Following the Money

The Rockefeller Institute of Government publishes the standard accounting of what each state pays the federal government and what it receives. In federal fiscal year 2022, Massachusetts paid $144.7 billion and received $114.7 billion, a gap of $30.0 billion². That year anchors the county and district detail that follows, because it matches the Internal Revenue Service (IRS) county and ZIP code tax data used to place the taxes³.

Most of what Massachusetts sends is individual income tax. Of the $144.7 billion paid in 2022, $92.4 billion (64%) was individual income tax, $38.3 billion (26%) was payroll tax for Social Security, Medicare, and unemployment insurance, $11.7 billion (8%) was corporate income tax, and $2.3 billion (2%) was excise and other taxes^{2, 3}.

The gap moves with the economy, but the direction does not. In Rockefeller's preliminary estimate for 2023, Massachusetts paid $126.3 billion and received $119.5 billion. It got back 95 cents for every dollar it sent and ranked 49th of the 50 states⁷. Every other New England state received more than it paid⁷.

In 2022, when strong markets pushed federal tax receipts to a record, Massachusetts sent $30 billion more to Washington than it got back. In 2023, when receipts fell, it still ranked 49th. A state that sends more than it receives in good years and in lean ones is a capital exporter. Those dollars are earned here, sent to Washington, and spent somewhere else. Part One described what happened when Massachusetts lost the defense capital that built Route 128¹. These figures show the other side of that loss: the Commonwealth still generates the capital, but much of it leaves.

The statewide gap hides two very different economies. Federal taxes come mostly from Greater Boston, where incomes and payrolls are highest. Federal spending reaches every county, and in the western part of the state it is larger than what residents pay.

The same split holds by congressional district. The First District (MA-01), which covers western Massachusetts, is the only district that receives more than it pays, a net $4,174 per resident. The Fourth, Fifth, and Eighth districts (MA-04, MA-05, and MA-08) pay the most, at a net $14,204, $13,395 and $11,567 per resident³.

About $9.8 billion of federal spending in 2022, mostly awards with no recorded place of performance, could not be placed in a single district. That is why the nine districts together show a larger outflow than the state's $30.0 billion^{2, 3}.

What flows into the receiving counties is mostly support for households rather than investment. In Hampden County, federal contracts came to $66.1 million in 2025, out of $6.15 billion in federal awards placed in the county. Most of the rest was Medicaid and direct payments to individuals³. That money sustains families, and it should. It does not build companies, and it does not compound.

What compounds, and what does not

Federal money compounds only when it buys something that keeps producing. A research grant that becomes a patent and then a company compounds. So does a contract that trains engineers who go on to start firms, which is how defense spending built Route 128¹, and an infrastructure grant that builds a road or a transmission line that serves for decades. A benefit check sustains a household and circulates through local businesses, and that matters. But once it is spent, it does not grow.

Of the $114.7 billion that came back to Massachusetts in 2022³:

• $59.7 billion went to people and their health care providers as Social Security, Medicare, unemployment insurance, and other benefits.
• $27.6 billion came as grants, most of it to state and local government for Medicaid, schools, transportation, and research.
• $18.4 billion came as federal contracts, much of it for research, defense, and technology work.
• $7.3 billion was paid to federal employees and military personnel working in the state.
• $1.6 billion came as federal loans, insurance, and other assistance.

Social Security is the largest single stream. It paid about $31.3 billion to 1.35 million Massachusetts beneficiaries in 2024, roughly one in five residents, estimated from December benefits⁴⁷. Compared with 2022 federal spending, that is more than a quarter of all federal money that reaches the state. On Cape Cod, benefits come to $8,433 per Barnstable County resident and more than half of the federal money that reaches the county; in Suffolk County they come to $2,505 per resident and 11%^{3, 47}. By district, the Ninth, which runs from the South Coast through Cape Cod and the Islands, has the most beneficiaries, 265 per 1,000 residents, and the Seventh, centered on Boston, has the fewest, 119⁴⁷. These checks are earned, and they matter. They sustain households; however, they are not built to compound.

By that test, the contracts and the research and infrastructure share of the grants can compound, and only where local capital is ready to back what they produce. The rest is support. The $30.0 billion that does not come back at all is capital that never gets the chance.

This is the shape of an economy whose capital is not coordinated. The wealth Greater Boston generates leaves through the federal system, and the communities that most need investment receive support instead.

Banks and credit unions are the oldest form of local capital. A dollar deposited in a community bank was meant to become a mortgage, a business loan, or a line of credit down the street. This section tests whether that still happens.

The first step is to separate local savings from money that is only booked here. Massachusetts banks reported $602.8 billion in deposits on June 30, 2025. Five Boston-area offices held $312.3 billion of that. They include State Street's custody bank at $207.8 billion and Bank of America's 100 Federal Street office at $54.9 billion, along with large Citizens and Santander offices⁸. Those balances belong to institutions and customers across the country. Set aside, they leave $290.5 billion in local bank deposits. Credit unions add another $45.6 billion in member shares, for $336.0 billion in local savings⁴.

