Massachusetts

State Fiscal Briefs

September 2020

Massachusetts’s budget basics

According to the National Association of State Budget Officers (NASBO), Massachusetts’s total expenditures in fiscal year (FY) 2019 were $59.8 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 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 $77.6 billion in FY 2017 (the most recent year census data were available), or $11,303 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 $9,446.

Massachusetts’s largest spending areas per capita were public welfare ($3,242) and elementary and secondary education ($2,366). 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 $77.5 billion in FY 2017, or $11,287 per capita. National per capita general revenues were $9,592. Massachusetts uses all major state and local taxes. After federal transfers, Massachusetts’s largest sources of per capita revenue were property taxes ($2,435) and individual income taxes ($2,145).

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 (127 Democrats to 32 Republicans and 1 independent) and Senate (34 Democrats to 5 Republicans), with veto-proof majorities in both houses. The entire legislature is up for election in 2020 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 Charlie Baker announced his proposed FY 2020 budget in January 2019. Both the budget and 2019 state of the state address highlighted the governor’s proposal to spend an additional $266 million on programs aimed at treating substance addiction and abuse, particularly opioid addiction. The governor endorsed lowering the state’s individual income tax rate to 5 percent but called for new taxes on legalized sports betting, opioids, and e-cigarettes and vaping products. His budget dedicated $297 million for the state’s stabilization fund, which would bring the state’s reserves to $2.8 billion.

The legislature passed its budget in July 2019. The legislature allocated more funds than the governor recommended, but nearly half of the additional dollars went to the reserve fund. The legislature’s budget also did not enact any of the governor’s new taxes (although the it passed the vaping tax later in the year). Governor Baker signed the budget without any line-item vetoes. It was the first time he had not vetoed part of the budget since taking office in 2015.

Governor Baker released his proposed FY 2021 budget and gave his 2020 state of the state address in January 2020.

For more on Massachusetts’s budget, see