Gorzkowicz, Michlewitz, Rodrigues Announce Consensus Revenue Forecast of $43.614 Billion for Fiscal Year 2026
Baseline state tax revenue growth expected to grow by 2.2 percent
BOSTON – Today, Secretary of Administration and Finance Matthew J. Gorzkowicz, House Ways and Means Chair Aaron Michlewitz, and Senate Ways and Means Chair Michael J. Rodrigues agreed on a consensus revenue forecast for Fiscal Year 2026 (FY26) of $43.614 billion, including the income surtax.
Excluding the income surtax, the baseline FY26 consensus revenue estimate totals $41.214 billion, an increase of 2.2 percent over the current FY25 benchmark. The three parties agreed to an income surtax estimate of $2.4 billion, as well as a spending threshold of $1.95 billion for FY26, reducing the amount of revenue available for budgeting to $43.164 billion. This spending threshold represents $650 million in additional surtax available for spending compared to the FY25 General Appropriations Act (GAA). The establishment of a spending threshold will ensure that surtax spending in the budget is sustainable.
“This consensus revenue estimate for Fiscal Year 2026 responsibly reflects our current economic environment. While our economy and revenues over the past couple years have continued to grow, the post-pandemic rate of growth has slowed and our budgeting must adjust accordingly. This agreement will enable us to build a budget that delivers on our goals and values without the risk of creating further structural problems in future fiscal years. The increase in available resources from surtax is also critically important, aligning our estimates with the strong performance we saw in FY24 in surtax and making it possible to continue to use this resource for transformative investment in our education and transportation systems,” said Administration and Finance Secretary Matthew J. Gorzkowicz. “I want to thank Chair Michlewitz, Chair Rodrigues, and the Ways and Means teams for their collaboration as we developed this responsible revenue forecast that will ensure fiscal stability for Massachusetts in the years ahead and I look forward to continued partnership through the FY26 budgeting process.”
“This Fiscal Year 2026 consensus revenue figure will allow the Legislature and the Healey-Driscoll administration to collectively construct a reasonable and suitable budget for the upcoming fiscal year. By being ever watchful of the Commonwealth's finances and basing the budget on a judicious consensus revenue figure, we will be able to make fiscally sound decisions over the next few months as we work to make the critical investments that our constituents deserve,” said House Committee on Ways and Means Chair Representative Aaron Michlewitz (D-Boston). “I want to thank Chair Rodrigues and Secretary Gorzkowicz for their partnership in working to reach this agreement. I look forward to continuing to work closely with both of them as we work towards a final budget for fiscal year 2026.”
“Rooted in sound fiscal decision making, the Fiscal Year 2026 consensus revenue estimate reflects our ongoing efforts to tighten our belts and further align state spending growth with tax revenue growth in response to increasing post-pandemic spending obligations and the challenges ahead. With this agreement, we are laying the groundwork for a balanced FY26 budget that prioritizes our state’s economic health, promotes stability and continues to shape a more affordable and sustainable path for the Commonwealth, “said state Senator Michael J. Rodrigues (D-Westport), chair of the Senate Committee on Ways and Means. "I want to thank our partners in the House, Chair Aaron Michlewitz and his team in the House Committee on Ways and Means, and in the Healey-Driscoll Administration, Secretary Matthew Gorzkowicz and his team in the Executive Office for Administration and Finance for their continued collaboration. I look forward to working closely with both of them and their respective teams as we strive to build a responsible and fiscally sound budget plan for FY26.”
The consensus revenue forecast is the basis on which the Healey-Driscoll Administration, the House, and the Senate will build their respective FY26 budget recommendations. Pursuant to Section 5B of Chapter 29 of the General Laws, the Executive and Legislative branches convene every year to establish a joint revenue forecast. This process was informed by testimony given by the Department of Revenue, the State Treasurer’s Office, and independent, local economists from area foundations and universities during a public hearing held by the Secretary and Chairs on December 2, 2024.
Of the forecasted $43.614 billion in FY26 state tax revenues, an estimated $2.327 billion is projected to be capital gains tax revenue of which $666 million will be statutorily transferred to support long term liabilities, such as the Stabilization Fund, pension costs and retiree health insurance expenses.
The agreement also includes several off-budget transfers that are mandated by current law, including:
·
$4.933 billion to be transferred to
the pension fund, a $432 million increase over the FY25
contribution that keeps the Commonwealth on schedule to fully fund its pension
liability by 2036
·
$1.426 billion to support the
operations of the Massachusetts Bay Transportation Authority (MBTA)
·
$1.265 billion for the Massachusetts
School Building Authority (MSBA), which will support school construction
projects across the Commonwealth
· $27 million for the Workforce Training Fund to support the Commonwealth’s workforce and business productivity and competitiveness
The Executive Office for Administration and Finance and the House
and Senate Committees on Ways and Means also determined the potential gross
state product (PGSP) growth benchmark for calendar year 2025, as required by
M.G.L. Chapter 29 Section 7H ½. The PGSP growth benchmark informs the
Commonwealth’s health care cost growth benchmark, established by the Health
Policy Commission each year. The three bodies have reached agreement that the
PGSP figure for calendar year 2025 will remain 3.6 percent. PGSP is a measure
of the “full employment” output of the Commonwealth’s economy and reflects
long-term trends in the economy rather than fluctuations due to the business
cycle and, as a result, is meant to be fairly stable from year to year.
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