Against that base, lenders made $69.8 billion in new local loans in 2025: mortgages, small business loans, and loans backed by the U.S. Small Business Administration (SBA). That is 21 cents of new lending for every dollar on deposit⁴.

The lowest ratios are in the same western counties that depend most on federal dollars^{3, 4}. Their residents save, but their savings are not being turned into local credit at the rate the rest of the state sees. Many mortgages are also sold to investors outside Massachusetts once they are made, so even the lending that does happen often leaves the state's balance sheets. Local savings are a pool of capital, and right now that pool drains away from the communities that hold it.

Small business lending

Small businesses are where new local capital usually goes first, and they get the smallest share of it. Of the $69.8 billion in new local lending in 2025, $5.8 billion went to small businesses: $5.0 billion in bank small business loans reported under the Community Reinvestment Act, $596 million across 2,038 SBA 7(a) loans and $187 million across 245 SBA 504 loans⁴. That is 8% of all new local lending, and 1.7 cents for every dollar on deposit in the state.

The pattern repeats by place. In Berkshire and Hampshire counties, small business lending came to 1.3 cents per dollar of local deposits. Middlesex County, home to more research and venture activity than anywhere else in the state, came in at 1.4 cents⁴. Mortgages account for most of the rest. Massachusetts lenders are financing the purchase of homes far more than the creation of businesses.

Compared with the nation

Massachusetts is home to about 2.1% of the U.S. population⁶. In 2025 it accounted for about 3.0% of the nation's new mortgage dollars: $64.3 billion of the $2.12 trillion reported under the Home Mortgage Disclosure Act (HMDA). It accounted for about 1.7% of bank small business lending: $5.0 billion of about $291 billion reported under the Community Reinvestment Act (CRA)^{4, 30}. Massachusetts lenders run ahead of the country on homes and behind it on businesses.

The comparison uses shares of national lending rather than lending per deposit dollar. National deposit totals include custody and online balances booked in a few financial centers, the same kind of balances this report sets aside for Massachusetts, so a national ratio would not be an appropriate comparison.

For every dollar a typical Massachusetts bank lends to businesses, it lends about $19 against property.

What local deposits fund instead

The answer is real estate. Most mortgages no longer depend on deposits at all: independent mortgage companies, which fund loans by selling them to investors rather than holding them, made 61.9% of U.S. mortgage dollars in 2025³⁰. What Massachusetts banks keep on their own books is concentrated in property. Regulators measure each kind of loan against a bank's capital, the cushion of its owners' money that absorbs losses, so a figure above 100% means the bank has lent more against that kind of asset than its entire capital. According to the Federal Deposit Insurance Corporation (FDIC), the median Massachusetts bank holds home mortgages equal to 314% of its capital, or $3.14 for every $1 of capital, and commercial real estate loans equal to 272%, or $2.72. Its loans to operating businesses for working capital and equipment, which regulators call commercial and industrial loans, come to 31%, or 31 cents³¹. For every dollar a typical Massachusetts bank lends to businesses, it lends about $19 against property.

Real estate lending is the core business of most community banks, because loans secured by property are easier to underwrite and price. Massachusetts leans further than most. Federal regulators call for closer supervision when a bank's commercial real estate loans reach 300% of its capital and have grown by half or more in three years⁴⁰, and the median Massachusetts bank sits at 272%. The Federal Reserve Bank of Boston reports that the median New England community bank holds investor-owned commercial real estate equal to 202% of its capital, against 129% for the median community bank nationally³¹. Business lending is slower and harder to underwrite, and it is the kind of credit a local economy most needs.

Deposits in Massachusetts are being lent; however, they are being lent mostly against buildings, and very little to the companies that create new jobs and new income.

No law sets a share of deposits that a Massachusetts lender must lend locally. The federal Community Reinvestment Act, and a Massachusetts version that also covers state-chartered credit unions and licensed mortgage lenders, rate each institution on how well it meets the credit needs of the communities it serves, including low- and moderate-income neighborhoods³⁹. The ratings are judgments of performance. How much each bank or credit union lends at home, and to whom, is its own decision.

Boston is one of the great capital management centers in the world. Most private securities offerings in the United States are reported to the Securities and Exchange Commission on Form D, which records who raised the money and where the issuer is based. In 2025, funds and financial vehicles based in Massachusetts reported raising $112.4 billion. Of that, $103.6 billion was raised in Suffolk County alone⁵.

Massachusetts operating companies, the businesses that hire people and build things here, reported raising $6.2 billion on Form D in the same year⁵. For every dollar raised by a Massachusetts company, Massachusetts-based funds raised about eighteen.

The comparison needs care. Funds raise money from investors everywhere and invest it everywhere, so the $112.4 billion is not Massachusetts money leaving the state. Form D also captures only part of venture funding; Part One reported that Massachusetts startups raised $16.7 billion in 2025¹. The point is about gravity. The expertise, the relationships, and the capital itself pass through Boston, and only a small share of it is directed back into the Commonwealth's own companies.

