Governor Healey’s Proposed Budget Braces for Difficult Times Ahead While Making Ample Use of Fair Share
Governor Maura Healey’s Fiscal Year (FY) 2027 budget proposal is the first step of the FY 2027 state budget cycle. The budget outlines the governor’s plan to spend over $62.8 billion, which includes $2.7 billion in Fair Share surtax revenue, the surtax on high incomes in Massachusetts, but does not include pre-budget transfers.1 The governor’s proposal also includes a supplemental budget for the current fiscal year (FY 2026) with recommended uses for the $1.35 billion in one-time Fair Share revenue, available because collections surpassed projections.
Jump ahead to any of the following sections, which reflect the policy areas where MassBudget has significant expertise and pays particular attention to the priorities of our grassroots and coalition partners.
Summary
The state budget is a comprehensive and complex document that includes most of the state’s revenue sources and expenditures for a specific fiscal year. Annually, the Massachusetts Budget and Policy Center (MassBudget) issues an analysis on the governor’s proposed budget, paying particular attention to the policy areas that our grassroots and coalition partners have identified as their priorities. The following analysis details the governor’s budget proposal in early childhood education and care, education, transportation, housing, and health and human service programs that are critical for the communities that our closest partners represent and serve. The analysis is supported by data-driven reports, including several published previously by MassBudget, with the goal of providing advocates, lawmakers, policymakers, and other interested parties with tools to better understand the human impact of the governor’s proposed budget.
The governor’s budget proposal reflects the challenges of federal funding losses and difficult new requirements for federally supported programs like MassHealth (Medicaid) and the Supplemental Nutrition Assistance Program (SNAP). Nonetheless, the proposed budget would make ample use of Fair Share revenue. Investments in education and transportation from Fair Share revenue will advance new programs and solidify funding for established programs, such as completing the final year of the Student Opportunity Act and stabilizing the coming year’s finances at the MBTA. The budget proposal is about a 3.8 percent increase over the FY 2026 General Appropriations Act (GAA), not adjusted for inflation. Adjusted for inflation, the budget increases funding only 1.5 percent over the FY 2026 General Appropriations Act (GAA).
With looming, large cuts in federal funding as the backdrop to the FY 2027 state budget process, the governor’s budget proposal is built on very modest expected growth in tax revenues and only a handful of other, similarly modest additional revenue proposals.
Facing federal government funding cuts, the state modestly increases revenue and has the opportunity to do more
The governor’s FY 2027 budget proposal includes approximately $450 million more in tax revenue than the $44.9 billion agreed to in the FY 2027 Consensus Revenue Estimate (CRE).2 The bulk of this additional $450 million in state tax revenue included in the governor’s FY 2027 proposed budget comes from two sources related to federal taxation:
- Expanding the pass-through entity excise tax (PTE) program to include Fair Share surtax payments. This enlarges a program where the Commonwealth provides a mechanism to help mostly high-income households reduce their federal taxes and then skims off a portion of these households’ savings. The governor’s proposed budget estimates that this would generate an additional $296 million in FY 2027 for the Commonwealth. The PTE excise program is an accounting “workaround” that allows filers with “pass-through” income – which is overwhelmingly collected by high-income households – to choose to pay their Massachusetts taxes through a special payment structure. This special structure allows these tax filers to deduct more of their state tax payments from their federal taxable income, thus reducing their federal tax bills significantly. As part of the PTE excise workaround, the Commonwealth collects the equivalent of a small portion of the federal tax savings generated by these PTE filers. The PTE excise program thus increases tax revenue for the Commonwealth, while also significantly cutting federal taxes for many high-income households.
- The governor also proposes, via a separate standalone bill, delaying and, in some cases, limiting elements of the federal corporate tax cuts included in the recent federal “One Big Beautiful Bill Act” (OB3). The administration’s bill, if enacted, would not constitute a new tax or a tax increase. The governor’s proposed budget assumes the bill would preserve $108 million in FY 2027 state tax collections that otherwise would be lost by the Commonwealth due to federal law flowing automatically into the Massachusetts tax code. However, fully opting out of all five federal changes would more than double these savings ($278 million in total in FY 2027). All of this revenue can be invested in the many needs of people throughout the Commonwealth.
