Last week, MTF published a fiscal update brief reviewing Fiscal Year (FY) 2025 tax revenue collections, the current budget balance estimate, and the Healey-Driscoll administration’s closeout supplemental budget. It included MTF’s recommendation for swift action by the Legislature on the final spending bill of the year and it encouraged policymakers to set aside surplus revenues now to prepare for federal action or economic slowdowns in the future.

In this follow-up brief, MTF expands on that analysis to offer an update on FY 2026. In addition to assessing state tax revenue collections trends through September, it also summarizes a range of revenue and spending exposures that policymakers must monitor and adapt to in the months ahead. When that information is paired with reasonable assumptions, it is clear that the Commonwealth should prepare for an FY 2026 and FY 2027 that will be marked by uncertainty and challenging financial decisions. Fortunately, there are several opportunities for policymakers to take action now and put the state in a stronger position to react, respond, and recover from adverse federal action or economic trends.