Balanced and responsible spending plan proposes transformative investments in transportation and higher education, advances Gateway to Pre-K agenda and continues to make Massachusetts more affordable and competitive

Boston - Balanced and responsible spending plan proposes transformative investments in transportation and higher education, advances Gateway to Pre-K agenda and continues to make Massachusetts more affordable and competitive; 2.6 percent budget growth is under rate of inflation; Governor also filed a Fair Share supplemental budget to spend surplus Fiscal Year 2024 surtax revenue 

BOSTON - The Healey-Driscoll Administration today filed its Fiscal Year 2026 (FY26) budget recommendation, a $59.6 billion plan, in addition to $1.95 billion in surtax spending, that would stabilize the MBTA, enable critical investments in transportation and higher education infrastructure, and responsibly control spending in ways that protect key services, make Massachusetts more affordable and improve quality of life.

“Our Fiscal Year 2026 budget proposal is a balanced, forward-looking blueprint that meets the needs of our residents and businesses while also taking care of their tax dollars. We’re making historic investments in the infrastructure that our quality of life and economy depend on – stabilizing the MBTA, fixing our roads, bridges and regional transit, and modernizing college campuses, all while creating good jobs,” said Governor Maura Healey. “This budget also prioritizes affordability and economic development – continuing the progress we have made in child care, college affordability, tax cuts, housing, veterans services and more. We are able to build on this progress while controlling our spending and tightening our belts, just as families and businesses are doing across our state.”

“I hear from residents, business and local officials on a daily basis about the challenges they face. I’m proud of the way that this budget responds to those needs, while also making sure Massachusetts can sustainably support the programs and services on which everyone in Massachusetts relies,” said Lieutenant Governor Kim Driscoll. “We’re fully funding the Student Opportunity Act to make sure our K-12 schools have equitable access to the resources their students and educators need, growing local aid, boosting Chapter 90 funding to improve roads and bridges and creatively investing in our infrastructure.”

This budget, filed as House 1, fully funds the fifth year of the Student Opportunity Act, increases Unrestricted General Government Aid by 2.2 percent and uses an innovative strategy to maximize robust Fair Share revenues to stabilize the MBTA, boost Chapter 90 funding to $300 million per year for the next five years and invest billions in our transportation system and higher education campuses.

With $59.6 billion in non-surtax spending, House 1 limits growth in the budget to 2.6 percent, which is under the current rate of inflation, to responsibly control growth and appropriately align spending with modest revenue growth. At the same time, the budget proposes $1.95 billion in spending supported by the voter-approved Fair Share surtax to support transformative investments in education and transportation. 

The House 1 Fair Share investments are augmented by a supplemental budget to spend $1.3 billion in FY24 surplus surtax revenue to increase investment across the transportation and education systems, helping to maintain commitments to the Commonwealth Cares for Children (C3) program, universal school meals, free community college and fare-free regional transit.

The combined investments will keep Massachusetts on track for universal Pre-K access in Gateway Cities by the end of 2026 and continue to support the Healey-Driscoll Administration’s Literacy Launch initiative, a transformative plan to improve early literacy education and ensure students receive the highest quality, evidence-based reading instruction available.  

House 1 dedicates $765 million in Fair Share revenue to the Commonwealth Transportation Fund (CTF) to leverage $5 billion in borrowing over the next 10 years for capital, while also making impactful investments in annual operations. These funds will be appropriated to support transportation investments including $500 million to stabilizing the MBTA’s operations, more than doubling support from last year. It also maintains key initiatives such as the Income-Eligible Fare Relief program, the MBTA Academy, grants to support fare-free programs at Regional Transit Authorities and RTA connectivity.

The borrowing unlocked by utilizing the CTF, along with surplus Fair Share and other resources, will enable the state to invest $8 billion in transportation over the next 10 years, including $1.5 billion ($300 million per year) over five years for Ch. 90 reform, $1.5 billion for road and bridge repair, and $850 million for the MBTA to support maintenance facilities modernization and power system resilience.

