For the second year, the Healey-Driscoll administration and policymakers in the House and Senate have put forward an Innovation and Capital Fund supplemental budget to complement the annual budget development process for FY 2027. The supplemental spending bill appropriates a total of $1.9 billion, $1.3 billion of which is supported by supplemental surtax revenues currently stored in the Innovation and Capital Fund.

5 Things to Know

The Massachusetts Taxpayers Foundation has staked out the responsible path in this debate with its opposition to questions calling for an income-tax reduction and rent control.

“These questions are intended to address critical issues that require action: affordability, competitiveness and fiscal sustainability,” the Massachusetts Taxpayers Foundation, an independent, non-partisan research organization focused on state finances and policy, stated in announcing its position Monday.

The Massachusetts Taxpayers Foundation on Monday came out in opposition to a proposed income tax cut scheduled to go before voters in November, becoming the first major business group to take this stance.

Thematically, Howgate said, all three ballot questions that MTF is opposing speak to critical issues of affordability, competitiveness, and fiscal sustainability. Those issues, he added, remain important and deserve a better public policy response from Beacon Hill.

In November, Massachusetts residents will vote on as many as 11 initiative petitions that would make major changes to state law. Three of those questions relate directly to the Commonwealth’s economic and fiscal future:

• Implementation of mandatory rent control policy in all communities;
• Limitation of the state’s annual cap on allowable tax collections; and
• Reduction of the state’s base income tax rate from 5 percent to 4 percent.

The Massachusetts Taxpayers Foundation estimates that the tax cut would result in a $5.4 billion annual revenue loss for the state. Doug Howgate, president of the foundation, told The Light that this is a static analysis, meaning the calculation does not account for changes in economic activity.

The Healey administration filed its Fiscal Year (FY) 2027 budget on January 28th. The Governor’s $63.36 billion operating budget proposal increases spending over the FY 2026 General Appropriations Act (GAA) by $2.3 billion (3.8 percent).

The revenue foundation for the Governor’s budget is the $44.9 billion consensus revenue estimate, which includes $2.7 billion in income surtax revenue.

On January 28th, the Healey-Driscoll administration filed its budget proposal for Fiscal Year (FY) 2027. The $63.36 billion plan increases spending over the FY 2026 General Appropriations Act (GAA) by $2.3 billion (3.8 percent) and over the administration’s estimated spending level for FY 2026 by $668 million (1.1 percent). The Governor’s proposal relies on $404 million in revenues tied to the passage of legislation she filed two weeks prior related to recent federal corporate tax changes.

On October 1, 2025, federal lawmakers failed to resolve a budget deadlock to start Federal Fiscal Year (FFY) 2026, resulting in a federal government shutdown. Forty days later, on November 9th, the Senate announced an agreement between Senate Republicans and eight Senate Democrats to temporarily fund the government and that agreement was signed into law by President Trump on November 12th. The funding package provided temporary funding through January 30, 2026, requiring an additional appropriations package by the end of January to prevent another shutdown.

As budget writers prepare for the Fiscal Year (FY) 2027 budget development process, they continue to closely monitor FY 2026 revenue collections and the myriad factors—stemming from both state and federal action—that impact the stability of the state budget.