Governor Healey’s State Budget Proposal Key Takeaways
February 2, 2026
On January 28, 2026, Governor Healey released her Administration’s budget recommendations for fiscal year 2027, which begins July 1. Referred to as “House 2,” the proposal includes funding levels for state programs, changes to certain state laws, and aid to quasi-public agencies like the MBTA. House 2 is the first step in the State House budgetary process. In terms of next steps, the House is expected to issue their budget proposal in April, followed by the Senate in May—a conference committee will then be established in June to negotiate the final legislative plan that will be sent back to the Governor in early summer.
Overall, Governor Healey’s plan represents a 3.8% increase over the current budget, and prioritizes state funding for education programs, safety-net assistance, state health insurance, and grants for workforce development. There are no proposals to increase taxes or fees, and it recommends spending more of the Fair Share surtax revenue to cover annual state operating budget needs. As a reminder, the Fair Share surtax revenue can only be used on either transportation or education programs.
The Governor proposes spending $3.8 billion of Fair Share surtax revenue, with approximately 46% going to transportation and 54% going to education. For education, the surtax money continues to support free school breakfast and lunches for all K-12 students, free community college, expanded early education programs, and over $500 million in local aid to municipalities to support general education costs. A Better City continues to urge State House leaders to deliver a 50-50 split of this money, but we recognize the challenging fiscal climate the state is facing this year. Overall, the Governor’s proposed approach to investing Fair Share surtax revenue is reasonable, and generally consistent with our recent recommendations to the Healey-Driscoll Administration.
On transportation, the Governor’s FY27 vision for programming Fair Share surtax revenue is largely consistent with the current approach. Governor Healey’s proposal would dedicate a total of $1.1 billion in Fair Share funds to the MBTA to maintain current service levels and avoid any projected deficits over the next two years. The proposal also allocates Fair Share surtax money to maintain transit service at Regional Transit Authorities, expand micro transit and last mile innovation grants, and address unpaved roads across Massachusetts.
The Governor is also proposing a large increase in the amount of Fair Share revenue that can be dedicated to transportation infrastructure improvements through the Commonwealth Transportation Fund. This proposal expands upon a financing plan that was initially presented by A Better City and is currently allowing for additional capital spending at MassDOT and the MBTA.
Additionally, the budget plan includes a detailed proposal to create a “Progressive Design Build” procurement program for MassDOT and the MBTA. These new rules would apply to large, complex infrastructure projects, such as the I-90 Allston Multimodal Project, Cape Cod Bridges, reconstruction of highway interchanges, and commuter rail modernization plans. You can see this language here.
With respect to energy and environmental priorities, the total funding for environmental programs in House 2 does decline slightly, but the Governor is emphasizing that this plan adequately supports the actions to ease energy costs, properly administers expedient permitting and compliance, and accelerates clean energy development through key reforms to the energy siting and permitting process.
You can read Governor Healey’s budget press release here, as well as coverage here and here. This link will take you directly to the State’s FY27 Budget Recommendations website.
A Better City looks forward to engaging with State House leaders in the coming weeks and months—please reach out to Tom Ryan with any questions or feedback.
