Massachusetts budget writers struggled Thursday to grapple with the impacts of President Donald Trump’s efforts to reduce the size of the federal government and slash large amounts of federal funding on Gov. Maura Healey’s $62 billion fiscal year 2026 state budget.
The actions of Trump and billionaire Elon Musk’s Department of Government Efficiency infiltrated nearly every aspect of a budget hearing at the State House where top Democrats questioned whether Healey had a backup plan if the flow of cash from Washington stops.
Administration and Finance Secretary Matthew Gorzkowicz said it is difficult to follow what is happening in Washington but state officials are “scenario planning and we’re trying to figure out what the impacts of those various scenarios might look like.”
“The problem is going to be too big for any one branch to think that they’ll have a proposal to solve it,” he said. “We’re going to have to come together. It’s going to require legislation. It’s gonna require, perhaps, looking at appropriations and looking at resources. Maybe we have to allocate resources differently than we have in the past.”
During his first several months in office, Trump has tried to freeze federal funding, including grants and loans states rely on, that do not align with his political views. Those attempts have run into myriad lawsuits, including from Massachusetts Attorney General Andrea Campbell.
Officials in Healey’s office acknowledged that the political and fiscal environment has changed dramatically since they first released their spending proposal for the next fiscal year in January. Local lawmakers probed the governor on contingency plans because her fiscal year 2026 budget relies on $16 billion in federal dollars.
Healey said there is “no doubt” Massachusetts finds itself in a challenging moment.
“The cost of providing services has only increased here and around the country,” Healey said. “Revenue growth is ongoing, more modest and federal actions, real, potential, both on direct funding and also on broad economic disruption that we don’t know the full extent of yet creates a lot of uncertainty as we work together right now to do this important work.”
Healey’s spending plan for fiscal year 2026 represents a 7.4% boost in overall spending compared to the fiscal year 2025 plan she signed into law last summer, a jump that outpaces the rate of inflation in the United States.
The budget plan also includes a series of tax proposals like applying the sales tax to candy purchases and subjecting synthetic nicotine products like ZYN pouches to the same excise tax as tobacco products.
The governor also pitched capping charitable donation deductions at $10,000 for joint filers and $5,000 for individual filers instead of leaving the option uncapped. Budget-writers in Healey’s office said the change could generate $164 million in tax revenue.
But lawmakers pressed Healey on whether capping charitable donation deductions was a smart move. Rep. Aaron Michlewitz, a North End Democrat and lead budget-writer in the House, asked Healey whether there was any room to “shift in relation to those” policies.
Healey said she has heard concerns from not-for-profit organizations about the proposal because they “are going to probably be facing even greater strain than ever.”
“I think it’s something that we’d like to actively engage with you on in dialog in terms of working out a way to do what’s best, to support people in this state,” she said.
Gorzkowicz said officials looked at other states when they crafted the proposal.
“We’re happy to share that information with you as you’re thinking about it and partnering with you about better ways to structure this in light of the changing revenue environment we’re in,” he said.
After the hearing, Healey said her office would “evaluate” their charitable donation deduction cap measure.
“We filed it at a time where we hadn’t seen the impact of the Trump administration funding or lack thereof coming through,” she said. “We listen and take seriously the concerns of the not-for-profit community and what might happen there.”
Healey did not say whether she was willing to reconsider the application of the tobacco excise tax to synthetic nicotine and sales tax to candy.
“I’m not hearing any issues with those taxes,” she said. “… All we were trying to do is treat candy the same as cupcakes.”
Rep. Todd Smola, a Warren Republican, said the policy changes concerning candy and synthetic nicotine may seem “like small numbers” but the Legislature “always walks into these proposals very lightly.”
“These particular proposals, typically … target the individuals that are least likely to afford an increase, even if it’s minuscule to our eyes,” he said.