Massachusetts’ “Fiscal Crisis” Doesn’t Add Up
The Legislature and Governor just finalized a new state budget, totaling $63.4 billion in spending for FY2027. For yet another year, Massachusetts is collecting and spending significantly more than it did the year prior.
The continued growth in both revenue and spending indicates that claims like those from the state’s teachers union that the Commonwealth is in a “fiscal crisis” might not carry much water.
In fact, the state’s mounting budget suggests Massachusetts has an opportunity to rein in spending – which has grown at a rapid clip – and provide much-needed taxpayer relief without sacrificing key services.
Fearmongering Over Looming Fiscal Crisis
Last year, following federal program restructuring and funding cuts, various groups claimed the state was headed for financial disaster.
“…We have to expect a huge budget threat.” – Max Page, president of the Massachusetts Teachers Association
“…disastrous cuts in health care services…” – Progressive Massachusetts
“The FY 2026 Massachusetts budget could experience significant cuts after it is enacted.” – MassBudget
The unions used this argument not only to oppose two proposed initiatives that could provide tax relief to Massachusetts families, but to push for tax increases as well.
While the state has experienced some meaningful impacts from federal funding cuts, the latest revenue collections and spending increases show not only were the predictions of a fiscal crisis overstated, but the state appears to be collecting and spending more than ever before.
Revenue Reality Check
Before forming the FY2026 budget last year, officials estimated the state would collect more than ever for that fiscal year, forecasting more than $43.6 billion in tax revenue. According to tax collection estimates through May published by the state Department of Revenue, the Commonwealth is surpassing initial benchmarks.
Tax collections aren’t the only source of revenue for the state but make up a large majority of total cash for the state. At the same time, state budgets (which detail how the state will spend its revenue for each fiscal year) have continued to grow year after year.
State Spending is Outpacing Taxpayers’ Income
The state’s latest enacted budget for fiscal year 2027 represents a 4 percent increase in spending over last year. Despite public concerns that revenue and state-funded programs may take a hit due to the economy and federal outlook, it appears the state is so far weathering the impacts rather well: the state is collecting more and spending more than it ever has.
That continued growth in spending is cause for some concern, though. Two key drivers of recent revenue growth are the state’s income surtax and capital gains income – two volatile and unpredictable sources of income. The growth in spending also goes beyond the recurring revenue available to support it. An increased reliance on one-time revenue and short-term budget fixes could cause problems for budget-writers down the road.
Additionally, state spending has grown about twice as fast as taxpayers’ wages or inflation. While the state’s enacted budget has risen more than 135 percent since FY2010, Massachusetts’ average wages have only risen roughly 70 percent (based on the latest available Bureau of Labor Statistics data), and inflation has risen roughly 51 percent.
This represents increases to the annual budget that is passed at the beginning of each fiscal year. But the state’s spending doesn’t stop there. The state routinely enacts supplemental budgets throughout the fiscal year to add additional spending beyond what was in the initially approved budget.
This occurs across administrations: Governor Maura Healey just signed a FY2026 supplemental budget bill in June, authorizing an additional $1.6 billion in state spending using funds from the income surtax. Several years ago, then-Governor Charlie Baker signed a supplemental budget allowing $1.7 billion in additional spending in FY2022.
While the annual budget process keeps hiking state spending higher and higher, the Commonwealth’s true total spending is even greater. While the state continues to increase spending without guardrails, taxpayers are picking up a larger bill every year.
Conclusion
Union leadership says Massachusetts is in the midst of a financial crisis, anticipating cuts to state-funded programs. As a result, they allege the Commonwealth can’t afford spending reforms or tax relief.
But that doesn’t seem to be the case. State taxes, which make Massachusetts one of the highest per capita tax burdens in the nation, are projected to skyrocket past the state’s own targets. Taxpayers already say the state’s high taxes are driving residents, talent, and businesses elsewhere. Beyond that, spending is slated to increase significantly over last year, and substantially more than residents’ incomes or cost of living are rising. That means spending may outpace actual revenue that can be collected.
Massachusetts’ investment in education, technology, and business is important, and has historically led the nation in many ways, but high costs are deteriorating that status as residents and businesses leave. To avoid a true crisis in the future, we need to find ways to ensure the state is spending responsibly long-term and holding itself accountable to taxpayers.
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