Gov. Healey files FY26 state budget proposal

Gov. Maura Healey today filed her $61.5 billion state budget plan for fiscal 2026, in tandem with a $1.3 billion fiscal 2025 supplemental budget bill.

The bills include several positive investments in municipal government, though they reflect a budget year with only modest revenue growth expected at the state level.

In order to make some of her proposed investments in fiscal 2026, the governor would leverage several sources of revenue, including surplus surtax revenue (also known as “Fair Share” funding) from fiscal 2024, the Student Opportunity Act Trust Fund, and anticipated surtax revenue budgeted for fiscal 2026.

Healey’s budget bill, known as House 1, would increase the main discretionary local aid account by 2.2% over fiscal 2025, while increasing Chapter 70 school aid by $420 million, honoring the commitments made in the 2019 Student Opportunity Act. Healey proposes increasing the “minimum education aid” figure up to $75 per pupil for fiscal 2026 — significantly above the statutory minimum of a $30 per student increase each fiscal year. This represents the highest amount included in a governor’s budget recommendation.

The governor’s state budget proposal is the first step in a months-long process. The House and Senate Ways and Means committees are expected to host a budget hearing in the coming months on municipal and school aid for fiscal 2026, and the House is expected to debate its budget bill in April, with the Senate deliberating its own bill in May. The Legislature will work to get a final budget bill to the governor by the beginning of the fiscal year on July 1.

Unrestricted General Government Aid
Healey is proposing an increase of $28.8 million (2.2%) in the Unrestricted General Government Aid account, which aligns with the consensus forecast for state tax revenue growth announced earlier this month.

The MMA will be working closely with lawmakers to advocate for an adequate funding level for UGGA in order to maintain essential municipal services.

Chapter 70
House 1 would continue implementation of the funding schedules in the Student Opportunity Act, bringing Chapter 70 school aid up to $7.3 billion, an increase of $420 million over fiscal 2025.

House 1 would increase the per-student minimum new aid from the statutory $30 to $75 for fiscal 2026. An initial examination of the proposal indicates that 233 of 318 school districts (77%) would be classified as “minimum aid” districts, and would be set to receive the increased per-student funding.

The 6% increase to Chapter 70’s total bottom line is funded through several funding sources, including general revenue, fiscal 2026 anticipated surtax revenue, and the Student Opportunity Act Trust Fund.

• See the Department of Elementary and Secondary Education’s calculation of fiscal 2026 Chapter 70 aid and net school spending requirements for individual cities, towns and regional school districts based on House 1 (including preliminary fiscal 2026 charter school assessments and reimbursements)

Charter schools
House 1 would fund charter school reimbursements at $179 million, intended to meet the state’s statutory obligation to mitigate Chapter 70 losses to charter schools as outlined in the Student Opportunity Act.

While the proposed budget meets the state’s obligation, the MMA continues to highlight the serious flaws in the overall charter school finance system.

Special education
House 1 would fund the Special Education Circuit Breaker program at $682 million, with $532 million provided in House 1 and $150 million provided in a fiscal 2025 supplemental budget proposal. According to the administration, this represents full funding of out-of-district transportation cost reimbursements, which are provided for in the Student Opportunity Act.

Rural school aid
House 1 would level-fund Rural School Aid for eligible towns and regional school districts at $16 million. The grant program helps districts facing the challenge of declining enrollment to identify ways to form regional school districts or regionalize certain school services to create efficiencies.

The MMA will continue to advocate to bring this account closer to the $60 million recommended by the Commission on the Fiscal Health of Rural School Districts in its 2022 report, “A Sustainable Future for Rural Schools.”

School transportation
By leveraging fiscal 2026 surtax funds, House 1 would increase funding for regional transportation reimbursements from $99.4 million in the current fiscal year to $116 million. The administration says its proposal would reimburse districts for approximately 95% of local costs.

Reimbursements for the transportation of out-of-district vocational students would be fully funded at $6.2 million, marking a significant change to this chronically underfunded account.

While House 1 would level-fund reimbursements for the transportation of homeless students under the federal McKinney-Vento Act, at $28.6 million for fiscal 2026, the administration noted that this account could see additional funding through the recently requested Emergency Assistance supplemental budget. The impact of this funding level would vary from community to community, depending on the number of homeless families that are sheltered in local hotels and motels.

PILOT
House 1 would fund payments-in-lieu-of-taxes at $54.5 million, an increase of $1.5 million. This amount is intended to ensure that no municipality sees a decrease in its overall PILOT payments due to recent valuation changes.

Road and bridge funding
House 1 reflects the governor’s recent announcement of major investments in transportation statewide. To that end, House 1 would dedicate $765 million of fiscal 2026 surtax funding toward the state’s Commonwealth Transportation Fund, to increase bonding capacity by $5 billion.

Using this new bonding capacity, the governor announced that she will seek a five-year, $1.5 billion investment in the Chapter 90 program for local road and bridge maintenance — an annual increase of $100 million. The formula for the additional $100 million would be inclusive of all municipalities, but based on road miles.

The fiscal 2025 supplemental budget bill also includes $25 million for the Winter Resilience Assistance Program (WRAP).