The Federal Reserve Bank of Boston sees the same drift. Massachusetts companies drew about 10% of U.S. venture capital dollars in the 2010s, 7.3% in 2024 and 5.2% in 2025. Over the same years they continued to account for about 6% of the number of venture rounds raised nationally⁹. Massachusetts companies are still raising rounds at about the same rate as before. Each round is bringing in less money relative to the rest of the country.

Outside Greater Boston, the private capital market barely reaches. Companies in MA-01 reported raising $9.0 million across three offerings in 2025. Hampden and Hampshire counties each reported about $9 million, and Berkshire County reported a single offering with no money raised⁵. These are the same places that lend the least of their own deposits and depend most on federal support.

Capital needs somewhere to go. New businesses are the first place local capital goes to work, and the rate at which a state forms them is the clearest measure of demand for that capital.

Massachusetts used to lead. From 2010 through 2019, it had the second-highest average quarterly net business formation rate in the country. From January 2020 through September 2024, it had the lowest of any state, while every other New England state finished above the national average of 0.60%¹⁸. In 2023, Massachusetts lost a net 70 firms to other states, its worst year on record since at least 1994¹⁸.

The pipeline has not recovered. Census Bureau data shows about 2,500 high-propensity business applications a month in Massachusetts in 2026, the filings most likely to become employers¹⁹. Fewer new companies means fewer places for local capital to go, and less capital means fewer new companies. That loop is the one this series is about.

The two problems have to be solved together. A capital source that waits for deal flow will find too little of it, and founders who cannot raise money here will form their companies somewhere else.

Part One argued that capital attracts talent, companies, and population¹. The migration data shows what happens when capital does not stay. Over the three years to July 2025, Massachusetts lost a net 4.1 residents per 1,000 each year to other states, ranking 45th of 51 states and the District of Columbia. South Carolina, the leader, gained 12.9 per 1,000⁶.

People go where companies are being built, and companies are built where capital is put to work.

The people leaving span every income level and age group. Internal Revenue Service migration data shows Massachusetts lost a net $3.9 billion in income to other states in 2022, and filers earning over $200,000 accounted for 56% of that loss¹⁰. Counted by household for 2022 to 2023, the state lost a net 16,464 households. About 87% of them earned under $200,000, and 51% were headed by people aged 26 to 45¹¹. Massachusetts is losing both the people with capital to invest and the young workforce that new companies hire.

Some read the outflow as a response to the state's 4% surtax on income above about $1.1 million, which took effect in 2023. Residents leaving Massachusetts that year took a net $4.2 billion in income with them⁶². The surtax itself keeps growing: it raised $2.99 billion in fiscal 2025 and $3.38 billion in fiscal 2026, against $2.4 billion budgeted⁶². MassBudget's reading of the same IRS data points to affordability, since most of the households leaving earn under $200,000¹¹. Whatever the mix of causes, people at every income level are leaving, and the capital that would give them reasons to stay is what this report measures.

Jobs tell the same story. Since mid-2022, Massachusetts employment has grown 0.6% against 3.8% nationally, leaving the state about 215,500 jobs short of where national growth would have put it⁹. People go where companies are being built, and companies are built where capital is put to work.

Wages

Massachusetts has the highest median household income of any state, $104,828 in 2024. Adjusted for inflation, that is 0.6% below 2019⁶⁰. The gains have gone to the top: households earning more than $215,000 in today's dollars have grown from about 4% of the state in 1973 to about 21%⁶¹. Workers with a bachelor's degree earn about $39 an hour. Workers with only a high school diploma earn about $23, roughly 30 cents more than in 1980 after inflation⁶¹. A starter home in Greater Boston takes $181,000 a year¹⁷, far above what the median household earns. Wages rise where new companies compete for workers. In the state with the lowest net business formation rate in the country¹⁸, that competition is thin, and the typical worker's pay has stalled.

Real estate is where most Massachusetts households hold their wealth and, as Section 3 showed, where most of the state's bank lending goes. It is moving in two directions at once.

The residential side shows the cost of a capital-poor economy to the people who live in it. A household needs $181,000 a year to afford a $600,000 home in one of the region's lower-priced towns, and only 17% of Greater Boston renters earn that much, down from 29% in 2021¹⁷. Renters in that position are often the 26-to-45-year-olds who head half of the households leaving the state¹¹.

The commercial side shows the cost to the public balance sheet. The property tax supplies 71.7% of Boston's operating revenue. The Boston Municipal Research Bureau reports that business property values fell for the second straight year in fiscal 2026, with commercial values down $2.39 billion²¹. As commercial values fall and residential values rise, the burden shifts to homeowners: the residential share of the levy rose from 41.7% in fiscal 2024 to 46% in fiscal 2026²¹. Researchers at the Boston Policy Institute and Tufts University's Center for State Policy Analysis project office values could fall 35% to 45% from 2024 levels by 2029, costing the city about $1.7 billion over five years²¹.