While both proposals would increase the Commonwealth’s annual tax revenue, more can be done to bolster revenue in the FY 2027 budget. Rather than merely limiting and delaying the adoption of the federal OB3 changes, lawmakers can and should opt-out entirely from these expensive, ineffective, and grossly inequitable corporate tax breaks. Based on the Department of Revenue’s estimates, opting-out from the OB3 tax cuts would preserve approximately another $170 million in FY 2027 on top of what the governor’s bill proposes and would prevent additional revenue losses in future years. Other states are taking bold, preemptive action to halt the loss of revenue from OB3 corporate tax cuts. Massachusetts should follow suit.
Lawmakers also have many other options to generate new, progressive tax revenue to invest in communities throughout the Commonwealth. These include closing tax loopholes that allow billionaire multinational corporations to hide their profits overseas as a way to avoid paying Massachusetts state taxes. Lawmakers can similarly revive the governor’s earlier proposal to make charitable deductions more equitable, eliminate the special sales tax exemption for aircraft tax exemptions, and other options.
Governor Healey’s budget proposal would free up additional general funding by redirecting capital gains tax revenue
There are two other changes in the governor’s budget proposal that would increase the amount available to spend in the FY 2027 budget. The first would enable an estimated $470 million in capital gains tax revenue to be available for the General Fund spending rather than being deposited automatically into the state’s rainy day fund and other funds at the end of FY 2027. This change is part of a more comprehensive set of reforms proposed by the governor to the process that sets a default for redirecting “excess” capital gains tax collections above an annual threshold. These “excess collections” typically get set aside for particular purposes, like building up the state’s rainy day fund, paying down state retiree benefit and pension costs, and funding disaster relief. Based on input from a Stabilization Fund and Long Term Liability Task Force, the governor proposes to raise the threshold in FY 2027 by $470 million to better align with recent capital gains collection totals, and to base each future year’s threshold on a rolling ten-year average of actual capital gains tax collections. This change would have the effect of adding $470 million to the amount available for appropriation from the General Fund in the governor’s proposed FY 2027 budget.
The second change proposed by the governor is to add to the General Fund in FY 2027 interest earned by the money held in the General Fund rather than distributing these interest earnings to other funds, as is typically done.
Fair Share
The governor’s FY 2027 proposed budget includes $2.7 billion from the Fair Share surtax, the voter-approved ballot initiative that enacted a surtax on the highest-income households in Massachusetts. In addition, the governor is proposing a FY 20263 supplemental budget of $1.35 billion in one-time Fair Share spending. This sum includes $200 million the governor separately proposed for the Discovery, Research, and Innovation for a Vibrant Economy (DRIVE) initiative to stimulate research at public higher education institutions. This investment would be another way that Fair Share funds replace lost federal funding and would support research and development in Massachusetts universities. The combination of the FY 2027 budget proposal, the accompanying FY 2026 supplemental Fair Share budget proposal, and the proposed investment in DRIVE totals $4.05 billion in Fair Share spending on education and transportation programs. Fifty-six (56) percent would be invested in education and 44 percent in transportation programs.
In the governor’s budget proposals, 30 education and transportation programs receive funding from the Fair Share FY 2027 budget and FY 2026 supplemental budget. The table below details the programs funded by Fair Share.
| Category | Program | FY 2026 Fair Share Supplemental Budget Proposal Appropriation | FY 2027 Governor’s Budget Proposal Appropriation |
|---|---|---|---|
| Education | Adult English Language Learners Waitlist | $5,000,000 | |
| Education | High Dosage Early Literacy | $25,000,000 | |
| Education | Special Education Circuit Breaker Reserve | $150,000,000 | |
| Education | Accelerating Achievement | $10,000,000 | |
| Education | Financial Aid Supplement Reserve | $18,300,000 | |
| Education | Operating Transfer to Spinout Success Fund | $5,000,000 | |
| Education | Transfer to High-Quality Early Education and Care Affordability Fund | $150,000,000 | |
| Education | Investment in DRIVE Initiative | $200,000,000 | |
| Education | Childcare Grants to Providers | $360,000,000 | |
| Education | CPPI Pre-K Initiative | $32,000,000 | |
| Education | Financial Aid Expansion | $85,000,000 | |
| Education | School Meals | $198,000,000 | |
| Education | Mental Health Birth to Higher Education | $6,000,000 | |
| Education | Literacy Launch Initiative | $25,000,000 | |
| Education | SUCCESS for State Universities | $14,000,000 | |
| Education | Student Opportunity Act Expansion | $550,586,435 | |
| Education | School Transportation Reimbursements | $62,000,000 | |
| Education | Reimagining High School | $32,000,000 | |
