Massachusetts' state spending has boomed since the onset of the COVID pandemic, a Globe review of budget data found, far outpacing previous eras due to what state officials, budget watchers, and others described as a stew of factors, some of them unprecedented.
Healthcare costs have shot up, often outpacing inflation. The state, while slicing taxes for many, in 2023 began collecting money from a new multibillion-dollar surtax on high earners. State lawmakers opted to continue paying for some programs initially covered by federal COVID-era dollars, adding hundreds of millions of dollars in costs. It remains to be seen to what degree the state can, or will, shoulder an even larger fiscal burden should President Trump's efforts to slash federal funding prove successful.
The pandemic also remixed state finances in previously unseen ways, swelling state tax collections, which, in turn, helped to drive additional spending. In this way, Massachusetts was part of a national trend: Between 2019 and the current fiscal year, state tax collections nationwide ballooned by 40 percent, including multiple years of double-digit growth, according to the National Association of State Budget Officers, a nonpartisan trade group.
"That level of revenue growth was unprecedented," said Brian Sigritz, the group's director of state fiscal studies.
Massachusetts' spending has matched, and ultimately could even exceed, that rate. Should lawmakers pass a budget at the $62 billion spending level that Healey proposed, the state budget will have grown by 48 percent from the $42 billion plan the state adopted in 2019, the last fiscal year untouched by the effects of the pandemic.
In comparison, the state's spending plan grew by about 37 percent in the seven-year stretch proceeding the pandemic. Taken together, should lawmakers adopt Healey's proposed budget, state spending would effectively double from fiscal year 2012, when then-Governor Deval Patrick signed a $30.6 billion budget.
Last month, Healey proposed a 7.4 percent increase over the budget she signed just last July. The jump includes plans to spend nearly $2 billion generated by the state's so-called millionaires tax -- hundreds of millions above what state officials budgeted for this year but still less than what it has actually generated. Spending on MassHealth -- the state's Medicaid program -- alone would jump by more than $2.5 billion under Healey's plan, or 13 percent, from the current budget, at a time when healthcare costs are rising faster than inflation.
"It's not sustainable growth'" state Senator Michael Rodrigues, a Westport Democrat who chairs the Senate's budget committee, said of the overall 7 percent spending increase represented in Healey's budget plan. "We have to be very careful about how we expand the bottom line."
The Massachusetts Senate and the House won't release their own budget plans until the spring, and both Rodrigues and his House counterpart, state Representative Aaron Michlewitz, emphasized it's not yet clear what spending level the Legislature will embrace.
"Our task," said Michlewitz, a North End Democrat, "is to make sure we're putting forth a responsible budget that doesn't put us into circumstances that we can't get out of."
How Massachusetts got to this point, even during an unprecedented time, offers some guidance. During the pandemic, Massachusetts and other states were awash in cash, thanks to a mix of federal aid and skyrocketing tax revenues that bucked the doomsday predictions lawmakers were fielding in the spring of 2020.
That flood of money flowed in various directions. Policymakers plowed billions into the state's emergency savings account, which is designed to backstop the budget in case of an economic downturn and now stands at more than $8 billion. The state created various other reserves, one of which officials have repeatedly tapped to pay for climbing costs in its emergency shelter system. Roughly $3 billion simply went back to taxpayers, thanks to a decades-old law intended to limit state tax revenue growth.
But a lot also dropped directly into the budget, which grew by 9 percent and 7 percent, respectively, in 2023 and 2024.
"The economy was really weird, and we were keeping up with that," said Evan Horowitz, executive director of Tuft University's Center for State Policy Analysis. "But even after you adjust for that, the budget is still growing."
Lawmakers and Healey have helped spur some of that spending growth by opting to pay for programs after federal aid dried up, arguing the initiatives were crucial for state residents.
That included paying $475 million for a grant program aimed at helping keep early educators and day cares afloat. The state is also now covering $170 million in costs to provide free breakfast and lunch in the state's schools, which lawmakers made permanent in 2023. Massachusetts is projected to spend more than $250 million this year on an emergency rental-assistance program that cost the state less than $42 million in fiscal year 2022, the ballooning bill driven by escalating demand amid the state's housing crisis.
"Yes, the budget has increased, but so has poverty and inequity," said Viviana Abreu-Hernández, president of the left-leaning Massachusetts Budget and Policy Center. "The state has invested more money into supporting communities that have been historically more vulnerable and that the pandemic showed how vulnerable they were."
Revenue from the millionaires tax, which voters approved in 2022, also helped fund a slew of new programs, including fare-free buses and free community college tuition for residents.
Healey is also seeking to use some of that new surtax to cover the costs of school aid increases, which the state committed to under a 2019 funding overhaul. But even with hundreds of millions of more dollars dedicated each year, the new formula did not keep up with high rates of inflation and has not staved off cuts and layoffs at the local level.
Spending on MassHealth, the largest single piece of the state budget, and for health and social services personnel are also putting increasing pressure on state coffers.
More than 2 million people relied on MassHealth for health insurance as of last year, or roughly 260,000 more than before the pandemic -- and more than state officials expected. The services the state is covering are also simply costing more, particularly for long-term care, where costs have shot up by 11 percent alone, said Matt Gorzkowicz, Healey's budget chief.
Costs for the state's emergency shelter system have climbed over $1 billion a year, but even if Healey and lawmakers are able to drive down costs with various proposals, it could become a larger drag on the annual budget, given the state has repeatedly turned to an account seeded with surplus money from past years to fill the gap.
"When the music stops, it will become a budget issue," said Doug Howgate, president of the Massachusetts Taxpayers Foundation, a business-backed budget watchdog.
"We had a base budget that got a little ahead of ourselves during the pandemic," he added, noting the goal generally is to "get back" to limiting spending growth to 3 percent each year. "If we don't do that in the long term, the state is not going to have budgets it can support."
Others warn the state is in for a reckoning, particularly should Trump and Congress slash federal aid to states. (His administration has already attempted to freeze some of it.) Paul Craney, executive director of the conservative-leaning Massachusetts Fiscal Alliance, said should more high-end taxpayers successfully dodge paying the millionaires tax, by leaving the state or by devising other tax strategies to avoid the payments, it will become less reliable and threaten the new programs built upon its revenue.
"It's going to be a crash," Craney said. "It's very predictable."