On the same day President Donald Trump is set to sign a landmark domestic policy bill that will reshape state finances for years to come, Gov. Maura Healey approved a $60.9 billion annual budget and rolled out a companion proposal designed to empower her administration with greater cost-cutting power.
Healey on Friday signed the fiscal year 2026 budget lawmakers sent her on Monday, 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 5% but is more than $1 billion smaller than the version Healey filed in January, before the federal bill emerged.
The governor 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 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 2% 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 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 on 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.
The existing state law limits a governor’s power to trim spending midway through the year only to the executive branch, which according to Gorzkowicz makes up roughly 55% to 60% 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 megabill, which the U.S. House approved Thursday and Trump plans to sign 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 health policy nonprofit KFF suggested the Medicaid changes could cost Massachusetts $15 billion to $25 billion over the next decade.
Another outside section to Healey’s new bill would grant the state Department of Public Health the ability to set the schedule for childhood vaccines instead of relying on recommendations from the U.S. Centers for Disease Control’s Advisory Committee on Immunization Practices -- a panel that U.S. Health and Human Services Secretary Robert F. Kennedy completely reshaped last month.
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 an annual budget than any Massachusetts governor in at least 25 years.
For every other annual 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 on the budget because lawmakers sent it to Healey before the July 1 start of the fiscal year for the first time since 2016.
In another unusual move, Healey does not plan any press conference to discuss her budget actions. The only public event on her schedule Friday is attending the Boston Pops Fireworks Spectacular on the Charles River Esplanade in the evening.
“I’m proud to sign a budget that is fiscally responsible and protects what makes Massachusetts special,” Healey said in a statement. “I’m grateful to the Legislature for their strong partnership and efficient work to develop and pass this budget for the people we serve. In Massachusetts, we are continuing to lead and do what we know works – focusing on lowering costs, protecting essential care and services, and moving our economy forward by investing in housing, transportation and our schools.”
“We are also signing this budget in a moment of great dysfunction in Washington,” she 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.”
In a social media post the day before she announced her action on the budget, Healey touted her approach to state spending as a contrast with the incoming federal law.
“We want you to have access to health care, to education, transportation,” Healey said. “I want you to be able to afford groceries, housing, heat and electricity. That’s what we’re focused on delivering.”
The fiscal 2026 budget increases state spending just shy of 5.4% 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.
A $27.5 million reduction this time around pairs with a directive Healey issued to the Group Insurance Commission to eliminate coverage of GLP-1 weight loss drugs for state employees unless medically necessary. Officials said that change would more closely match private health insurance, where several plans have called out the increasingly popular drugs as major cost drivers.
Healey also cut $10 million from the Massachusetts Clean Energy Center, according to Sen. Michael Barrett, the Senate’s point person for energy and climate policy and the chairman whose committee is reviewing Healey’s energy affordability legislation.
The governor originally proposed a $30 million outlay for MassCEC. The conference committee budget settled on $20 million, and then Healey vetoed it down to $10 million.
Barrett said the additional change hinders clean tech at a time when it is talked about as a cornerstone of the state’s economy for decades to come and threatens the state’s readiness for a post-Trump era.
“I don’t quite see how it all computes and I’m astounded. I feel that Massachusetts is sending a very weird signal out into the world,” Barrett said. “We’re not going to see any clean energy progress on the federal front and now we’re doing something that would have the effect of doubling the federal assault.”
Lawmakers have the power to override any of the governor’s vetoes with a two-thirds vote in each chamber.
Healey also returned two outside sections of the budget with amendments, one seeking a technical change and the other proposed to study, not implement, a mandatory retirement savings program for employees who lack access to such programs through their workplaces.
That Secure Choice Savings Program had drawn criticism from the National Federation of Independent Business both when the House quietly added it via amendment and when the provision survived conference committee negotiations.
In a letter to lawmakers alongside her amendment, Healey said she believes “further consideration of the proposal is warranted.”
“Saving for retirement is an important goal, but there are many ways to encourage this behavior. This proposal has invited feedback from various groups who, while supportive of the goal of expanding access to retirement saving, suggest there are additional implementation questions that need to be resolved prior to enactment,” Healey wrote. “These implementation questions should be answered before we establish a new statewide program and obligation on Massachusetts employers.”
Legislative negotiators built some flexibility into the final state budget bill they shipped Healey, aiming to strike a balance between Democrats’ appetite for significant spending on state services and the prospect of federal funding cuts.
They trimmed the bottom line hundreds of millions of dollars below the original House- and Senate-approved versions, incorporated nearly half a billion extra surtax dollars, and left about $800 million in anticipated revenues unappropriated as a cushion against future impacts.
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 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.
Healey’s office provided written quotes about the budget from House Speaker Ron Mariano and Senate President Karen Spilka thanking the governor for her signature.
“This FY26 budget makes key investments that better support Massachusetts students and families, that increase access to affordable health care, and that provide for a safer and more reliable public transportation system – all without raising taxes,” Mariano said. “In a moment of incredible uncertainty at the federal level, this budget is proof that government can be both fiscally responsible and an agent of good, the kind of government that our residents deserve.”
Added Spilka, “In Massachusetts, we know that the best investment we can make is in our people, and this budget reflects the Senate’s continuing commitment to do so while maintaining our equal commitment to responsible money management. This statewide approach to investment delivers resources to every part of the state and protects our most vulnerable residents from the cruelest actions of the federal government, while our continued focus on education and mental health ensures that people have they keys to unlock the doors of opportunity.”
This is a developing story. Check back for updates as more information becomes available.
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