| Education | Free Community College | $85,000,000 | |
| Education | DCF and DTA Related Child Care | $198,000,000 | |
| Education | Income-Eligible Child Care | $6,000,000 | |
| Transportation | Transfer to the Commonwealth Transportation Fund | $25,000,000 | |
| Transportation | Operating Transfer to Infrastructure and Transportation Innovation Fund (Transportation Spinout) | $14,000,000 | |
| Transportation | MBTA Workforce/Safety Reserve | $550,586,435 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Regional Transit | $62,000,000 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Unpaved Roads | $11,200,000 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Microstransit and Last Mile initiatives | $137,048,000 | |
| Transportation | MBTA operating subsidy | $119,446,795 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Workforce Pipeline | $124,718,769 | |
| Transportation | Sustainable Aviation Fuel (SAF) Credit | $975,000,000 | |
| Transportation | Operating Transfer to Infrastructure and Transportation Innovation Fund (Transportation Spinout) | $5,000,000 | |
| Transportation | MBTA Workforce/Safety Reserve | $121,700,000 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Regional Transit | $45,000,000 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Unpaved Roads | $7,000,000 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Microstransit and Last Mile initiatives | $15,000,000 | |
| Transportation | MBTA operating subsidy | $523,000,000 | |
| Transportation | Operating Transfer to Massachusetts Transportation Trust Fund: Workforce Pipeline | $43,000,000 | |
| Transportation | Sustainable Aviation Fuel (SAF) Credit | $30,000,000 |
For more information on Fair Share funding see the early education and care, K-12 education, higher education, and transportation sections below.
Early Childhood
Increased Child Care Financial Assistance Investments Will Not Significantly Increase Access
The governor’s FY 2027 budget proposal continues the trend of year-over-year increases to child care financial assistance (CCFA) line items. The governor proposes $1.22 billion in funding across CCFA line items, a 9.7 percent increase over the FY 2026 enacted budget, adjusted for inflation. The projected increase in CCFA spending is driven primarily by a FY 2026 increase to reimbursement rates for CCFA educators, as well as an increase in the overall number of families being served through the state subsidy program. The Department of Early Education and Care (EEC) projects that this funding would allow them to continue serving children who are currently receiving subsidized care. The additional funds will also slightly increase the agency’s capacity to serve children who are receiving subsidies through Department of Children and Families- and Department of Transitional Assistance-based eligibility (which are entitlements) or other limited eligibility statuses.
However, this funding level would not allow EEC to offer new vouchers to families who are eligible based on their income. Income-eligible subsidies are, by far, the most common form of CCFA, but access to new income-based vouchers has been severely limited since March 2024. There are over 29,000 children on the waitlist for income-eligible CCFA. At this level of funding, access to affordable child care will continue to be severely limited for low-income families in FY 2027.
Level funding for grants for child care providers would dilute program impact
The governor proposes $475 million in funding for the Commonwealth Cares for Children (C3) operational grant program, the same amount the program received in FY 2026. Since its creation in 2021, C3 has been an essential support for early education programs, and in turn, children and families. The monthly grant program has contributed to increased program staffing, wages, and educator retention. A more stable workforce has led to more child care program slots, particularly in under-resourced communities. Child care centers that receive C3 grants have been able to reduce the financial burden on families, either by offering tuition relief or foregoing tuition increases. Massachusetts is the only state in the country to maintain and build upon the pandemic-era support from the federal government that allowed for the creation of C3.
No increase in funding for C3, however, threatens this progress. Rising costs for food, rent, utilities, and other program expenses continue to place a strain on child care program budgets. Approximately 600 new programs have become licensed during FY 2026; and while they are helping to expand child care supply, they have not had access to C3 grants due to limited funding. Universal availability to this funding has been a hallmark of the C3 program but insufficient funding threatens that model.
The budget lays groundwork for Universal Pre-K in Gateway Cities
The Commonwealth Preschool Partnership Initiative (CPPI) receives a significant increase in the governor’s proposed FY 2027 budget compared to the FY 2026 enacted budget. Taking into account funding for Summer Step Up, which is earmarked in CPPI line items, the governor’s proposal would double CPPI funding, taking it from $15.5 million to just under $32 million in FY 2027. CPPI currently operates in 30 cities across the Commonwealth and supports the collaboration between school districts and community-based programs to offer affordable, high-quality preschool.
