By Sam Larson
Vice President, Government Affairs

The Massachusetts Legislature’s $58 billion budget for the fiscal year that began July 1 increases spending by roughly $1.8 billion, or 3.5%, compared to the budget signed by Governor Healey last July. It contains no tax increases and does not draw from the Commonwealth’s $9 billion Rainy Day Fund.

The House and Senate both accomplished policy objectives during negotiations. The House was able to secure online Lottery sales after three consecutive years of proposing the policy. The Senate was able to secure free community college for all, which will begin this fall.

Revenue collections (outside of the income surtax) were essentially flat compared to the previous year. In order to fund the 3.5% spending increase, the budget uses $1.03 billion in one-time, or non-recurring, revenues and redirects money that would otherwise automatically be directed to savings accounts.

Here is a summary of the key issues from the Fiscal Year 2025 (FY 25) budget, which is now on the desk of Governor Maura Healey.

Tax Policies  

Tax Amnesty Program– The budget contains a one-time tax amnesty program that would create a two-month period for both individuals and corporate filers to submit old tax returns. The scope of the program and months when the program is available will be determined by the Commissioner of the Department of Revenue. The administration believes this program could generate roughly $75 million in revenue.

Spending of Note  

• $6.9 billion in Chapter 70 Funding that fully funds year four out of six of the education spending increases set by the Student Opportunity Act;
• $1.5 billion for Early Education and Childcare, including “C3” Grants and expanded child- care subsidies for families;
• $2 billion for higher education, including$117.5 million in funding for tuition-free community college;
• $1.3 billion in unrestricted General Government Aid to cities and towns;
• $20.33 billion for MassHealth

AIM’s Government Affairs team secured an additional $20 million for the Massachusetts Clean Energy Center (MassCEC), which focuses on growing and supporting the development of clean- energy sectors such as climatetech, offshore wind, clean transportation, decarbonization technologies, and grid modernization technologies. Advancements in these sectors represent an enormous opportunity for the Massachusetts economy. MassCEC also supports workforce development through rigorous industry research and well-informed training programs for students, adult learners, and employers.

Outside Policy Sections

• Online Lottery – The budget allows the state treasurer to develop an online platform for the state lottery system and the revenue raised will go to support early education grants.
• Tuition-Free Community College – The budget provides free tuition starting this fall for students enrolled at state community colleges. Students will also receive up to $1,200 for books, supplies and other costs.
• Excess Capital Gains Transfers- The budget also mirrors the administration’s push to make up to $375 million in excess capital gains tax revenue available for spending. Capital gains revenue above a certain threshold is automatically deposited into savings, but some will be diverted to the general fund.
• Hospital and Payor Assessments -The budget adopts several changes to the hospital assessment formula.
• Gender Identity on Records – Individuals may charge the designated sex on their birth records.

Income Surtax Revenue/Spending

While the budget does not call for any new taxes, it allocates the roughly $1.3 billion in new revenue that the state anticipates collecting from the Question 1 income-surtax proposal that voters adopted in 2022. This is a roughly $300 million increase over last year’s surtax spending. Here is a full breakdown of the spending:

58.5% of Fair Share spending will go to education:

• $117.5 for Free Community College
• Universal School Meals

41.5% of Fair Share spending will go to transportation investments including:

• $447 million to the MBTA
• $100 million to Regional Transit Authorities (including $40 million to cover free rides)

AIM anticipates that more than $800 million in additional Question 1 revenue will be available to the Legislature in the fall when April’s surplus revenue is classified by the comptroller.

Shelter Spending  The FY’ 25 budget makes $500 million available to cover costs associated with the state’s shelter system for homeless families. $175 million of which would come from a savings account known as the Transitional Escrow Fund. This would cover roughly half of what the Healey Administration estimates to spend on the system in FY 25.