Sales confirm what the assessments show. Lenders and distressed owners are taking Boston-area office buildings back at a fraction of their former prices³²:

• One Lincoln Street, 1.1 million square feet, sold to its lenders for $400 million at a March 2025 foreclosure auction, less than half what its owner paid in 2006 and three years after a $1 billion refinancing.
• 100 Summer Street, 32 stories, went back to its owner at an October 2026 foreclosure auction for $260 million, about a third of the $806 million it paid in 2019.
• The Park Square Building in Back Bay went to its lender, an affiliate of Starwood Property Trust, on a $95 million winning bid in March 2026.
• Brickstone Square in Andover, about 1 million square feet, went to its lender, PCCP, at auction.

For patient capital, the repricing is also an opening. Buildings that short-term owners are forced to sell at a discount can be converted, re-leased, or held through the cycle by an owner with no deadline to exit.

Energy is the one bill every household and business pays every month, and most of what it pays leaves the state. Part One showed that Massachusetts pays some of the highest electricity prices in the country¹. Following the money shows who finances the energy system, who owns it, and where the returns go.

Prices. Electricity customers in Massachusetts paid an average of 26.42 cents per kilowatt-hour across all sectors in August 2026, against 14.87 cents nationally, according to the U.S. Energy Information Administration (EIA). In the contiguous United States, only California was higher²⁴. For all of 2024, the state's average was 23.94 cents, fifth highest in the country²⁴. Massachusetts households, businesses, and governments spent $31.1 billion on energy in 2024¹⁶. That is what end users paid for electricity, heating fuels, and transportation fuels: consumer and ratepayer spending, not investment. The state produces no oil, gas, or coal of its own, so most of the fuel portion of that spending goes to producers outside the state.

What it means for a monthly bill. The average Massachusetts household used 570 kilowatt-hours of electricity a month in 2024, a third less than the national average of 863, and still paid more: $167.20 a month against $142.26 nationally²⁴. A kilowatt-hour runs a typical microwave for about an hour. At the national average price, the same household would have paid about $94 a month. The difference, about $73 a month or $880 a year, comes to roughly $2.6 billion a year across the state's 2.9 million residential customers. Heating comes on top of that. About half of Massachusetts homes heat with natural gas, and the state estimated the average gas-heated home would spend $883 to heat through the winter of 2025 to 2026, and the average oil-heated home about $1,103⁴⁸.

The wires. The largest energy investment now under way in Massachusetts is in the distribution grid. The state's utilities filed grid plans in 2024 for their first five-year investment term, which runs from July 2024 to June 2030²⁵. Eversource's plan called for $4.5 billion in electric operations and $1 billion in clean energy enablement over five years, part of $12.1 billion over ten. National Grid's plan called for more than $2 billion over five years²⁵. Customers pay for that investment through their rates, and the returns go to the utilities' shareholders. One of the two largest, National Grid, is headquartered in the United Kingdom.

Generation: what has closed, what has been built, what is planned

Since 2012, Massachusetts has lost 4,586 megawatts (MW) of coal, nuclear, oil, and gas capacity, and its wind, solar, and battery capacity has grown from about 100 MW to about 6,100 MW⁴⁵. On paper, the state has more generating capacity than it did in 2012. In practice, the coal, oil, nuclear, and gas plants that run on demand in any weather have shrunk by 39%, and most of what replaced them is solar, which produces nothing on winter evenings when demand peaks, and batteries, which shift power by a few hours rather than make it. What comes next is almost all batteries: of the 732 MW under construction or planned in federal records through 2028, 674 MW are batteries. No new gas, nuclear, or wind plant is in the federal pipeline, and two proposed gas plants totaling 632 MW are listed as canceled or postponed⁴⁵.

Federal plant records show the full ledger. Since 2012, 5,645 MW of power plants have retired in Massachusetts: 1,916 MW of natural gas, most of it the Mystic station in 2024, 1,525 MW of oil, 1,489 MW of coal and Pilgrim's 674 MW of nuclear⁴⁵. Over the same years the state added 6,909 MW, but 3,915 MW of that is solar and 744 MW is batteries. The new plants that can run on demand are 1,351 MW of gas, including the Salem Harbor plant that opened in 2018^{38, 45}. The 800 MW Vineyard Wind 1 farm came online in 2026, and the two offshore wind projects the state has selected since, 1,878 MW in all, have not started construction^{28, 37}.

