Mass. Senate budget panel recommends 6.3% annual spending increase

Senate Democrats plan to press ahead with a large boost in state spending on the traditional budgeting timeline, even as the chamber's budget chief cautioned that "all bets are off" if federal Medicaid cuts materialize.

The Senate Ways and Means Committee on Tuesday plans to roll out a $61.32 billion budget for fiscal year 2026, calling for a 6.3% increase in spending that's less than the 7.4% bump Gov. Maura Healey sought and the 6.6% the House proposed but still more than twice the rate of growth as last year.

The draft budget bill, which will be up for debate in the Senate starting May 20, does not feature any tax increases and instead pays for spending that can't be covered with expected growth in tax revenues by leaning on more than $1.2 billion in one-time funding. The spending increases total more than $3.6 billion, but the bill does not call for and withdrawals from the state's rainy day fund, which has an estimated $8.2 billion balance.

Much of the spending growth is, as budget-writers put it in a summary, "functionally non-discretionary." A $2.34 billion increase in MassHealth accounts for nearly two-thirds of the total growth over the fiscal year 2025 budget Healey signed last summer, and the Senate Ways and Means proposal also calls for $533 million more on other health and human services programs, $460 million more on Chapter 70 school aid and $237 million more for the Group Insurance Commission that provides health coverage to public workers.

All other non-surtax spending would increase by a combined $59 million under the bill.

"Unless we want to slash services and programs that we provide to our citizens, there's very, very little more that we can do on any of these line items," Senate Ways and Means Committee Chair Michael Rodrigues told reporters.

"Sixty-five percent of that growth is just in MassHealth," he later added. "Think nursing homes, long-term care for seniors, health care for seniors, for disabled, for low-income individuals. That's the driver, and unless we want to start reducing services to our residents, I don't see any way that we can — we've scrubbed it clean."

Senate budget-writers have a different vision for one-time revenues than the governor, who proposed a suite of tax increases that were dropped in the House budget and therefore ineligible to emerge in the Senate draft.

Their bill calls for redirecting roughly $600 million from capital gains tax collections above a certain threshold toward the state's unfunded pension liability, about $166 million more than the Healey and House budgets. The Senate Ways and Means plan also calls for pulling $350 million in what Rodrigues described as "ARPA funds that have yet to be contracted out," an increase of $150 million over the other two budget drafts.

Beacon Hill officials agreed to plan on spending about $1.95 billion in revenue from the voter-approved surtax on wealthy Bay Staters, money that can only go toward transportation and education investments.

The Senate Ways and Means bill would direct two-thirds of the pot to education, funding so-called C3 grants to early education providers, part of a school aid increase outlined under the Student Opportunity Act, continuation of free school meals for all students, and costs of free community college that Massachusetts launched in last year's budget.

The rest would go toward transportation. Between surtax and other dollars, the Senate Ways and Means Committee budget would provide the MBTA with $500 million and the state's 15 regional transit authorities with a combined $214 million, including funding to cover fare-free service.

Altogether, Senate Democrats are proposing a major funding injection for the T, which is facing a budget gap that could imperil service improvements, but one with significantly less money than Healey and the House envisioned.

Rodrigues said his team "believe[s] this is enough money."

"It's very, very significant investments in the MBTA. We believe it's enough money, on top of the $1.4 billion that the MBTA gets in supports from the one cent on the penny on the sales tax," he said. "We want to ensure that our spending, whether it's Fair Share dollars or general obligation dollars, has regional equity. There are 14 or 15 other RTAs around the commonwealth that service citizens of the commonwealth. We want to ensure that they have resources to provide transportation services for them also."

Rodrigues said he envisions the annual state budget as a better vehicle to fund operational costs, which he believes lean more toward education than transportation. The Senate on Thursday will also take up a mid-year spending bill putting to use about $1.3 billion in available surtax revenue, and Rodrigues said he thinks a "supp" like that is better to fund "non-recurring" capital programs, especially in transportation.

Taken together, the Senate Ways and Means Committee's fiscal 2026 budget and forthcoming supplemental budget would direct 58% of the combined surtax dollars toward education and 42% toward transportation.

Rodrigues said his eventual goal is "to be as close to balancing" the funding split.

"It's going to take a couple of years for it to settle out," he said. "We're hoping to be around the 50-50 range."

The Senate Ways and Means budget would fund another year of school aid increases laid out in the funding reform law known as the Student Opportunity Act. It calls for $7.3 billion in Chapter 70 aid, a significant boost over the governor and the House bills, and increasing minimum aid to $150 per pupil.

Senators also proposed $31 million to fully fund the Pappas Rehabilitation Center for Children in Canton and $4.8 million for the Pocasset Mental Health Center on Cape Cod, two facilities that Healey sought to close in cost-cutting maneuvers before hitting pause amid blowback.

Rodrigues described the budget bill as "policy-light," though it does feature language designed to prevent brokers fees from being passed along to tenants. A similar Senate-backed provision died last year in housing bill talks with the House, and House Democrats are now pushing for their own version of the restriction.

The Senate Ways and Means bill does not include another House policy rider that would hit the brakes on the Healey administration's proposed reforms to the admissions process at vocational and technical schools.

Unlike the House, whose budget would level-fund unrestricted general government aid (UGGA) at fiscal 2025 levels, the Senate proposed a 2.2% increase that mirrors Healey's spending plan.

Senators will have until the end of the week to file amendments to the annual budget bill, and debate will begin on Tuesday, May 20. Traditionally, the House approves a budget in April followed by the Senate in May, and a private team of negotiators hash out a compromise sometime after the July 1 start of the fiscal year.

Policymakers and advocates have been vocalizing concerns for months about potential budget upheaval stemming from the Trump administration, which has moved to slash federal spending, including on Medicaid, partly to achieve tax relief.

"If they make significant reductions in Medicaid reimbursements, all bets are off, because that is over a billion dollars a month, I think, in MassHealth reimbursements to the commonwealth of Massachusetts," Rodrigues said.

The Westport Democrat said he had "conversations" about turning back to the COVID-era playbook, when lawmakers used a series of interim budgets to keep state government funded and punted their annual budget bill into the fall to give them more time to navigate pandemic upheaval.  For now, he said, it's most "prudent to move forward and to pass a budget based upon facts that we know now."

"It's so uncertain. We hear from experts, there's no way [Trump's] going to touch Medicaid, because Medicaid reductions will probably hurt so-called red states more than us, because we have such a high percentage, highest percentage in the country, of our population that has health insurance," Rodrigues said. "Then there are other folks that say, you know, he's liable to do anything, and it's going to change at a moment's notice. So we've just got to stay calm, stay focused, and be open-minded enough that we might be back at the table in a few months."

Last week, Senate President Karen Spilka suggested budget revisions might become necessary later in the year depending on how prospective federal cuts unfold.

Spilka told reporters Monday that budget-writers are navigating "an uncertain moment."

"Things change, not week-to-week, forget about even month-to-month or week-to-week [or] day-to-day — it's hour-to-hour. So it's impossible to know the true level of the chaos that's going on," she said. "We can only produce a budget based on what we know, what we do know, when and how. What we do not know is that the federal government might decide to punish this state financially for being who we are, and that, to me, is among the worst punishments possible."