Massachusetts is experiencing a notable resurgence in its economic rankings, climbing 18 spots to No. 20 in CNBC’s annual America’s Top States for Business study for 2025. This improvement comes after a significant drop of 23 places the previous year. Much of this turnaround can be attributed to the state’s growing independence from federal funding, particularly as looming federal budget cuts are under consideration.
According to the Center on Budget and Policy Priorities, federal funds accounted for 30% of Massachusetts government spending last fiscal year, positioning the state as the 14th least dependent on Washington. With a federal workforce of about 25,000, Massachusetts has one of the smallest federal workforces relative to its total employment. Governor Maura Healey emphasized the state’s ability to tackle complex challenges, citing the allocation of $1.5 billion for child care funding in response to reductions in federal support post-pandemic. Despite still struggling with access to affordable child care, the state’s measures have led to an eighth-place finish in the Quality of Life category this year.
However, the state faces ongoing challenges as it navigates its economic strategy amidst federal cutbacks. The Trump administration’s efforts to freeze $3.2 billion in grants to Harvard University and terminate additional federal contracts could adversely affect Massachusetts’ significant health and scientific research institutions. As highlighted by Christopher Anderson, president of the Massachusetts High Technology Council, the threat of research funding cuts poses risks to the state’s innovation economy, which heavily relies on academic and research institutions.
Budgetary concerns remain pressing, as Anderson noted that years of “unsustainable” state spending have hindered Massachusetts’ capacity to invest in critical economic development projects. The Mass Leads Act, which aims to channel substantial funds into life sciences, climate technology, and artificial intelligence, faces significant funding challenges due to state borrowing limits. Moreover, despite the improved ranking, Massachusetts struggles with high business costs, ranking second only to Hawaii in expense and facing the highest wage costs in the nation.
Moving forward, experts suggest that fostering stronger collaborations between private sector companies and research institutions may be essential for Massachusetts to thrive amid these budgetary and federal challenges. The state is poised for a potential new era of innovation-driven partnerships that could help bolster its economy.
Overall, while there are significant hurdles to overcome, Massachusetts’ commitment to tackling these issues presents opportunities for innovation and growth, fostering hope for a stronger economic landscape in the future.