The solar figure needs a closer look, and the state's own unit lists show where it went. Massachusetts' three solar incentive programs, the original and second solar renewable energy certificate programs (SREC I and II) and SMART, list 133,966 systems totaling about 4,374 MW⁴⁶. Almost all of them are home systems: 129,065 systems of 25 kilowatts (kW) or less, about 1,020 MW in all. But most of the capacity is in 851 ground-mounted arrays of 1 MW or more, about 2,480 MW, or 57% of the total, most of them community and commercial solar farms connected to local distribution lines rather than to the regional grid⁴⁶. Those arrays sit mostly in Worcester, Plymouth, Bristol, and Hampden counties. Franklin and Berkshire counties have the most solar per resident; Suffolk County has the least⁴⁶. Counting systems outside those programs, the Solar Energy Industries Association puts the state's total at about 5,900 MW, 14th in the nation⁴¹.

Ratepayers paid for much of it. A typical home system costs about $32,000 before incentives, or roughly $2.90 a watt⁴². The certificate programs, SMART, and net metering credits are all funded through electric bills, and most of the solar in the state was built with one of them⁴³. The state's own study, published in October 2026, finds that SMART has cost ratepayers $7.7 billion and returned $11.5 billion in lower wholesale prices and avoided costs, and that solar built since 2018 saves the average household about $9 a year, with or without panels⁴³. Critics count it differently: net metering credits rooftop owners at the full retail price, which is more than the costs their power avoids, and households without solar make up the difference⁴³. Either way, $9 a year does not move a $2,000 annual electric bill.

The power does travel, but not far. Rooftop systems mostly serve the building they sit on, and only about 190,000 Massachusetts homes, 6.5% of residential customers, have net-metered solar²⁴. The solar farms feed local distribution lines, where their output is used nearby and shows up at the regional grid operator only as lower demand. In 2024, solar of all sizes produced about 6.2 million megawatt-hours, roughly 12.5% of the electricity Massachusetts customers bought, nearly all of it on sunny afternoons²⁴. Installations have also slowed: from a peak of 567 MW in 2017, new program solar fell to about 104 MW in 2025⁴⁶.

What is in the queue

ISO New England, the nonprofit that runs the region's grid and wholesale power markets, keeps a queue of projects asking to connect. In January 2026 it held 13,966 MW of proposed generation across the six New England states, about 46% batteries, 44% wind, and 10% solar³³. Federal plant records list no new gas or nuclear plant in development in Massachusetts⁴⁵.

The queue is also shrinking. By S&P Global's count, it peaked at about 42,000 MW in 2024 and has since fallen to just over 17,000 MW. Since 2020, 58,000 MW of projects have withdrawn or been terminated, nearly twice the roughly 30,000 MW of generating capacity installed across all of New England today³³. The withdrawals were led by 31,000 MW of batteries and 19,000 MW of mostly offshore wind³³. Among projects far enough along to hold interconnection agreements, three offshore wind farms totaling 2,295 MW and a group of batteries make up most of the capacity, and 76% of the region's committed battery capacity is in Massachusetts²⁷.

What it costs, and who was paying

The contracted wind and solar were priced on federal tax credits. The Inflation Reduction Act of 2022 offered wind, solar, and battery projects investment and production tax credits worth 30% or more of project cost, available into the 2030s. The federal budget law enacted on July 4, 2025, known as the One Big Beautiful Bill Act, ends those credits for wind and solar projects that did not begin construction by July 4, 2026 and are not in service by the end of 2027³⁴. Batteries and other technologies keep the full credit for projects that begin construction through 2033, phasing out after that³⁴. Analysts named New England Wind, the permitted project off Massachusetts, as one of two approved offshore wind farms most at risk³⁴.

The sums are large. Vineyard Wind 1 cost about $4 billion, and its developer puts New England Wind 1 at about $3 billion of direct investment³⁷. Massachusetts selected 2,678 MW of offshore wind across three projects in 2024, before one of them, Vineyard Wind 2, withdrew³⁷. The capital behind these projects comes from outside the state. Vineyard Wind 1 is owned by Avangrid, part of Spain's Iberdrola, and Copenhagen Infrastructure Partners of Denmark, and its $1.2 billion tax equity investment came from JPMorgan Chase, Bank of America, and Wells Fargo³⁷. In October 2026 the federal government asked a court to let it reconsider New England Wind's permit³⁷.

Batteries

Batteries are the one resource still being built in volume, and they face a different obstacle: local opposition. Large battery plants in Massachusetts now total 744 MW, led by the 250 MW Medway Grid project and the 150 MW Cranberry Point project, and another 675 MW is under construction or planned, including the 250 MW Energizar project in Suffolk County, the 200 MW Taft project in Worcester County, and the 168 MW Salt Cod project in Bristol County⁴⁵. Residents have fought proposals in Boston, Tewksbury, Agawam, Westfield, Wendell, Pittsfield, and Oakham, mostly over fire risk, and developers have canceled at least four large projects since 2024³⁵. Leominster's city council approved a one-year moratorium on new battery sites³⁵.

State law limits how far towns can go. Massachusetts zoning law bars unreasonable local regulation of solar and the storage that serves it, and the Attorney General's office has rejected town moratoriums, including Blandford's in March 2026³⁵. Since July 2026, battery projects can seek a single consolidated permit from the state Energy Facilities Siting Board³⁵. Bills pending in the Legislature would instead pause new lithium-ion storage projects for up to 18 months³⁵.