House 1 and the supplemental budget also invest $475 million in Commonwealth Cares for Children (C3) program, supports universal school meals, continues the MassEducate program to provide no-cost community college and expands the Commonwealth Preschool Partnership Initiative (CPPI) to continue to implement universal Pre-K in Gateway Cities. An investment of $125 million in Fair Share resources for higher education capital will also support $2.5 billion in borrowing over the next 10 years to address the significant backlog of deferred maintenance and modernization needs on our UMass, state university and community college campuses. This recurring investment would support the higher education bond bill, the BRIGHT Act, filed yesterday by the administration.

House 1 Overview

House 1 proposes $59.6 billion in gross spending, a 2.6 percent increase over current Fiscal Year 2025 spending estimates, excluding spending tied to the income surtax and Medical Assistance Trust Fund. This is consistent with the rate of inflation. 

The budget relies on the FY26 consensus tax revenue agreement of $43.614 billion, including $2.4 billion in collections from the 4 percent income surtax, with a spending cap agreed to with the Legislature of $1.95 billion. Total non-surtax revenue growth represents 2.2 percent, or $907 million, over FY25 benchmarks. 

In light of modest tax revenue growth, the House 1 recommendation utilizes a thoughtful combination of recurring and one-time funding sources to ensure a responsibly balanced budget. Importantly, this budget does not utilize any funding from the Stabilization Fund, which is estimated to grow to a record high of $8.333 billion after House 1 makes $133 million in transfers from excess capital gains. The consensus revenue estimate assumes $2.33 billion of capital gains tax revenue of which $666 million will be statutorily transferred to support long-term liabilities, such as the Stabilization Fund, pension costs and retiree health insurance expenses. 

The budget recommendation maintains the state’s commitment to fully fund its pension liability by 2036 with $4.933 billion in FY26, a $433 million increase over the Fiscal Year 2025 contribution. In order to maximize our available resources, House 1 recommends using a greater portion of excess capital gains for our pension and OPEB contributions than traditionally used, which has the benefit of freeing up space on the budget for other critical programs. Projected sales tax revenues will enable a $1.426 billion transfer to support the operations of the MBTA and $1.265 billion will be transferred to the Massachusetts School Building Authority to support school construction across the state. The budget also commits $27 million for the Workforce Training Fund to support the state’s workforce, competitiveness, and serve as an engine for growth. These pre-budget transfers of tax revenue total $8.317 billion, leaving $32.897 billion in net tax revenue available for spending, an increase of $414 million. 

Accounting for more than 21 percent in spending growth over the past years and modest anticipated revenue growth, Governor Healey’s budget takes steps to address the mismatch between spending and revenue, while maintaining key investments and putting the state on a path of sustainability. The budget accomplishes this goal by utilizing additional excess capital gains for long-term pension and other post-employment benefit liabilities, reallocating unspent ARPA funding, program savings and targeted revenue generation. 

House 1 also anticipates generating $60 million by targeting excessive drug prices with a penalty on manufacturers when the price of a drug exceeds inflation, which will protect consumers. In addition, the administration proposes meaningful savings proposals, focused on mitigating direct impacts on services for our most vulnerable populations, to remain good fiscal stewards for our residents.

“Our ability to meet the demands on our budget for health care, education and other services requires the state to responsibly and creatively invest limited resources in ways that maximize impact for residents. This budget responsibly controls spending and limits growths without jeopardizing the progress and impact we’ve been able to make over the past year working to make our education systems, tax code and housing more affordable for the people of Massachusetts,” said Secretary of Administration and Finance Matthew J. Gorzkowicz. “It also puts us on a path toward sustainability in the future while preserving the investments that will allow the Healey-Driscoll administration to deliver on its promise of a more affordable, competitive and equitable Massachusetts.”

Fair Share

The FY2026 budget is the third to include revenue from the new 4 percent surtax on income above $1 million that Massachusetts voters approved in November 2022.

