Amid a struggling job market and heightened costs of living, Massachusetts’ economy is projected to experience slower growth in the coming fiscal year, partly due to fluctuating state tax revenues and federal funding cuts.
The One Big Beautiful Bill Act and a spate of executive orders have slashed $3.7 billion in federal funding towards Massachusetts.
Experts say federal initiatives have negatively affected economic growth in the state, citing the uncertainty sparked by tariffs and funding cuts for healthcare, welfare programs and higher education.
“No single one of them is enough to turn you from growing to shrinking, but they’re all kind of weighing down on our ability to expand,” said Michael Goodman, professor of public policy at the University of Massachusetts Dartmouth, referring to the Trump administration’s policies.
Massachusetts is expected to lose out on $650 million in anticipated tax revenue as a result of tax breaks and spending cuts in the One Big Beautiful Bill Act, signed into law by President Donald Trump in July.
“We’re not immune here in Massachusetts to the forces that shape the national economic results,” Goodman said.
Some believe the future of Massachusetts’ economy will reflect that of the national economy, claiming the impacts of federal tariffs and policies will trickle down and shake up the state’s fiscal affairs.
“If the national economy goes south, then the rest of the states, most likely, are going to go south too,” said Massachusetts State Rep. John Barrett. “If they’re cutting programs, they’re cutting trillions and trillions of dollars out of money that was flowing back into the states.”
Barrett expressed concern for the effects of the national economy and the loss of federal funding on Massachusetts healthcare.
“It’s going to have a terrible impact, especially on health insurance costs,” he said. “Tough times are ahead, and I believe we’re headed for a downturn in the economy.”
The federal government has cut $1.6 billion in funding for health and human services in Massachusetts, according to the Massachusetts government website.
Goodman said Massachusetts spends a sizable chunk of its yearly fiscal budget, which exceeds $50 billion, on healthcare. The One Big Beautiful Bill Act would significantly reduce how much money the federal government gives the state to ensure low and moderate income households, disabled adults and chronically ill children receive coverage, he added.
“The reductions in federal funds will lead to hard choices that our state has to make about who can be covered and how those health care bills are going to be paid,” Goodman said.
Laurence Kotlikoff, an economics professor at Boston University, said that federal budget cuts targeting higher education are also a problem because of current reductions in hiring and potentially reduced hiring at universities in the future.
Universities are partly suffering as a result of the federal government’s policies on immigration and international students, which have made it more difficult for non-U.S.-born students to obtain visas, said Kotlikoff.
“We have a massive attack on higher education,” he said. “Massachusetts, of course, is particularly dependent on that in terms of its economy.”
Massachusetts’ industrial profile is shaped by sectors that are accustomed to absorbing shocks from international and national economic downturns, such as healthcare, technology, innovation and life sciences, Goodman said.
Clean energy, renewable energy and offshore wind are industries being undermined by federal regulations and policies, he said.
“There does appear to be a special emphasis on disinvesting in those areas of the economy that have been priorities for our state government,” Goodman said.
Goodman said the Massachusetts economy is currently in good shape, however things could change down the road.
“The state economy is hanging in there, but certainly the future looks murky,” he said.