The gas pipeline

Natural gas fuels about half of New England's electricity, and pipeline supply is tight in winter^{26, 36}. The expansion closest to happening is modest. Enbridge's Reliable Affordable Resilient Enhancement project (RARE) would add about 75 million cubic feet a day to the Algonquin pipeline, which carries about 3.1 billion cubic feet a day, an increase of roughly 2.4%³⁶. State regulators approved Eversource's contract for the new supply in January 2026. In October 2026 Governor Healey asked the federal government to speed its review, saying the project would lower costs for 600,000 customers and save about $40 million a year³⁶. With its buyers contracted and the state asking for it, RARE is likely to be built. The sources reviewed do not report its cost.

The larger projects are less certain. Enbridge's Project Beacon could raise Algonquin's capacity by up to 10%, with service possibly starting in 2030, and Williams is seeking to revive the Constitution pipeline, which needs permits from New York³⁶. Neither has a firm path yet.

More pipeline capacity helps the mix at the margin. Gas on the pipelines is contracted first to heating customers, and power plants use what is left, so new supply mainly steadies heating costs and reduces reliance on imported liquefied natural gas (LNG) at the Everett terminal³⁶. It adds no generating capacity. And like the grid's other owners, the pipeline's owner is based outside the state.

The gap

Massachusetts already buys most of its electricity from outside the state. In 2024, power plants in Massachusetts generated 20.9 million megawatt-hours, enough for only 42% of the 49.4 million megawatt-hours its customers bought; the rest came over transmission lines from elsewhere in New England and beyond^{24, 45}. The grid operator forecasts New England's winter peak rising from 20,483 MW in 2026 to 26,411 MW by 2035, an increase of about 5,900 MW, as heating and transportation electrify²⁶. Massachusetts' own plants could supply 12,759 MW in September 2026, 1,447 MW less than in 2012, even with Vineyard Wind and the new batteries counted⁴⁵. SouthCoast Wind and New England Wind 1, together 1,878 MW for Massachusetts, are waiting on contracts and federal permits³⁷. The state's climate plan calls for 8,360 MW of solar by 2030, and it has about 4,300 MW³⁵. Modo Energy's reading of the queue finds about 4,400 MW of new renewable and storage capacity on track to be built across all of New England through 2029²⁷.

Massachusetts is paying premium prices to finance an energy system it largely does not own. The generation it needs next is waiting on capital, permits, and local consent, and the federal tax credits that financed the last round are ending for wind and solar. Energy assets earn long-term, regulated or contracted returns. Those are exactly the kind of durable cash flows that patient local capital can own, and keep at home.

The rest of the infrastructure backlog

Energy is one piece of a larger backlog. By its 2023 assessment, the MBTA needs about $24.5 billion to bring its system to a state of good repair, including $6.4 billion for facilities, $5.3 billion for tunnels and bridges, $5.1 billion for power distribution and $2.4 billion for trains and buses⁶³. Its capital plan for fiscal 2027 to 2031 is $10.3 billion⁶³. The state's water commission found a $21.4 billion gap in drinking water and wastewater funding over 20 years in 2012, with federal stormwater rules adding up to $18 billion more⁶⁴. The governor's 2025 transportation plan puts $8 billion over ten years into roads, bridges, and regional transit⁶⁵.

Private capital can carry the parts of this backlog that pay their own way: water and wastewater systems funded by rates, power systems and vehicles under long-term contracts, and housing and commercial development on land near transit stations. Tunnels, track, and most roads depend on public budgets and remain public responsibilities. The test is the one this report applies to federal dollars: an asset that keeps producing income can compound, and patient local capital can own it.

None of this is a story of scarcity. Massachusetts holds more of the raw material of a capital-driven economy than almost any state in the country.

Pension assets are not ranked here because the Census Bureau and the Public Employee Retirement Administration Commission (PERAC) report them on different dates. A Census-based ranking will be added in the next data update.

The research base turns federal and corporate dollars into ideas and companies every year. The public pension systems hold $146.8 billion on behalf of teachers, police, firefighters, and municipal workers across the state¹⁴. Many of the least-funded systems are in the communities this report has described. Springfield's system is 40.1% funded, Worcester Regional's 51.9%, New Bedford's 54.5% and Fall River's 55.7%¹⁴. These systems need durable, long-term returns, and the economies of their own cities need long-term investment. Today those two needs are met separately, if at all.

Where the pension money goes

Most public pension money in Massachusetts is managed in one place. The Pension Reserves Investment Trust (PRIT) Fund, overseen by the Pension Reserves Investment Management Board (PRIM), held $123.3 billion at the end of 2025⁴⁴. Besides the state's own systems, 37 local retirement systems are required to invest all of their assets in it, and 63 more invest some or all of theirs by choice⁴⁴. At June 30, 2025, the fund held 37.0% in public stocks, 22.5% in bonds, 15.5% in private equity funds, 10.6% in hedge funds and other portfolio completion strategies, 10.2% in real estate, 2.6% in timberland and 1.7% in cash⁴⁴.