House 1 recommends the following investments across the two priorities: 

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The Fair Share supplemental builds on House 1 with the following proposed spending:

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Local Aid

The strength of Massachusetts’s 351 cities and towns is critical to the overall success of the state, and the Healey-Driscoll Administration is committed to equipping our communities with the resources they need to thrive. In House 1, that commitment is reflected in the administration’s recommendation of over $9.205 billion for local aid, $480.7 million over FY25 GAA. 

House 1 also ensures access to high-quality education for students across Massachusetts by fully funding the 5th-year implementation of the Student Opportunity Act (SOA), dedicating $7.322 billion to Chapter 70 education aid. This is a $420 million, (6.1 percent increase), over FY25. This funding provides a minimum per pupil aid rate of $75. 

Unrestricted General Government Aid (UGGA) supports essential government services such as public safety and public works. House 1 recommends funding UGGA at $1.338 billion, aligned with consensus tax revenue growth and reflecting a $28.8 million, or 2.2 percent increase, over FY25. 

House 1 also proposes to fully fund the Special Education Circuit Breaker at $682 million, with $532 million provided in House 1 and $150 million provided in the Fair Share supplemental budget. This funding level reflects full phase-in of out-of-district transportation cost reimbursement provided for in the SOA. 

House 1 also maintains the administration’s commitment to supporting school transportation through programs such as regional school transportation-recommended at $116 million, representing a 95 percent reimbursement-and non-resident pupil transportation (vocational)-recommended at $6.2 million, representing full funding, and homeless student transportation-recommended at $28.8 million. 

Finally, House 1 proposes using Fair Share surtax resources to expand capital capacity which will enable Chapter 90 funding to reach $300 million annually, a 50 percent increase over the traditional $200 million.

Highlights

Education

Early Education and Care

• $475 million for the Commonwealth Cares for Children (C3) program to support early education and care providers’ day-to-day operational costs, including compensation and additional workforce and quality investments that enable programs to better recruit and retain their staff while mitigating increased costs for families.?
• $67.7 million for the Commonwealth Preschool Partnership Initiative (CPPI),, providing funding for a multi-year investment to increase enrollment in Pre-K programs and put the state on the path to Universal Pre-K
• $1.1 billion for Child Care Financial Assistance funding, supporting approximately 65,000 children at over 4,000 providers

K-12 and Student Opportunity Act

• $7.3 billion in Chapter 70 aid to school districts, an increase of $420 million over FY25
• Includes $75 minimum aid per pupil to ensure all districts receive increased supports
• $32.5 million proposal to “Reimagine High School”, a  multi-year approach on college and career readiness initiatives historically prioritized by Administration and Legislature 
• Special Education Circuit Breaker fully funded at $682 million, an increase of $132 million over FY25
• $150 million made available for reimbursement in FY26 via the companion Fair Share supplemental budget
• $170 million to maintain?free school breakfasts and lunches
• $25 million for Literacy Launch to ensure?quality reading instruction for our youngest students, an increase of $5 million over FY25
• $5 million for early childhood mental health supports, with an additional $5 million in Fair Share to be utilized across EOE?

Higher Education

• $125 million to unlock approximately $2.5 billion in capital funding for infrastructure improvements across public higher education campuses
• $80 million to sustain MASSGrant Plus and maintain FY25 financial aid expansion
• $94 million to sustain Free Community College, first implemented in FY25
• $24 million for MassReconnect, providing students age 25+ free community college
• $8.2 million to maintain mental health supports at public higher education institutions

Transportation

MassDOT

• $617 million to support MassDOT operations, including $55 million from Fair Share revenues. 
• Includes $80 million for snow and ice removal, a recommendation based on the $77.4 million average cost over the last five years. 

