By Chris Lisinski.
On the same day that Donald Trump signed a landmark domestic policy bill that will reshape national and state finances for years to come, Gov. Healey approved a $60.9 billion annual budget and rolled out a companion proposal designed to empower her administration with greater cost-cutting power.
On the July 4 holiday, Healey signed the fiscal year 2026 budget lawmakers sent to her on June 30, in the process vetoing $130 million in planned spending amid crystallizing concerns that federal funding to Massachusetts will drop and the state may face new costs in a world where the so-called “big, beautiful bill” is the law of the land.
Between her spending cuts and changes that legislative negotiators made to cushion against financial strain, the final budget that became law – which is packed with big funding boosts for health care, education and transportation plus policy measures like a limit on renter-paid broker fees –raises spending by more than five percent but is more than $1 billion smaller than the version the governor filed in January, before the federal bill emerged.
Healey and her deputies will pursue other steps to further buttress against budgetary impacts from economic downturn or federal funding cuts, especially to the massive and costly Medicaid insurance program.
Officials announced last Friday that an executive branch hiring freeze implemented in May will remain in effect for the duration of fiscal year 2026, which runs through next June. The administration will also scrap a two percent raise for thousands of executive branch managers set to start in January, which officials said would save $17 million.
While Healey did not veto any of the earmarks lawmakers wrote into the budget to support projects and programs in their districts, the administration will delay paying about $125 million of those until at least the fall. Administration and Finance Secretary Matthew Gorzkowicz said that if the state is in a precarious fiscal position at that point, everything will be on the table, including cancellation of earmarks.
Some of the governor’s biggest new plans to control state spending will need buy-in from the Legislature.
Healey last Friday filed a new $130 million supplemental budget bill that her office said would create a $100 million “flexible pool of resources” that the administration could tap later in the year to deal with “changing economic conditions and federal spending decisions.”
The other $30 million would go toward a housing preservation and stabilization fund, which Gorzkowicz said would provide resources to housing programs amid concerns about safety-net impacts from new federal policy.
That bill would also grant the administration the ability to transfer some line-item spending between agencies and use capital dollars instead of operating dollars to pay for some Department of Transportation workers. The governor is also asking for new authority that might prove unpalatable to some lawmakers: a limited-time ability to cut spending unilaterally from the entire state budget.
State law limits a governor’s power to trim spending midway through the year only to that of the executive branch, which, according to Gorzkowicz, makes up roughly 55 percent to 60 percent of the budget. Other areas like quasi-public agencies, local aid, retirement and other post-employment benefits, and debt service cannot be targeted by what are commonly known as “9C cuts.”
Gorzkowicz said the new supplemental budget would, only in fiscal year 2026, allow the administration to trim from anywhere if revenue collections fall at least $400 million below projected benchmarks or if federal policy changes cost the state budget $400 million or more.
Officials are still sifting through the federal mega-bill, which the US House approved Thursday and Trump signed on Friday, to determine its full impacts on state budgeting. Gorzkowicz said he hopes to have a better understanding in roughly a month.
A preliminary estimate from the health policy nonprofit KFF suggested the Medicaid changes could cost Massachusetts $15 billion to $25 billion over the next decade.
The timing of Healey’s budget signature is unusual in two ways: She announced the action on a federal holiday that created a long weekend, and she acted more quickly on the annual budget than any Massachusetts governor in at least 25 years.
For every other budget since fiscal 2001, at least seven days elapsed between the final Senate enactment vote and the governor’s response, according to data tracked by the Massachusetts Taxpayers Foundation.
Gorzkowicz said the administration wanted to move rapidly because lawmakers sent the budget to the governor’s office before the July 1 start of the fiscal year for the first time since 2016.
“We are also signing this budget in a moment of great dysfunction in Washington,” he added. “The president is poised to sign a bill that’s going to kick hundreds of thousands of Massachusetts residents off their health care, increase energy and groceries prices, and cost people their jobs.”
The fiscal 2026 budget increases state spending just shy of 5.4 percent over the spending bill Healey signed last summer. Some of that increase is driven by the use of $2.4 billion in revenue from the voter-approved surtax on high earners, which will fund major investments in K-12 schools, early education and care grants, operating support for the MBTA and regional transit authorities.
Healey vetoed a combined $130 million from 28 line items, less than the $248 million net spending she struck from last year’s budget and the $205 million net spending she eliminated the year before. Lawmakers have the power to override any of the governor’s vetoes with a two-thirds vote in each chamber.
House budget chief Aaron Michlewitz called the legislative budget “not only [a bill] that will allow our economy to grow, but will also do this while maintaining the Legislature’s commitment to fiscal stability [and] sustainability.”
“Some have said that this piece of legislation is actually the real ‘big, beautiful bill’ being taken up this week,” Michlewitz said on Monday while introducing the accord. “Unlike the one in Washington, this piece of legislation is one that will not hurt our residents, but will help improve the lives of all our constituents, not just the ones with the largest paychecks.”
Gorzkowicz said the administration has spoken with budget chiefs in the House and Senate about convening a hearing in the fall with economists to examine the state’s financial footing and whether officials need to revise their tax collection estimates for fiscal 2026.
The secretary by law must certify by Oct. 15 that the state has sufficient revenues to fulfill expenditures, and he said that deadline will be a key early milestone.
Colin A. Young contributed reporting to this article.