The fund is run like most large pensions: diversified around the world, through outside managers. It uses dozens of public markets, real estate, and timberland managers, and more than 100 private equity managers across more than 400 partnerships⁴⁴. PRIM budgeted $504.3 million in investment management fees for fiscal 2025, which PRIM puts at 0.48% of the assets its managers oversee. Private equity accounted for 41% of those fees while holding about 15% of the assets, and its managers also keep a share of profits, known as carried interest, on top of their fees⁴⁴. The fund returned 9.62% after fees in fiscal 2025, behind its 10.93% benchmark, and 12.7% in fiscal 2026, behind its 14.8% benchmark, when it reached a record $129.5 billion. Its chief investment officer attributed nearly all of the 2026 shortfall to private equity, which returned 3.6% against an 11.1% benchmark^{44, 49}.

The fund's annual report does not break out how much it invests in Massachusetts companies or property⁴⁴. The teachers, police officers, and firefighters whose retirement savings these are own small slices of thousands of companies around the world, and very little of the economy in the cities where they work. A share of that capital invested in Massachusetts companies and assets, at the returns the fund needs, would tie public workers' retirement security to the success of the communities they serve.

Owning what they oppose

Some of the loudest critics of private equity in Massachusetts are the public workers whose pensions fund it. Nurses and teachers led the outcry over Steward Health Care, the hospital chain created when Cerberus Capital Management bought six Massachusetts hospitals in 2010 and that collapsed into bankruptcy in 2024⁵⁰. Answering that criticism, Cerberus said its returns had gone largely to investors, “including millions of teachers, firefighters, law enforcement personnel” and other pension funds, universities, and endowments⁵⁰. At the Massachusetts Teachers Association's 2025 annual meeting, a delegate proposed that the union commission an independent investigation “to trace our retirement savings” through PRIM to private equity managers⁵¹.

The same gap runs through artificial intelligence. Data centers face growing local opposition across the country, and PRIM began researching data center investments in 2026^{44, 52}. PRIM's own board described a market driven by a narrow set of AI companies, and public stocks, led by those companies, produced 73% of the fund's 12.7% return in fiscal 2026^{44, 49}. PRIM's chief investment officer also said the venture firms behind the largest AI companies have been reluctant to take public pension money, which left the fund with little or no exposure to them⁴⁹.

Public workers in Massachusetts own pieces of the companies they argue with, and almost none of the companies in their own towns. Investing part of their savings in Massachusetts companies and assets would let them see what their money builds, and hold it to account.

Endowments and insurers

Two other large pools sit beside the pensions. Harvard's endowment held $56.9 billion at June 30, 2025, with 41% of it in private equity, and MIT's held $27.4 billion⁵⁸. Both are permanent funds: MIT notes that state law requires it to keep each endowed gift as a permanent fund and preserve its purchasing power⁵⁸. That is the same long horizon a local investment institution needs. MassMutual, based in Springfield, held $298.5 billion in invested assets at the end of 2025, more than half of it in bonds, and Boston's Liberty Mutual reported $178.2 billion in total assets⁵⁹. Each of these institutions invests nationally and globally, as its mandate requires. A Massachusetts institution earning market returns gives each of them a way to put part of that capital to work in the state that built them.

Residents themselves received $139.5 billion in dividends, interest, and rent in 2024, a fifth of all personal income in the state¹⁵. Per resident, Massachusetts ranked fifth in the nation in 2025²⁹. Massachusetts households own a great deal of capital. Very little of it is organized to build anything at home. A local institution can give households a simple way in: a share of a permanent portfolio anchored in Massachusetts, with a low minimum, invested alongside the pension systems, banks, and foundations. Vermont tried a version of this in 1984, when Ben & Jerry's sold stock only to Vermont residents at a $126 minimum and one in 100 Vermont families became owners⁵³.

Read together, the eight findings describe one problem. Massachusetts generates capital, manages capital, and saves capital at a scale few places match. It lacks a way to direct that capital into its own economy over the long term. Federal taxes leave through Washington. Local savings drain away from the communities that hold them. Fund capital raised in Boston is invested across the world. Pension systems that need durable returns sit beside cities that need durable investment. Energy bills pay returns to owners outside the state. Each flow is managed by a different institution with a different mandate, and no one is responsible for the whole.

Massachusetts has funds with clocks, programs with budgets, and committees with reports. What it needs is a balance sheet with a mandate.