By increasing the investment in CPPI, EEC would be able to offer grants to more cities in FY 2027. Massachusetts’s Gateway cities are likely to be a priority for expansion, as the governor has previously set the goal of achieving universal access to preschool in Gateway cities by the end of 2026. Even if new Gateway city school districts receive CPPI grant funding in FY 2027, universal access to preschool will not be immediate. School districts that are new to CPPI start with planning grants, which provide the resources for the district to assess the early education needs in their city and create a proposal for implementation. Assuming adequate funding, new districts would be able to seek implementation grants in FY 2028, at which point they should be able to open new classrooms.
Even if the impact for children and families is not immediate, this new investment would represent a step towards access and education equity for the youngest learners. The CPPI prioritizes affordability and services to high need learners in its pursuit of universal preschool access.
K-12 Education
Resources for supporting equity in K-12 education
The governor’s FY 2027 budget proposal meets the obligations of the final year of the Student Opportunity Act (SOA). This is the final year of the ramp up of state support for local school districts to better serve students and provide more equitable funding to lower-income schools and communities, particularly for English language learners, students from families with low-income, and students with disabilities. The governor’s budget proposal provides a total of $7.6 billion in funding for schools, including $550.6 million to fund SOA with revenue from Fair Share. While it is important the SOA is fully funded in its final year, the budget proposal does not address the eroded value of the funding due to recent high levels of inflation.
The Special Education Circuit Breaker reimburses school districts for extraordinarily high special education costs, particularly the instructional and transportation costs associated with out of district placements required by a student’s individualized education plan. In the FY 2027 budget, the governor proposes $652.7 million for the Circuit Breaker, compared to $484.9 million appropriation in FY 2026. The governor also proposes an additional $150 million through the FY 2026 Fair Share supplemental budget proposal for the Circuit Breaker’s reserve funding. This increase would, according to the administration, enable the full reimbursement to school districts for the transportation and instructional cost of out-of-district special education students.
Universal free school meals continue
Revenue from Fair Share would provide $198 million, an $18 million increase over FY 2026, to sustain universal free school meals for Massachusetts’s children, regardless of income. Free school meal programs have been shown to reduce food insecurity for children and ease financial burdens on families.
Rural schools receive boost
The governor’s FY 2027 budget also proposes an increase to Rural School Aid, growing from $12 million in FY 2026 to $20 million in FY 2027, an increase of 63 percent when adjusted for inflation. This funding provides grants to school districts and education collaboratives in rural towns and regional school districts, to support greater collaboration and consolidation. Grants are prioritized for districts that have experienced significant enrollment losses that threaten their fiscal health. This funding is critical in supporting rural school districts, which face unique challenges, from declining populations and student enrollments to constrained tax bases.
Higher Education
Making higher education more affordable with Fair Share
The governor’s FY 2027 budget proposes a $137 million continued investment in free community college across the Commonwealth. According to the administration, this funding level will accommodate enrollment growth. After years of decline, exacerbated during the COVID-19 pandemic, enrollment in community colleges across Massachusetts has risen 38.5 percent since 2022, likely due to this program.
The budget proposal also appropriates $85 million to the MASSGrant plus program, which covers the full cost of tuition and fees at four-year, public state universities for students with lower-incomes. Because there is no state-wide free or no-out-of-pocket cost bachelor’s degree policy, state universities have to independently determine student eligibility criteria for “free tuition.” For example, Worcester State University created ValuePlus, which requires students to be Massachusetts residents, eligible to receive Pell Grant tuition aid, and have a family adjusted gross income (AGI) of $75,0000 or less, or not live on campus (commute). Framingham State University created Framingham Promise which has an AGI requirement of $85,000 or less and Bridgewater State University’s Commitment Program requires an AGI of $125,000 or less. It is important to reiterate that while Fair Share continues to make significant contributions to higher education affordability, the cost of attending college is not just tuition and fees, it also includes housing, books, supplies (i.e., computer), food, and transportation. Therefore, affordability of attending college in Massachusetts continues to be a barrier for enrollment, retention, and completion of higher education degrees.
Additionally, the FY 2026 Fair Share supplemental budget proposes $18.3 million for financial aid reserves that can support financial assistance for Massachusetts students in public higher education institutions. Making higher education tuition more affordable addresses one of the multiple barriers that students with low incomes, first generation students, students of color, and students with disabilities face when pursuing postsecondary education. Investments in higher education, such as free community college and MassGrant plus, also stimulate the development of a highly skilled local workforce, addressing occupational shortages in all industry sectors.
