State bracing for cut of federal funds

Administration and Finance Secretary Matthew Gorzkowicz (left) testifies alongside Gov. Maura Healey about the governor's fiscal year 2026 budget bill at a March 6 legislative hearing.

Administration and Finance Secretary Matthew Gorzkowicz (left) testifies alongside Gov. Maura Healey about the governor's fiscal year 2026 budget bill at a March 6 legislative hearing. SHNS

By Sam Drysdale

State House News Service

Published: 03-10-2025 5:00 PM

BOSTON — With unusually high levels of uncertainty circling around the federal funding that buoys more than $16 billion of the state budget, Gov. Maura Healey’s finance secretary said that federal cuts would be too big of a problem for the executive branch to solve on its own.

“We’re going to have to sit down collectively and do it, because I can tell you, the problem is going to be too big for any one branch to think that they’ll have a proposal to solve it,” Administration and Finance Secretary Matthew Gorzkowicz said during a budget hearing before the Ways and Means Committees last Thursday.

Gorzkowicz added, “It’s going to require legislation. It’s going to require, perhaps looking at appropriations and looking at resources. Maybe we have to reallocate resources differently than we have in the past. But it’s not — the executive branch is not going to have the ability to do it all.”

The state has more than $8 billion stocked away in a rainy day fund, but state tax collections continue to rise and Senate Ways and Means Chairman Michael Rodrigues has indicated that he may hesitate to tap into it, even in light of federal cuts.

“We must forego any immediate temptation that may hurt our state’s long-term economic health, while carefully identifying and assessing areas of concerns where we, as a commonwealth, may need to shoulder the burden in the absence of federal support,” Rodrigues said.

Serious concerns over the federal revenues that support state spending were a major theme of the first annual budget hearing, which also touched on the “new normal” of moderate revenue growth similar to pre-pandemic levels, and cost growth exceeding inflation in several areas of government spending.

President Donald Trump sent shockwaves throughout state government when he announced in January that he would freeze federal grants and other congressionally approved government programs. The administration rescinded the memo that froze federal financial assistance, and it was then blocked by two federal judges, but the administration is focused on downsizing government and says it still plans to revisit the plan in the future.

“We are stepping back, and we’re taking a more comprehensive look and trying to just understand, based on proposals that are being advanced from Washington, what the impact on the state will be,” Gorzkowicz told reporters after the budget hearing Thursday.

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He continued, “As you can imagine, those proposals are changing, and it’s been difficult to try to get information about some of the details behind those proposals. But we’re working with the Cabinet, we’re working with all levels of government to just understand what those proposals might be, to try to run some scenarios and some modeling to understand that impact.”

The finance secretary said there might not be much the state can do to make up for lost federal funding.

“And let’s be clear, there may not be the ability to backstop much of what we’re seeing, but to the extent that we have to look at existing resources or make changes, we’re going to need the partnership with the Legislature to do that. They have the power to legislate and appropriate,” he said.

Healey referred several times over the course of the hearing to reports Thursday that Trump may sign an executive order to disband the U.S. Department of Education.

Doing so, she said, would cut funding for students in Massachusetts who receive special education services, Title I grants for low-income families and other education dollars in Bay State schools.

“We as a state are not going to be able to absorb or make up for cuts that come from a federal administration,” she told reporters about the possible elimination of the Department of Education. Earlier, she said, “So, it’s just to say we’ve got to keep real-time awareness in terms of what’s out there, what’s coming down, whether it’s by executive order or some other like DOGE-y whatever, exercise.”

Healey and her team weren’t the only ones concerned about federal funding cuts affecting the state budget.

“This committee also has to build a budget for the looming fear of what might come next from the federal government, that is unpredictable, to put it mildly,” said House Ways and Means Chairman Aaron Michlewitz.

He continued, “It is our job to cut out the noise, no matter how loud that may be, and produce a budget that provides the services that our constituents rely upon, while also being ready to pivot if necessary.”

Michlewitz’s counterpart in the Senate, Michael Rodrigues, said it’s “all hands on deck moment” due to “threats from Washington to cut federal funding in areas like health care and education, or tariffs that will drive up the cost of delivery for our residents.”

While budget writers try to anticipate possible federal actions, they are also contending with a return to modest revenue growth after several years of substantial collections that coincided with big state spending increases.

Revenue collections in fiscal year 2025 have outperformed expectations, and budget writers plan for more growth in fiscal 2026 — but tax collections have still flattened compared to years when state coffers were injected with billions of pandemic-related federal grants.

Despite slowing revenue growth, Healey’s budget maintains popular pandemic-era programs that were originally paid for with COVID-related dollars from the federal government, including $475 million in grants for early education and care providers and $170 million for universal free school meals.

During the pandemic, the federal government also expanded Medicaid eligibility, which brought more Bay Staters onto the rolls of its MassHealth program. That was followed by an eligibility redetermination effort that reduced enrollment. Five years later though, enrollment in MassHealth stands at about 2.2 million — 260,000 more members than it had at the beginning of the pandemic.

Gorzkowicz referred to MassHealth’s inflated rolls several times over the course of his testimony on Thursday, pointing out that the public insurance program is the most expensive line item in the budget. Additionally, MassHealth members’ acuity is much higher, he said.