State Fiscal Briefs

September 2021

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Massachusetts’s budget basics

According to the National Association of State Budget Officers (NASBO), Massachusetts’s total expenditures in fiscal year (FY) 2020 were $63.0 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Massachusetts’s combined state and local direct general expenditures were $80.1 billion in FY 2018 (the most recent year census data were available), or $11,635 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,801.

Massachusetts’s largest spending areas per capita were public welfare ($3,448) and elementary and secondary education ($2,410). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Massachusetts’s combined state and local general revenues were $82.0 billion in FY 2018, or $11,908 per capita. National per capita general revenues were $10,071. Massachusetts uses all major state and local taxes. After federal transfers, Massachusetts’s largest sources of per capita revenue were property taxes ($2,565) and individual income taxes ($2,365).

Massachusetts’s politics

Governor Charles D. Baker, a Republican, was elected in 2018 with 67 percent of the vote. The next gubernatorial election is in 2022.

Massachusetts has a divided government. Democrats control both the House of Representatives (129 Democrats to 30 Republicans and 1 independent) and Senate (37 Democrats to 3 Republicans), with veto-proof majorities in both houses. The entire legislature is up for election in 2022 because both representatives and senators serve two-year terms.

Massachusetts’s budget institutions, rules, and constraints

Massachusetts uses an annual budget. The legislature must pass and the governor must sign a balanced budget, but a deficit can be carried over into the following year. Massachusetts further limits revenue growth, but the limit may be overridden by a simple legislative majority. There are also limits on total authorized debt and debt service incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Massachusetts’s recent fiscal debates

  • Massachusetts currently has a flat individual income tax rate (5.05 percent). In 2018, advocates pushed a ballot question that would have added a 4 percent surtax on taxable income above $1 million. Before the vote, however, the Massachusetts Supreme Court removed the question from the ballot because it asked voters both to approve the tax and how the funds would be spent (education and transportation)—Massachusetts requires that ballot initiatives ask voters only about related subjects. Advocates are now trying for a constitutional amendment, which does not have such restrictions but requires the state to pass bills in two legislative sessions and voters to approve it at the ballot box (the earliest possible election is 2022).
  • In 2018, Massachusetts enacted a paid family-leave program. Beginning in 2021, the state will provide workers up to 12 weeks to care for a newborn child or a family member with a health condition and 20 weeks for their own medical needs. The program is funded by a 0.75 percent payroll tax on employers. If employers provide leave benefits equaling or exceeding the state’s benefits, they are eligible to apply for a tax exemption. The state estimates the program will cost $800 million annually.
  • In September 2019, Governor Baker temporarily banned the sale of e-cigarette and vaping products. The legislature later passed legislation that will levy a 75 percent excise tax on the wholesale price of vape products and ban all flavored tobacco products, including menthol cigarettes. Massachusetts already has one of the highest tax rates on cigarettes in the country, at $3.51 per pack.

Massachusetts’s current budget

Governor Baker released his FY 2021 budget proposal in January 2020. The governor proposed $44.6 billion in general fund spending, a 2 percent increase over enacted FY 2020 spending.

Because of the COVID-19 pandemic, the Massachusetts legislature delayed its action on the FY 2021 budget, and instead enacted a three-month, $16.5 billion temporary budget in August 2020. In December, legislators approved and the governor signed a complete, $45.9 billion FY 2021 budget. The state’s $3.6 billion shortfall was bridged with funds from the state’s reserve funds, federal relief money, and the delay of a recently enacted income tax deduction for charitable giving.

Governor Baker released his FY 2022 budget and gave his State of the State address in January 2021. The governor proposed general fund spending of $45.9 billion, or roughly the same level as enacted general-fund spending for FY 2021. Governor Baker’s plan includes $246 million in new education funding targeted at low-income students and no tax increases. His plan relies heavily on using the state’s reserve funds to balance the budget.

For more on Massachusetts’s budget, see