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, like the programs discussed above, have been built upon long-established federal grants for families of limited means. State programs funded with the Fair Share have addressed the remaining gap between federal grant assistance and true affordability. Changes to federal aid programs like Pell Grants could require additional investment by the Commonwealth to make up for lost Pell Grant funds.
Transportation
The governor’s FY 2027 budget proposal and accompanying FY 2026 supplemental budget proposal would continue the general improvement of transportation with greater investment since passage of the Fair Share surtax. These proposed budgets do not attempt to address longer-term strains in transportation funding. Fair Share, however, has enabled the upgrading of roads and bridges, making public transit safer, more accessible and reliable, and supporting local transportation priorities.
MBTA projected deficit is bridged next year
The governor’s FY 2027 budget proposal and the accompanying FY 2026 supplemental budget proposal would together support MBTA operations and investments for longer-term improvements for the next fiscal year. The governor’s FY 2027 budget proposal would provide the MBTA’s primary operating support account with $470 million, the same amount provided in FY 2026 (not including a $200,000 earmark). Assuming this level of support, the MBTA had projected a $648 million operating shortfall that the MBTA would face in FY 2027, after depleting reserves in FY 2026. Additional Fair Share funding in the governor’s proposed FY 2026 supplemental budget would add $523 million in MBTA operating support and $121.7 million for a reserve to provide adequate workforce and investments to address safety and reliability concerns flagged by the Federal Transit Administration. The governor’s FY 2027 budget proposal would close the MBTA budget gap for FY 2027. It is important to keep in mind that additional revenue will be needed in FY 2028, when the MBTA projects a $837 million operating deficit.
It is a precarious situation that the MBTA’s basic operations are so dependent on this year’s large Fair Share supplemental budget. For one thing, Fair Share funds are ideally used for new government initiatives, although that is difficult to achieve when tax cuts and federal cuts erode the revenue base. Moreover, supplemental Fair Share funds are specifically intended for one-time uses, not for funding ongoing programs. Finally, Fair Share revenue has outperformed expectations and, as a result, the first two supplemental Fair Share budgets accompanying the last two state budgets have been very large. Specifically, over a billion dollars in unspent Fair Share funds from previous fiscal years were a direct result from surtax collections vastly exceeding planned spending. Over time, it will not be possible for annual Fair Share spending to continue to exceed the amounts annually collected and will level off. (For a discussion of this constraint, see “Taking Stock of Transportation Funding”)
Support for regional transit would receive a smaller boost
The governor’s FY 2027 budget proposes $217.5 million in operating transfers to the Commonwealth’s 15 regional transit authorities (RTAs), an increase of $8.5 million or 4 percent over FY 2026, not adjusted for inflation. Of this amount, $66 million would be provided to support operational enhancements and improvements and $35 million would support free fares across all RTAs. This amount has not increased from FY 2026, despite inflation and the greater number of riders who have begun riding since the beginning of free fares.4
The governor’s Fair Share FY 2026 supplemental budget proposal would provide an additional $45 million to support grants for workforce and training initiatives at RTAs and support transit service improvements. These grants are slightly less than the $50 million provided to RTAs in the previous Fair Share supplemental budget that was split between support for workforce development and training and support capital for investments.
Defraying costs for client travel at Health and Human Services
In the governor’s FY 2027 budget proposal, $100 million would be transferred from the Commonwealth Transportation Fund to the Department of Health and Human Services (HHS) and combined with $350 million in general funds for HHS to transfer to its departments for transporting clients. This is a new line item and appears to be a new use for funds from the Commonwealth Transportation Fund.
Investments in roads, bridges, transportation innovation
The governor’s proposed FY 2027 budget would allocate $645 million in non-Fair Share funds to the Massachusetts Transportation Trust Fund for Massachusetts Department of Transportation spending. This funding will largely invest in roads and bridges. This would be a 15 percent, not adjusted for inflation, increase over the $559 million provided in the FY 2026 budget.
The governor’s FY 2026 supplemental budget proposes several other future-looking investments, including:
- $43 million for improving the workforce pipeline of civil engineers and other workers that support capital projects for highways, rail, and transit.
- $30 million in tax credits to encourage lower-carbon, more sustainable aviation fuel.
