The leadership of Massachusetts is not worried.
The commonwealth passed a $63.4 billion budget without too much difficulty. Its surtax on high earners is the envy of other progressive states, pulling in billions of dollars annually. Its economy is growing slower than the national average, but not enough to threaten revenue.
"The headwinds we're facing, others are facing as well," said Deputy Treasurer Sue Perez, and rating agencies "feel like we have enough tools to be able to react to different things."
These are strong tailwinds for the commonwealth's upcoming bond deals. There are challenges — namely, a potential state revenue cap — on the horizon, but high levels of wealth and education and a strong surplus allow Massachusetts to approach them from a position of strength.
Massachusetts plans to sell a competitive general obligation bond deal on Sept. 9.
The $879 million deal will have five tranches, according to Deputy Treasurer Sue Perez, with one being taxable and one a refunding. Otherwise, it resembles the commonwealth's standard GO deals.
The tax-exempt new-money component — $200 million of Series 2026E, $180 million of Series 2026F, and $300 million of Series 2026G — will mature from 2028 to 2053, according to an investor presentation from the commonwealth.
The taxable series, $70 million of Series 2026H, will mature from 2028 to 2034.
The deal's refunding series, $128.365 million of Series 2026C, has maturities in 2031 and from 2036 to 2038. It will refund Series 2016A and validated loan 2016 Series J, according to Perez.
Massachusetts GOs are rated Aa1 by Moody's Ratings, AA-plus by S&P Global Ratings and AA-plus by Fitch Ratings.
In its rating report, Fitch highlighted the commonwealth's "considerable economic resources, effective management of economic and revenue cyclicality, and strong budget controls."
"The commonwealth's long-term liability burden remains well above the U.S. state median but represents a moderate burden on resources," Fitch's analysts added.
Massachusetts has $30.8 billion of GO bonds outstanding, according to
The commonwealth plans to issue through two other credits in October.
It will issue federal grant anticipation notes, and issue debt through a dedicated transportation revenue bond credit, which is new, Perez said. The final deal on tap for the calendar year is $750 million of tax-exempt GOs.
In November, Massachusetts voters will be faced with a ballot question asking them to expand the commonwealth's revenue cap.
You could be forgiven for not realizing that Massachusetts already has a revenue cap.
The current cap, known as Chapter 62F, mandates that Massachusetts offer taxpayers rebates if revenue exceeds a cap. The cap is calculated as the prior year's cap, plus the average income growth rate of the past three years. It has only resulted in two rebates since its passage in 1986.
The amendment would change the calculation. Instead of using the prior year's cap — the maximum the commonwealth could have earned — it uses the prior year's total revenue.
If the commonwealth experiences a recession, revenue could plunge, then return to normal the following year. The ballot initiative would prevent the commonwealth from collecting that revenue, S&P analyst Ladunni Okolo said.
The ballot initiative would also include revenue from the commonwealth's Fair Share tax, a surtax on incomes over $1 million, under the cap. Those revenues have been excluded from the cap since the surtax's creation, and they are particularly volatile.
The most recent rebate caused by 62F was in 2023. People took advantage of pass-through tax credits, Perez said, and many taxpayers got their payout in a different year than they paid in, which tripped the rebate.
The state paid roughly
The Massachusetts Opportunity Alliance said that if the proposed change had been in place since the cap's creation, it would have triggered rebates 24 four times in the prior four decades.
"This amounts to nearly $19 billion in taxes that should have been given back to taxpayers," the Massachusetts Opportunity Alliance wrote in a
If the cap is activated "every two or three years," it would cause a number of problems for Massachusetts lawmakers, said Phineas Baxandall director of research and policy analysis at the Massachusetts Budget and Policy Center, a progressive think tank.
Constant rebates would cause "some chaos in the budgeting process, inhibiting the legislature's ability to plan, and really making long-term investment more difficult," Baxandall said.
A poll from the University of Massachusetts found that 69% of voters
The current 62F cap doesn't affect the Treasury's issuing strategy, Perez said, because rebates are so rare. It's too early to say whether the proposed changes would affect the commonwealth's borrowing, she said.
The whole policy is "confusing," Perez said. "It's hard to package it up as to what voting yes means and what voting no means. You wonder what people go by when they vote for it."
There are many unanswered questions about the proposal's implications, Perez said, so the Treasury is waiting to see whether the ballot initiative is passed and how it will be implemented.
The state Senate put an amendment in an economic development bill that would curtail the cap's ability to cause rebates. The bill is being conferenced in the House/Assembly, Baxandall said.
In order to trigger a rebate under the amendment, the revenue would have to exceed seven and a half percent of personal income.
"It would create a kind of reality test for 62F rebates to say, 'Okay, is there really a particularly high degree of taxation of revenue collection at this moment, or is this extraneous factors?" Baxandall said.
Okolo doesn't expect the cap to cause problems for Massachusetts' borrowing. The commonwealth already has limits on the amount of bonds it can issue, and it has "managed those thresholds pretty well," she said.
S&P views Massachusetts as having "some revenue limitation" because of the current cap, Okolo said, which is factored into its rating. Massachusetts is not the only state with restrictions of this kind.
Connecticut's spending caps, known as "
Shortfalls in the Connecticut budget between 2017 and 2019 have held back the state's budget ever since, and created a "ratcheting effect," according to Patrick Murphy, who authored a
Colorado has seen a different problem, Okolo said: lawmakers have sometimes turned to one-time spending measures or reserve spending to deal with the revenue cap.
S&P analyst Geoff Buswick said the move to restrict revenues fits into a nationwide pattern of approaches to affordability. Some states have sought to
In Colorado, voters may be faced with
In the past, when low on revenue, the commonwealth has made municipalities share the pain, according to Buswick. This is a concern for Baxandall.
"When there's a deep recession, local aid tends to be one of the first things cut, or the deepest cut," he said, pointing to 2001 and the Great Recession as examples.
The biggest credit pressure for the commonwealth's municipalities is lagging economic and population growth, according to Okolo, especially for municipalities that can collect sales taxes.
A high cost of living is also a challenge in Massachusetts, Okolo said; municipalities feel they have to address affordability to keep residents from moving away.
Local governments' existing bondholders, Baxandall said, can take comfort in Massachusetts' state intercept program. It ensures that, no matter the budget catastrophe, debt service will be paid first.
Pensions are a challenge for both the commonwealth and local governments, Buswick said.
Massachusetts has "one of the heaviest debt burdens in the nation," Nuveen said. Its combined funded ratio for pensions stood at 64.7% in 2025, and its unfunded liability was $40.5 billion — greater than total GO debt outstanding, according to Nuveen.
The commonwealth is required to fully fund pensions by 2038, Buswick said, which means cost pressures will increase substantially.