MBTA

• $687 million in direct operating support to stabilize MBTA finances
• $400 million for the Federal Transit Administration (FTA) Workforce and Safety Reserve to help implement corrective actions from the FTA’s oversight report, including stabilizing the workforce and improving safety
• $300 million to replenish the MBTA’s budgetary deficiency reserve, which was used by the MBTA to balance their FY25 operating budget 
• $67 million for the implementation of the Income-Eligible Reduced Fare program, which began in September 2024 and is continuing to ramp up enrollment 
• $25 million for a Winter Resilience Assistance Program to aid all 351 cities and towns to prepare for storms and weather impacts, made more intense due to climate change 
• $45 million for the FY25 implementation of Low Income Fare Relief

Regional Transit Authorities (RTAs)

• $204 million in total support, including $94 million of historical state investment and $110 million of Fair Share to sustain prior year funding levels and maintain fare equity and service needs. 
• The budget proposes allocating the $110 million in Fair Share resources across several notable programs: 
• $66 million in supplemental State Contract Assistance to expand service hours, operate weekend services, and expand routes, among other operational improvements 
• $30 million for a grant program that supports RTAs in providing systemwide, year-round fare free transit service 
• $10 million for a grant program that supports RTAs in creating or altering routes that advance connectivity between existing public transportation routes, including those operated by RTAs and the MBTA
• $4 million for the Community Transit Grant Program to expand mobility options for seniors, persons with disabilities and low-income individuals; the program supports mobility management activities and operating costs 

Economic Development

• $12 million for workforce development and health equity initiatives at the?Massachusetts Life Science Center (MLSC)
• $7.5 million for Small Business Technical Assistance Grants?, leveraging a robust network of nonprofits to offer technical assistance, education, and access to capital for small businesses
• $7.5 million for the Community Empowerment and Reinvestment Program for community-led action focused on creating economic opportunity targeting historically underrepresented communities; operating investment complements $7.5 million in off-budget spending for this program
• $6 million for initiatives at the Massachusetts Technology Collaborative to support workforce, manufacturing, cybersecurity, and new opportunities for AI and robotics innovation
• $750,000 to expand the Entrepreneur in Residence Program/Talent H-1B Retention Visas for Entrepreneurs (THRiVE) to help keep international graduates of Massachusetts’ universities and colleges in the State

Housing

• A record $1.2 billion in targeted and strategic investments across the budget to make housing more affordable and accessible
• $115.5 million for subsidies to Local Housing Authorities,?a $2.5 million increase above the FY25 GAA to increase per unit budget caps
• $253.3 million for the Massachusetts Rental Voucher Program (MRVP), a historic investment to support over 10,400 voucher holders by the end of FY26, including over 130 new project-based vouchers
• $19.5 million for the Alternative Housing Voucher Program (AHVP) to support over 800 leased vouchers by the end of FY26 for people with disabilities
• $10.1 million for Sponsor-Based Permanent Supportive Housing to expand the permanent supportive housing pipeline by approximately 16 additional units, allowing for the most vulnerable individuals to exit shelter and enter permanent housing 
• $325 million for Emergency Assistance Family Shelter and Services?(EA) and $57.3 million for HomeBASE?to continue the administration's ongoing efforts to make shelter brief, rare, and non-recurring

Climate and Environment

House 1 sustains record investments in climate and environmental programming, including $559.8 million for the Executive Office of Energy and Environmental Affairs and a planned transfer to the new Disaster Relief and Resiliency Fund.

• $42 million for continued operating funding?for the?Massachusetts Emergency Food Assistance?Program
• $8.3 million to maintain support for environmental justice programming
• $30 million for the?Massachusetts Clean Energy Center?to continue supporting?workforce training programs in the clean energy industry, clean transportation adoption, and an energy retrofit pilot program

Labor and Workforce Development

• $15.7 million for Summer Jobs Program for At-Risk Youth (Youthworks) to subsidize wages and facilitate career development for at-risk youth and young adults 
• $10 million to implement training and employee retention strategies for high-demand occupations through the Workforce Competitiveness Trust Fund 
• $9 million for Career Technical Institutes (CTIs), which aim to close skills training gaps by expanding access to vocational education?, across EOL and Education
• $8.3 million for MassHire Career Centers to provide regional workforce training and employee placement services across 29 locations
• $3.3 million for the Registered Apprenticeship Program to fund placements?for registered apprentices to increase diversity in construction (essentially level with FY25 spending)

