State Fiscal Team Prepping For "What Comes Next"

"We will be prepared to understand where the impact is -- certainly not to speak for the secretary here -- but sort of what are short-term mitigations that may be possible, or management techniques, and then what would sort of go to another level for kind of policy considerations and changes," McNamara told his advisory board Tuesday. He compared the information-gathering effort to what the state frequently does when D.C. heads towards a federal government shutdown.

Federal aid is a major source of revenue for states. State records show Massachusetts expects to receive more than $15 billion in federal reimbursements in fiscal year 2025, a year when the state budget carries a $57.78 billion bottom line. Federal grants represented 36.4% of total revenue for state governments in fiscal year 2022, according to Pew Charitable Trusts.

Trump's administration has said it wants to control government spending and align it with the president's political and ideological aims. His White House has pledged that it will use executive powers to "continue to end the egregious waste of federal funding."

"There's a lot of uncertainty right now. We're doing our best to get as much information as we can so we can be prepared for if and when decisions may impact the flow of federal funds to the commonwealth. We're making sure we understand where federal employees are, what the payroll looks like. And I think there's sort of this view of, what does a temporary pause mean? And what does temporary mean? Is it three weeks? Four weeks? Is it two months? Versus what may happen with the federal grants on a longer term basis, meaning they make decisions to either allocate them differently or to cut them entirely somehow," Gorzkowicz said.

The secretary added, "What we're trying to do is work with our agencies, work with the comptroller's office, to create a baseline for how we can then be a bit more nimble and responsive to what might be happening as we learn more from the federal agencies. And frankly, they've been a little bit ambiguous in their direction ... and I think it's been a bit frustrating, but we're doing our best to try to interpret that, understand it, and stay on top of it."

The memo from Gorzkowicz and McNamara asked commissioners, general counsels and chief financial officers to review the federal directive and get in touch with federal grant administrators for more clarity, if possible. It also asked departments to identify "potential departmental actions to protect Commonwealth residents and resources in the event federal payments are stopped, including the use of other funding sources currently available to them."

"Please describe the impact of utilizing such funds on other state-operated programs and services. Agencies should not assume that additional state funding will be available," the memo said. "Therefore, please identify any state funding that would be required for the state to take on responsibility for critical federal programs and indicate whether and when legislative authorization would be required."

Though the memo that would have initiated the federal grants freeze was rescinded and a judge has since issued a restraining order blocking the freeze, McNamara said he and Gorzkowicz "agreed that it wasn't time to pause that work, because it's very likely to be necessary."

"I think everyone is in the same sort of wait-and-see [mode]. You know, what comes next? There are many different possibilities. It's unclear, but one that I would share, that's certainly a possibility, is that there will be another memorandum, or perhaps a series of them, but they will be more specific and targeted," McNamara said. "But no matter what comes next, it's up to us in the commonwealth to prepare for it."

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02/04/2025