What the state already has

Massachusetts already runs public investment programs, and they do good work at small scale. MassVentures, the state's venture capital agency, has invested $117 million in 189 Massachusetts companies since 1978 without annual appropriations, and made about $12 million in investments in fiscal 2025⁵⁴. Its START program has granted more than $5.7 million to 85 companies that won federal research awards⁵⁴. The 2024 Mass Leads Act authorized $500 million over ten years for the Massachusetts Life Sciences Center and $400 million over ten years for the Massachusetts Clean Energy Center⁵⁷. MassDevelopment, the state's development finance agency, financed or managed 409 projects tied to $4.65 billion of investment in fiscal 2025, and in February 2025 it absorbed the Massachusetts Growth Capital Corporation, the state's small business lender⁵⁶.

Measured against the flows in this report, these programs are small. The Mass Leads Act authorizations for life sciences and clean energy average $90 million a year, and the four state agencies that lend to businesses made 47 loans totaling $30.9 million in fiscal 2024^{55, 57}. Each program is built to fill a gap one grant, loan, or bond at a time, under its own mandate and budget. Owning companies and assets permanently, raising private capital alongside public money, and answering for the whole picture this report describes is a different job, and it is still unassigned.

Massachusetts has funds with clocks, programs with budgets, and committees with reports. What it needs is a balance sheet with a mandate: a permanent, privately led investment institution, headquartered and governed in Massachusetts, that invests wherever the returns are strongest and commits a defined share of its capital at home. It earns its returns nationally and compounds them here.

The evidence in this report points to what such an institution would have to do.

1. Hold capital permanently. Companies and infrastructure take decades to build. An institution that never has to return its capital on a fund's schedule can invest on the timeline the work requires.
2. Invest nationally, anchor at home. The institution earns competitive returns by investing across the country and, where the opportunity is strong, around the world. A floor of about a third of its invested capital stays in Massachusetts, and its headquarters, team, and board stay here. Because the floor is a share of the whole portfolio, every gain the national portfolio earns raises the amount invested at home, and the returns from both flow back to the Massachusetts partners who own it. Capital that leaves the state is the problem only when its returns and decisions leave with it. Here the owners, the governance, and the gains stay in Massachusetts, wherever the investments sit.
3. Build companies and own durable assets together. Backing the next generation of Massachusetts companies is the purpose. Owning cash-flowing businesses and infrastructure, including energy, is how the institution pays its own way while it waits for those companies to mature.
4. Partner with the capital already here. Pension systems need long-term yield. Community banks and credit unions need strong local borrowers. Families and fund managers in Boston need a reason to invest at home. One institution can give each of them a way in.
5. Bring public dollars into private projects. Massachusetts sent $30.0 billion more to Washington than it received in federal fiscal year 2022². An institution that works fluently with federal programs, state agencies, and municipalities can recapture part of that by pairing public funding with private projects that are already moving.
6. Spread the Massachusetts share across the whole state. The communities that receive the most federal support and the least private capital are where patient investment can change the most.
7. Measure what it moves. The ledgers in this report can track, year by year, whether capital is staying home. The institution should be judged against them in public.

How much capital it takes

The institution needs enough capital to matter and a pace its partners can sustain. A practical anchor is 1% of the $146.8 billion held by the state's public pension systems, about $1.5 billion, committed over ten years¹⁴. The other pools in this report could match it with smaller shares of what they hold^{15, 58, 59}:

Each commitment is an investment on market terms, approved by the partner's own trustees. Partners commit in stages and the institution calls the money as it invests, the way pension funds already fund private equity and real estate. A first close of $250 million to $500 million lets the institution make its first investments and build a record, and later closes follow that record. At full pace the institution invests about $257 million a year across its whole portfolio. A Massachusetts floor of about a third puts at least $85 million a year to work in the state, on top of the $121 million the state's own programs commit each year^{55, 57}. Because the institution holds its capital permanently, the returns on early investments are reinvested alongside new commitments, and the capital it manages grows faster than the commitments themselves.

What could go wrong

An institution like this carries risks, and outlining them is part of the design.

• Returns. A portfolio held entirely in one state would concentrate risk in that state's economy. Investing nationally with a Massachusetts floor spreads that risk. Pension trustees have a duty to earn what their members are owed, so the institution has to compete on returns from its first investment, and its partners should judge it that way.
• Politics. Public money invites pressure to back favored projects and places. A privately led board, independent investment decisions, and published results are the protections, written into the charter from the start.
• Deal flow. Capital needs companies to back. Section 5 showed fewer companies being started here, so the institution has to build its pipeline through universities, research labs, and existing businesses as well as fund it.
• Patience. Permanent capital earns its advantage over decades. The early years will show modest results, and the institution needs backers who signed up for that horizon.
• Crowding out. Strong local deals already attract capital. At home, the institution adds the most where private capital thins out: early-stage companies outside Greater Boston, long-lived infrastructure, and established businesses whose owners are ready to sell.

Massachusetts built exactly this kind of institution once. In 1946, a group of Boston leaders created a privately led investment company to turn the region's research into companies, and it built the economy of Route 128¹. The conditions that called for it then are back. The capital came first, and everything else followed. Massachusetts already has the capital. It needs the institution that earns returns wherever they are strongest and puts them to work at home.