Governor Maura Healey’s fiscal year 2027 budget totals $62.8 billion, a 3.8 percent year-over-year increase. The budget avoids sweeping new initiatives and largely preserves existing structures. That might be defensible in a period of stability. It is indefensible now.
Massachusetts faces a crisis of affordability, population loss, and weakening economic competitiveness. A steady-state budget does nothing to confront those conditions. It locks in the trajectory that produced them.
The budget does not seriously challenge government spending or its largest cost drivers. It relies more heavily on volatile revenues to support recurring expenses. And it walks away from the central promise made to voters in 2022—that surtax revenues would be additive and used to modernize education and transportation. Instead, those dollars are now being used to plug operating shortfalls.
This is not a budget designed to reverse but rather to manage the decline.
The Budget in Context: Supplementals, Skyrocketing Government Spending, and Outmigration
Three broad trends provide important context the state’s fiscal position.
First, state government spending continues to grow far faster than household income. Since 2010, real state spending has increased by 28 percent. Median household income has grown by 13 percent. That divergence reflects a structural imbalance: government commitments expanding faster than the capacity of households to pay for them.
Budgets built on that imbalance fail quickly under pressure. Even modest economic or demographic shifts produce fiscal stress, followed by predictable responses—higher taxes, one-time fixes, and deferred reform.
Second, this will not be a $62.8 billion budget by year’s end. Beyond the additions made by the House and Senate, recent history shows a clear pattern: large supplemental appropriations added throughout the fiscal year. When those get included, total 2027 spending could exceed $65 billion, a 7 percent year-to-year increase.
Finally, the state’s lack of competitiveness is now incontrovertible. Census data show a net loss of 33,000 residents, with out-migration concentrated among working-age adults and families. This narrows the tax base and makes state revenues less reliable.
“The budget leans more heavily on revenues from the 2022 surtax to stabilize recurring spending—an exposure to sources that could prove volatile.”
As a result, budget officials are leaning more heavily on revenues from the 2022 surtax to stabilize recurring spending. Those revenues are concentrated among a small number of high-income taxpayers and are sensitive to economic cycles and migration decisions. Using them as a backstop increases risk precisely as the underlying tax base weakens.
Stated differently, the state’s revenue streams are exposed. Sales tax collections depend on population and consumption. Corporate tax revenues respond quickly to profitability and location decisions—and in 2025, corporate tax collections declined. Capital-based revenues are even more sensitive to market conditions and taxpayer mobility. Out-migration undermines all of them at once.
The Path Not Taken: Economic Growth
The labor market confirms the demographic trend. Over the past five years, Massachusetts has lost 25,000 private-sector jobs, making it one of only four states to lose private-sector jobs during that period.
This is happening alongside some of the highest costs in the country for housing, energy, health care, and taxes—costs that demand strong job growth to remain sustainable. Instead, opportunity is thinning. The burden falls most heavily on young professionals, families, and middle-income households.
The comparison with peer states is decisive. Over the same period that Massachusetts lost 25,000 private-sector jobs, North Carolina gained 255,000. That 280,000-job gap reflects policy choices, not fate. Much of North Carolina’s growth occurred in professional, scientific, and technical sectors—areas central to Massachusetts’ historic strength and tax base.
“If we adopted policies aimed at competing with North Carolina, we could see $1.4 billion in new revenues rather than drive jobs elsewhere.”
That difference represents $1.4 billion in forgone annual tax revenue. Once that growth is lost, it must be replaced through higher taxes on a smaller base. Growth and competitiveness generate revenue. Taxing a shrinking base does not.
Pressure on Local Property Taxes
Rapid growth in the state budget has shifted costs onto taxpayers for years. By neglecting non-education local aid for well over a decade, the state has also shifted pressure onto municipalities and, through them, onto property taxpayers. In the proposed budget, overall spending grows 3.8 percent, while non-education local aid grows only 2.5 percent.
Municipalities cannot absorb that gap through efficiency alone. They respond with property –tax overrides, higher levies, and new fees. By avoiding hard budget choices, the state is forcing cities, towns, and property taxpayers to absorb the consequences. That is cost-shifting, not fiscal discipline.
Avoiding Government Efficiency
This cost shifting is the result of a state government budgeting on autopilot. There are some nods to efficiencies, but they are not substantial and they are not addressing obviously gaping holes in operating strategies focused on efficiency. The budget feels a lot like last year’s baseline multiplied by 1.04.
Autopilot is not a strategy.
We cannot keep rolling costs forward without deep scrutiny while households and municipalities are forced to make tradeoffs the state refuses to confront.
Healthcare
Healthcare is the largest area of government expenditure—and it is going to be challenged this year by federal policy positions. Addressing the resulting loss of hundreds of millions of dollars will take a strategy—and it can be done.
