serve as a critical partner in ensuring maximum impact of the newly created state Child and Family Tax Credit (CFTC) and the recently expanded state Earned Income Tax Credit (EITC). The 80 VITA sites across the state serve some 30,000 low-income taxpayers by helping them access free tax preparation, claim refundable tax credits, connect to other services like WIC and Head Start, and potentially save hundreds of dollars on tax preparation. This type of support will become even more vital as we see potential federal cuts to funding and staffing to programs that help families meet critical needs.
Sustained Increases to Cash Assistance Support the Commonwealth’s Most Vulnerable Families and the Elderly
The 10 percent cash assistance grant increases that took effect in April 2025 for Transitional Aid to Families with Dependent Children (TAFDC) grants and Emergency Aid to the Elderly Disabled and Children (EAEDC) are preserved in the final budget. The final budget also raises clothing allowance to $500 and expands TAFDC eligibility for pregnant women without other children to any stage of pregnancy, rather than restricting eligibility to the last trimester. These important changes will support the Commonwealth’s most vulnerable families.
Expanding Affordable Retirement Access to Small- and Medium-Sized Nonprofits
The FY 2026 budget expands access to retirement savings by allowing more nonprofits to offer their employees the CORE plan, a state administered retirement program. The budget increases the employee cap from 20 to 100 for the publicly-managed retirement savings program for small non-profits. Increasing the employee cap will make this retirement program more accessible to people across the Commonwealth and will significantly decrease the administrative costs that nonprofits pay for traditional 401k programs. This change provides employees at small- and medium-sized nonprofits the opportunity to save towards their own retirement, which could significantly impact their ability to independently afford their lifestyle during retirement years and build wealth.
Decreases to Caseworkers Will Make it Even More Difficult to Enroll in Food Assistance Programs
The FY 2026 budget failed to include additional funding for Department of Transitional Aid caseworkers. The caseworkers are crucial to ensure everyone who is eligible for programs like the Supplemental Nutrition Assistance program (SNAP) receives it. This absence of funding could result in the loss of 300 caseworkers and comes at a time when the federal government enacted a bill that will make it more difficult to enroll, and remain enrolled, in SNAP.
The FY 2026 General Appropriations Act (GAA) was signed the same day the federal budget reconciliation bill was signed into law. The reconciliation bill will severely cut human service programs that low- and middle-income families rely on to make ends meet, like Medicaid and SNAP, while providing significant tax breaks that largely benefit the wealthiest Americans. The loss of these and other federal funding – such as federal financial aid, Head Start, Section 8 housing vouchers, and changes in eligibility to enroll in the Affordable Care Act – mean that the FY 2026 Massachusetts budget could experience significant cuts after it is enacted.
While we see the broad benefits of Fair Share funding across the Commonwealth demonstrated in the FY 2026 GAA, cuts to federal support will bring enormous new funding challenges, particularly in programs designed to support the most vulnerable populations and communities. It will require additional and intentional effort to defend the advances that have been made in Massachusetts in recent years to make sure families have a robust safety net to rely on during their most challenging times. Implementing other revenue-generating policies, such as closing a corporate tax loophole, capping the state charitable deduction, and taxing luxury items such as private jets, would provide more resources to sustain these essential programs. Additionally, legislators should consider tapping into the Commonwealth’s Stabilization Fund, of which one of its primary stated uses is to address federal funding cuts.
Find more information on the FY 2026 budget in MassBudget’s Budget Browser tool, detailing each spending line item, comparing spending levels to past years with adjustments available for the impact of inflation.
*Spending from the FY 2025 Fair Share supplemental budget in June 2025 is currently listed in the Budget Browser as FY 2025 spending because it has not yet been officially carried forward to FY 2026.
Endnotes
1To ensure that this additional tax continues to apply only to the Commonwealth’s highest income taxpayers, the $1 million income level is adjusted annually to reflect any increases in the cost of living by the same method used for federal income tax brackets.
2 Section 9C of Chapter 29 of the Massachusetts General Laws requires that when projected revenue is less than projected spending, the Governor must act to ensure that the budget is brought into balance.The Governor can only use 9C powers to cut funding in parts of the government that are under their control – in other words, the 9C authority extends only to the executive branch agencies.
3 There is a threshold, which is adjusted upward annually, for the amount of tax collected on capital gains income that lawmakers can use to balance the budget. Collections above the threshold are automatically deposited into the state’s rainy day fund, though lawmakers can choose to forgo some or all of this deposit in any given year.
4 MassBudget plans to monitor capital investments in public housing as a result of the Affordable Homes Act in an upcoming report.
5 Chapter 70 education aid is the Commonwealth’s primary program for distributing its portion of K-12 public education funding to the state’s 328 local and regional school districts. The Chapter 70 formula aims to ensure that each school district has sufficient resources to provide an adequate education for all of its students, taking into account the ability of each local government to contribute. In short, the formula is designed to have an equalizing effect, with less wealthy districts receiving more state aid than wealthier ones.