- $5 million to make investments in start-ups and other early stage ventures pursuing the commercialization of transportation-related technologies and other innovations.
Fair Share invests in rural transportation
The FY 2026 Fair Share supplemental budget also proposes $7 million for repair, maintenance, and improvements to unpaved roads, primarily found in rural areas. This continues a program funded at the same level in the FY 2025 Fair Share supplemental budget. The governor also proposes allocating $15 million for “micro-transit,” using smaller vehicles responding on-demand to passengers without fixed routes.
For a full description of funding mechanisms for Massachusetts transportation, see MassBudget’s, “What Does Massachusetts Transportation Funding Support and What are the Revenue Sources?”
Housing
Housing investments outpace inflation, but so do rent increases
The governor’s FY 2027 budget proposes just over $1.2 billion in Housing and Livable Communities investments. Compared to the final enacted budget for FY 2026, this would be an increase of approximately 2.1 percent after adjusting for inflation. However, as noted in previous MassBudget analyses, housing costs tend to rise faster than inflation and further limit the purchasing power of housing assistance programs. Census data show that from 2022 to 2024 (the most recent years available), the median gross rent in Massachusetts increased by an average of more than 5 percent per year.5 For rental assistance programs in particular, rapidly rising rents continue to stress the safety net.
A mixed picture for core housing payment assistance programs
Approximately half of the Commonwealth’s housing budget is allocated to programs that help households pay for housing costs, either as an ongoing subsidy (e.g., rental vouchers) or on a short-term basis (e.g., emergency housing assistance). For FY 2027, the governor proposes a total of $600.6 million across these programs, an inflation-adjusted increase of approximately 5.4 percent over the FY 2026 enacted budget. However, the governor proposes increases to some programs and decreases to others. Furthermore, for some programs, additional funds were transferred into the line item during FY 2026 because existing funds were insufficient. The governor’s proposal includes:
- $201.2 million for Residential Assistance for Families in Transition (RAFT), which assists households with housing costs when they are facing eviction, foreclosure, loss of utilities, and other housing emergencies. This is a decrease from FY 2026 of approximately $6.3 million, or 5.2 percent after adjusting for inflation.
- $278.3 million for the Massachusetts Rental Voucher Program (MRVP), the state’s primary rental voucher program. This is an increase from FY 2026 of approximately $25 million, or 7.4 percent after adjusting for inflation. The administration estimates that this increase would allow the program to add approximately 340 new project-based vouchers, which are vouchers tied to specific housing units.
- $82.3 million for HomeBASE, the state’s primary tool for transitioning families from Emergency Assistance (EA) shelter to stable housing through housing payment assistance, as well as providing housing assistance to families who would be eligible for EA shelter. While this is an increase of $25 million from the FY 2026 enacted budget ($57.3 million), additional funds were transferred into HomeBASE later in the year and the program has required a total of nearly $97 million as of this writing. Additionally, budget gaps led to program interruptions at the end of FY 2025. HomeBASE has typically offered families a third year of assistance based on need after the standard two years, but this was paused due to a lack of funds. Accounting for the mid-year transfer, the governor’s proposal would be a decrease from total FY 2026 appropriations unless additional funding is added throughout the year. The Commonwealth has reported that EA shelter caseloads have declined significantly, which may reduce the need for HomeBASE assistance somewhat. But families transitioning out of shelter continue to face a punishing housing market, and HomeBASE may require additional funding in order to fully meet need during FY 2027.
- $19.2 million for the Alternative Housing Voucher Program (AHVP), the state’s primary voucher program for adults with disabilities. This is a decrease from FY 2026 of approximately $198,000, or 3.2 percent after adjusting for inflation. The administration estimates that this funding level will allow AHVP to support its existing caseload of approximately 890 vouchers.
Investments in homelessness would be a cut in real dollars
The governor’s budget proposes $450.2 million in homelessness services for FY 2027. While this is a small increase in absolute dollars (approximately $1.5 million) from the FY 2026 enacted budget, it is an effective cut of approximately 1.9 percent after accounting for inflation. The administration’s budget recommendation notes that homelessness in the United States is at an all-time high, and that homelessness in Massachusetts is at its highest level since at least 2013. This makes it especially important to increase, rather than decrease, funding for and access to homelessness services and homelessness prevention.
