House and Senate negotiators agreed Tuesday on a $1.56 billion spending package that strikes a middle ground on the distribution of income surtax funds for education and transportation, and adopts the House approach to mitigating the fiscal impacts of recent federal tax changes.
The conference committee report, which the branches could sent to Gov. Maura Healey this week, lands closer to the Senate’s push for a more balanced distribution of surtax dollars while preserving major transportation investments favored by the House.
The compromise includes $10 million for World Cup funding, a House priority, on top of another $10 million the Legislature previously allocated.
“We felt we felt comfortable enough moving forward with the full commitment that was made years ago,” chief House negotiator Rep. Aaron Michlewitz said of the allocation on Tuesday.
Negotiators also resolved one of the biggest policy disputes between the branches by linking implementation of certain federal tax code changes to the outcome of a November ballot question that would reduce the state’s income tax rate from 5% to 4%.
Of the surtax-funded spending, $794 million would support transportation initiatives and $558 million would fund education programs, representing a roughly 59-41 split. The House-passed bill had directed $885 million to transportation and $417 million to education, while the Senate version proposed $753 million for transportation and $591 million for education.
The largest transportation investment remains state support for the MBTA, and negotiators settled on a figure between the amounts favored by each branch. The agreement provides $595 million for MBTA operations, infrastructure and workforce improvements, compared to $740 million in the House bill and $535 million in the Senate version.
The package includes $450 million for operating assistance, $60 million for capital improvements and commuter rail infrastructure upgrades, $50.4 million for workforce and safety improvements, $20 million for the low-income fare program and $15 million for water transportation infrastructure.
The compromise reflects a long-running debate between the branches over how heavily surtax revenues should be concentrated on the MBTA versus distributed more broadly in non-MBTA communities that have their own transportation needs and goals.
“In speaking to my Senate colleagues, they’re very much concerned about regional equity,” Senate Ways and Means Chairman Michael Rodrigues said when unveiling the Senate proposal in April. “And we focus on our RTAs, and wanted to make significant investments in our regional transportation improvements, and also in education.”
Regional transportation and municipal aid remained a major feature of the final deal.
The conference report provides $144 million for regional transportation investments, including $100 million for “municipal winter relief” after cities and towns were hit with high snow and ice removal costs. That figure matches the Senate proposal and doubles the $50 million included in the House bill. Of the total, $80 million would be distributed based on road mileage and $20 million would be targeted to communities most affected by recent winter storms.
Rodrigues had said senators were hearing concerns “about the budget constraints placed upon our local and municipal budgets” and wanted “to help them as much as possible.”
The agreement also provides $25 million for workforce recruitment and retention at regional transit authorities, $10 million for RTA capital improvements, $5 million for on-demand microtransit and last-mile grants, and $3.75 million for maintenance of unpaved roads.
On the education side, the package includes $152 million for special education costs and circuit breaker reimbursements, slightly above the House’s $150 million proposal but well below the Senate’s $232 million allocation. It also dedicates $150 million for early education and care initiatives, matching the amount both branches had proposed.
Another major investment is $40 million for literacy programs, including $20 million for high-dosage tutoring and $20 million for the state’s literacy launch initiative.
The conference report also includes $27.5 million for regionalization incentives and rural school aid, $25 million in Green Schoolworks grants for clean energy infrastructure upgrades at local schools, $20 million for higher education endowment matching programs, and $18.3 million for financial aid expansion.
Negotiators retained several workforce development initiatives that Senate leaders had highlighted during debate, including $10 million for a scholarship program aimed at growing the state’s primary care physician workforce and $10 million for the Tomorrow’s Teachers scholarship and loan forgiveness initiative.
The agreement also includes $5 million for adult basic education and workforce readiness programs, $2.5 million for school-based mental health supports, and $1 million to help school districts implement bell-to-bell cell phone-free policies.
The cellphone funding comes as lawmakers in another conference committee continue to weigh proposals to limit student cellphone use during the school day and give districts financial support to adopt new restrictions.
The agreement also settles a significant tax policy dispute that emerged between the branches after President Donald Trump’s 2025 tax law altered portions of the federal tax code to which Massachusetts automatically conforms.
Healey administration officials have warned that, without legislative action, the changes could reduce state tax collections by roughly $442 million in the current fiscal year and more than $250 million annually in subsequent years. Both branches embraced the governor’s proposal to delay implementation of the federal provisions expected to have the largest impact on state revenues, but they diverged on how to handle a separate ballot question that would lower the Massachusetts income tax rate from 5% to 4%.
The final compromise adopts the House position. The report phases in conformity with the federal tax changes but also includes provisions that would pause those changes if voters approve the income tax reduction ballot question in November.
House leaders argued the mechanism would help offset the significant revenue losses they project from the proposed tax cut, while Senate leaders had initially favored the governor’s original delay plan without linking it to the ballot measure.
Ahead of negotiations, Rodrigues said senators wanted to “solely focus on the facts at hand” by delaying implementation of the federal changes, while House leaders argued they also needed to prepare for the possibility that voters could approve a major reduction in state income tax revenues this fall.
“I keep saying this. Negotiation is a term where things are being, offers are being sent back and forth. I don’t think that’s necessarily the case here,” Michlewitz told reporters Tuesday when asked how and if negotiations on the income tax ballot proposal are happening.
Outside the surtax-funded investments, the bill includes $207.7 million in supplemental appropriations from the General Fund to address budget pressures that emerged after enactment of the fiscal 2026 spending plan.
Among the largest allocations are $54.4 million for sheriffs’ offices, $41.7 million for Department of Transitional Assistance staffing, $31 million for Department of Correction operations, $20 million for home heating assistance and $12.3 million for public defense court costs.
The package also contains $5.5 million for mental health initiatives, $1 million for immigrant legal services, $3.5 million for providers offering transgender care, $1 million for transition-age youth services and $1 million for a cannabis public awareness campaign.
The bill also creates a new sales tax exemption for building materials used in approved affordable, moderate-income and middle-income housing developments, a measure lawmakers said is intended to encourage multifamily housing production amid higher construction costs and economic uncertainty.
Other tax provisions establish a credit for sustainable aviation fuel, create a tax credit of up to $5,000 for farmers who donate food to food banks and pantries, and make technical changes to ensure paid family and medical leave medical benefits are not subject to state income tax.
Conferees launched formal negotiations in April, with House Ways and Means Chairman Aaron Michlewitz saying he was “looking forward to trying to get this done in a quick fashion” as lawmakers simultaneously worked through the annual budget process.
If both branches approve the compromise this week, the measure would then move to Gov. Maura Healey’s desk for her consideration.
Download the FREE Boston 25 News app for breaking news alerts.
Follow Boston 25 News on Facebook and Twitter. | Watch Boston 25 News NOW