Health and Human Services

• Extends for one year the Massachusetts Health Connector ConnectorCare pilot program, expanding eligibility from 300 percent to 500 percent of the Federal Poverty Level
• $207 million for new Chapter 257 rates for human service providers and maintains $524.2 million to annualize FY25 rate increases
• $16.7 million to support additional direct care staff and reduce reliance on temp staffing at the Department of Developmental Services
• $5.8 million to annualize the Community Transition Liaison Program (CTLP)?at Executive Office of Aging and Independence (AGE) to transition clients in nursing homes back into the community
• $3.1 million in maintaining Safe Haven Housing beds at the Department of Mental Health
• $700,000 to expand Transitional Aid to Families with Dependent Children (TAFDC) eligibility for pregnant people
• $116.8 million to annualize the largest Turning 22 class to date and fully fund the FY26 class
• $466.8 million for TAFDC and $209 million for EAEDC to preserve benefits and support?caseload growth 

MassHealth

MassHealth, the Commonwealth’s Medicaid and Children’s Health Insurance Program (CHIP), provides coverage of health care and related critical services to over two million members, including over 45 percent of Massachusetts children and over 70 percent of Massachusetts residents living in nursing facilities. 

In FY26, MassHealth will continue to ensure members’ access to high-quality services, while proposing several steps to address three key drivers of spending growth: 

• Elevated caseload (260,000 above pre-COVID levels) with significantly higher acuity 
• New statutory spending requirements 
• Expiration of nearly $1 billion of enhanced federal revenue received during the pandemic 

Combined, these factors have led to significant growth in the MassHealth program and the need to identify tools to manage spending in FY26. These tools include increased program integrity initiatives, administrative savings, and managing provider rates. 

The House 1 budget recommendation would preserve access to medically necessary services and maintain and strengthen our commitment to universal coverage. By raising the asset limit for seniors on MassHealth for the first time in 35 years and growing primary care spending to 10 percent of total medical expenditures, House 1 would improve affordability as well.  

Public Safety

• Maintains funding to provide hybrid learning opportunities for all incarcerated individuals via personal tablets
• $15 million to enhance equity and eliminate barriers to communication through implementing the No Cost Calls law across all correctional facilities, including those run by county sheriff departments
• Maintains funding for State Police body-worn cameras for all sworn Troopers
• $2 million for the State Police Cadet Program, offering aspiring public safety professionals an equitable pathway to a career in law enforcement, and $10.5 million for the 92nd State Police Recruit Training Troop  
• Approximately $10 million to maintain support for reentry initiatives across DOC and EPS, including $7 million for the Pre- and Post-Release Services grant program 
• $2 million to?sustain the?Project Safe Neighborhood Initiative, a collaborative effort with law enforcement and community leaders to develop comprehensive solutions to reduce crime and protect communities

Serving Our Veterans

• Fully supports implementation of the HERO Act 
• $12.3 million to increase Ch.115 annuity payments to $2,500 
• Supports our veteran’s homes
• Chelsea Veterans Home has successfully transitioned into the new long-term care facility, expanding from 136 to 154 beds
• Holyoke Veterans Home is set to replace its long-term care facility by 2028, expanding its capacity from 128 to 234 long-term beds

Technology and Cybersecurity

House 1 further improves access to digital services while strengthening our cybersecurity posture through robust infrastructure and operational excellence.

• Continued expansion of the enterprise Cybersecurity and Risk Management strategy
• Builds out the Digital Roadmap and works to improve IT accessibility throughout the Commonwealth
• Support for coordination with municipalities, including cybersecurity training for municipal and school employees

To access the Governor’s filing letter, budget message, budget briefs, and specific account information click here.