The governor’s budget proposes decreases or level funding (an effective cut after inflation) for a range of programs, while also adding some new line items to address winter homelessness. These include:
- $258.6 million for Emergency Assistance (EA) Family Shelters and Services, which houses homeless families. This is a substantial decrease of approximately $17.8 million from the FY 2026 enacted budget, or 8.5 percent after adjusting for inflation. While the administration has cited lower caseloads in EA shelters as a justification for this decreased spending, these reduced caseloads are also caused by recent restrictions that make it more difficult to access shelter. These restrictions are not changed in the governor’s budget proposal.
- $7.5 million in a new Family Shelter Diversion line item, for the diversion of families away from EA shelters through the provision of other services. This new investment partially offsets the proposed funding cut to EA shelters and services.
- $114.0 million for Homeless Individual Shelters, which house homeless individuals who may not be eligible for family shelter. This is a small increase in absolute dollars of approximately $709,000 over the FY 2026 enacted budget, but a decrease of approximately 1.6 percent after adjusting for inflation.
- $12.0 million in a new Winter Beds line item, which will provide additional shelter capacity during the winter months.
- $27.8 million for Operation of Homeless Programs, which compensates caseworkers and support personnel. This line item increased significantly compared to the FY 2026 enacted budget, but a different shelter workforce line item (7004-0109, Shelter Workforce Assistance) was reduced from $10 million to $0. Taken together, the sum of these two line items is a slight decrease of approximately 3.7 percent after adjusting for inflation.
Slight cuts in real dollars to public housing investments
The governor’s budget proposes approximately $119.1 million in public housing investments. Compared to the FY 2026 enacted budget, this is a small increase in absolute dollars but a slight decrease of approximately 0.4 percent after accounting for inflation. This includes:
- $117.8 million for Subsidies to Public Housing Authorities, which is the main line item used to fund state public housing operations. This is a slight increase in absolute dollars, but a slight decrease of 0.4 percent after adjusting for inflation.
- $1.27 million for Public Housing Reform, a smaller line item focused on making improvements to public housing systems. This is also a slight decrease of approximately 0.7 percent after adjusting for inflation.
No new revenue proposals for housing
The governor’s proposed budget does not include new revenue proposals for housing. To increase the Commonwealth’s capacity to ensure stable housing for all of its residents, legislative leaders can strengthen the FY 2027 budget proposal by including a revenue source, such as a local option real estate transfer fee.
Additional Areas of Note
The following sections fall outside of MassBudget’s regular areas of research, but are nevertheless important to note in this budget analysis.
Healey administration continues to make health care spending adjustments as federal cuts loom
As health care costs continue to rise and the Commonwealth faces looming cuts to MassHealth (Medicaid) by the federal government, the governor’s FY 2027 budget proposal aims to control costs and ensure that residents maintain access to affordable care. The overwhelming majority of health-related spending (outside of state employee benefits) goes to MassHealth. The governor’s budget proposes $22.7 billion for MassHealth administration, for which most spending is reimbursed by the federal government. About $9.3 billion of the total cost of MassHealth is paid with state revenue.
The Healey administration is taking significant steps to slow the growth of MassHealth spending. For example, the FY 2027 proposed budget accounts for more effective program monitoring, a moratorium on non-federally mandated provider rate increases, and various healthcare benefit reductions (i.e. removing coverage for weight-loss GLP1s, capping adult member dental spending, and reducing care management funding). The administration also anticipates decreases in MassHealth caseloads which will result from new, more onerous federal work and reporting requirements. However, the loss of coverage for vulnerable residents may not even result in cost savings, as the Commonwealth will need to spend an estimated $30 million in FY 2027 to enforce these new federal requirements.
While MassHealth will face significant challenges in FY 2027 and beyond, programs like Health Connector fare slightly better in the governor’s budget proposal. The proposal includes funding for extending a pilot program that expands Connector Care eligibility to people and families earning between 300 and 400 percent of the federal poverty level. Rather than end in December 2026 as originally planned, the pilot will run through December 2027.
The Group Insurance Commission (GIC) plans and benefits – which provides health insurance to state employees and retirees – are another significant driver of health care costs in the Commonwealth. The governor does not control the GIC, as it is a quasi-independent state agency. However, the Healey administration has requested that the GIC limit program growth to $200.4 million in FY 2027 (a $100.5 million decrease compared to growth in the previous fiscal year). The purpose is to improve the sustainability of the program and cap the overall budget. This proposal funds GIC benefits and administration at $2.7 billion for FY 2027.