“High rates of “leakage”—mistaken, duplicative, and improper payments—is a real challenge for major benefits programs.”
MassHealth alone consumes $22 billion, more than one-third of the budget. Another $11 billion flows through other Health and Human Services programs. At this scale, modest efficiency gains free hundreds of millions of dollars.
It is well-known in federal and state policy circles that “leakage”—mistaken, duplicative, and improper payments—is a real challenge for major benefits programs.
While significant, real progress can be made. Consider that in another benefits program, unemployment insurance, that the federal estimates in recent years placed improper payment rates at 22 percent. The Healey administration, by strengthening program controls, lowered that to 16 percent—progress to be applauded but still unacceptably high. MassHealth faces similar vulnerabilities at a far larger scale.
Tools exist to address leakage. A recent paper from the Boston Consulting Group points to the use of existing artificial intelligence tools to identify errors and fraud before payments are made. BCG estimates savings from the application of these existing tools range from 5 to 15 percent over time. Even aiming for 1 to 2 percent in savings in 2027 could lead to hundreds of millions annually.
The governor can bemoan federal policy choices, but the state must control what it controls. And the leakage levels in major benefits programs are massive. The 2027 budget must pursue such efficiencies to ensure that taxpayers know that their dollars are being used wisely.
Universal benefits programs
Universal benefits programs like free school meals and free community college for all students are not a wise approach to stewarding taxpayer dollars. We should be generous but not blind—and there is no reason for the state to prioritize providing free meals to wealthy families even as our state tax and spending policies are driving away talent and jobs.
The programs should be means-tested. We should support families up to 300 percent of the federal poverty level, but by not extending K-12 meals and community college benefits to higher-income households, we can garner real savings—more than $100 million.
This approach is what adults recognize about life: There are tradeoffs in all decisions that we make.
The MBTA: More Money, Less Control
The fiscal fiasco at the Massachusetts Bay Transportation Authority most clearly illustrates the budget proposal’s failings.
By fiscal year 2018, the MBTA had balanced its operating budget while increasing investment in maintenance and upgrades. By last year, it was running a $700 million deficit. This year, more than $500 million will go to filling operating gaps rather than improving service.
Surtax dollars are now part of that backfill. Of $800 million in surtax funds allocated to transportation, $523 million is being used to cover operating costs instead of modernization. That is displacement, not investment.
“So now the surtax revenues are plugging operating budget holes at the T?”
The budget does not grapple with the MBTA’s most serious cost drivers. Bus operating costs have increased more than 90 percent since 2019; the closest comparable major transit system has seen an increase of only 40 percent over the same period. Pension contributions have risen from $40 million annually two decades ago to $210 million today, while funded status has fallen from 90 percent to 50 percent.
Turning around this runaway cost trajectory requires reasserting management control. We know how, because the tools were written into the 2015 MBTA reform law, championed by then–Speaker Robert DeLeo. DeLeo insisted on reforms designed to ensure that large new investments would be spent well. The law provided temporary relief from the Pacheco Law, and between 2015 and 2018—before the exemption expired for political reasons—that relief enabled competitive contracting and produced hundreds of millions of dollars in savings, along with service improvements. When competition is restricted, costs rise.
The 2015 law also imposed far stricter oversight through a Fiscal and Management Control Board. Until it was discontinued in 2021, the board enforced discipline that drove meaningful savings and necessary change at the MBTA.
Restoring these tools would reinforce—not undermine—the work now underway. Phil Eng has made progress on operational goals. Efficiency is not an obstacle to progress at the MBTA; it is what allows more money to flow to maintenance and upgrades instead of just having the money plug operating deficits.
When cost discipline is abandoned, new revenue is not used to improve systems—it is used to keep them afloat. That is exactly what is now happening with the 2022 surtax.
The Broken Surtax Promise
Voters approved the 2022 surtax with the expectation that it would modernize education and transportation. The budget does the opposite. Surtax dollars now stabilize operations at the MBTA and in education instead of forcing reform or delivering lasting improvements.
Once surtax revenues become routine backfill, the state locks in higher spending, defers reform, and deepens reliance on a volatile revenue source to mask structural problems.
“This budget is not reckless. It’s meh—the same old same old when we need bold.”
Choosing to Manage Decline
This budget is not reckless. It’s meh, it’s complacent—the same old same old when we need bold.
Our structural affordability pressures and the resulting out-migration of talent, jobs, and capital are the product of choices. A state budget is the most important expression of its priorities. Other states are choosing to compete, to grow, and to experiment. Massachusetts is turning inward and forgetting there is a big world out there.
We have the tools and the brains to change course—turning to cost discipline, program integrity, procurement reform, and a credible growth strategy—are available. They do not require that we turn our back on a sense of community responsibility.
A steady-state budget can make sense when conditions are stable. At a moment like this, it is a choice: not to contest, but to manage our decline.