Decreases to tax prep assistance funding would be harmful to lower-income tax filers
The FY 2027 governor’s budget proposal further decreased funding for Volunteer Income Tax Assistance (VITA) sites, which received just $250,000, an 86 percent cut, adjusted for inflation, from FY 2023 funding levels. VITA has continued to see funding decreases year after year, seen in the chart below.
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, and connect to other services like Women, Infant and Children Nutrition Program (WIC) and Head Start. Through participating in VITA services, taxpayers potentially save hundreds of dollars on tax preparation. This type of support is vital to helping low-income families meet critical needs.
Funding for DTA caseworkers creates barriers to food assistance access, could put federal funding at risk
The governor’s FY 2027 budget proposes nearly $148 million in funding for Department of Transitional Assistance (DTA) caseworkers, who help administer programs like the Supplemental Nutrition Assistance Program (SNAP), Health Incentive Program (HIP), and employment and training – all serving families and individuals with low incomes. This is an increase from the FY 2026 budget ($101 million), and the administration describes the funding increase as keeping up with projected need;though, the proposed funding would maintain the same number of caseworkers as at the end of 2025. Providing adequate funding to ensure DTA staffing is keeping up with increased need is critical for families to receive critical food assistance benefits and for maintaining essential federal funding for years to come. Since 2020, the SNAP caseload per caseworker has increased by nearly 35 percent, going from 850 cases in 2020 to 1300 cases in 2025. The shortage of caseworkers makes it difficult for families to access SNAP benefits. In 2025, between 61 to 77 percent of phone calls to a SNAP caseworker were blocked because of a lack of workers available to receive those calls.6 During the past 18 months, SNAP caseload declined, in part, because individuals and families could not access food assistance. Failing to address the shortage of caseworkers will also have dire consequences for federal funding moving forward. Eligibility changes to SNAP, and other human service programs included in the federal OB3 legislation, together with the requirement to states to assume part of the cost of the program benefits, will require skilled and experienced caseworkers to make sure program users comply with new eligibility requirements and reduce the Payment Error Rate. Failure to reduce the SNAP Payment Error Rate will result in Massachusetts having to assume a larger percentage of the cost of SNAP benefits, potentially costing the state hundreds of millions of dollars.
Looking Forward
The next step of the FY 2027 budget cycle will be the House Ways and Means budget proposal in April. Massachusetts lawmakers will be drafting a state budget within a volatile and unpredictable federal budget scenario. Looming federal budget cuts, changes to human service programs eligibility criteria, underfunding and defunding human service programs such as mental health and substance use services, housing assistance programs, grants to the nonprofit sector, and emergency management support to states will have severe consequences in the Commonwealth. It is imperative that legislators consider ways to grow the budget to adequately fund programs that support vulnerable populations such as families and individuals with low-incomes, workers, communities of color, and others who have been the backbone of Massachusetts economic growth. At a time when the federal government is targeting the most vulnerable populations, our lawmakers have the opportunity to demonstrate that they can create a Commonwealth where everyone, independently of their race, nationality, and socioeconomic background, can thrive.
Endnotes
1 “Pre-budget transfers” reflect general spending that is not subject to appropriation by the Legislature. These are typically portions of taxes or fees automatically directed to fund specific items in the budget. For example, a portion of the sales tax is automatically directed to the Massachusetts Bay Transit Authority (MBTA)
2The Consensus Revenue Estimate is an estimate of the tax revenue that will be collected in the coming fiscal year and is the starting point from which the governor, House, and Senate build their respective budget proposals.
3Though this is technically a FY 2026 supplemental budget, we anticipate that it will not be enacted until the end of this fiscal year and most, if not all, of these funds will be expended in FY 2027.
4On the impact of free fares to increase ridership and improve service, see MassBudget’s “Fare-Free Public Buses are Yielding Results in Southeastern MA”.
5Calculations based on U.S. Census Bureau. “Median Gross Rent (Dollars).” American Community Survey, ACS 5-Year Estimates Detailed Tables, Table B25064, https://data.census.gov/table/ACSDT5Y2022.B25064?q=B25064&g=040XX00US25&y=2022
6Based on Massachusetts Legal Reform Institute’s analysis data from the Department of Transitional Assistance and a Public Records Request. More information available here: https://www.masslegalservices.org/system/files/library/MLRI%20FY27%20House%202%20Budget%20Analysis_Revisions%20EOD%202.3.2026.pdf
