Massachusetts is America’s Most Improved State for Enterprise in 2025

For 400 years, the spirit of independence has served the folks of Massachusetts effectively. In 2025, it helped the state obtain a turnaround of kinds in CNBC’s annual America’s Top States for Business examine.

The Bay State is America’s most improved state on this 12 months’s rankings, rising 18 spots to No. 20 overall, after staging the most important drop — falling 23 locations — final 12 months. Massachusetts was in a position to make that U-turn due to its relative independence from Washington. With federal finances cuts looming, this 12 months’s CNBC study thought-about their potential influence on every state’s economic system.

Economic system is a very powerful class in 2025, and Massachusetts improved its rating within the class to No. 15, from No. 40 final 12 months.

In accordance with the Center on Budget and Policy Priorities, federal funds comprised 30% of Massachusetts authorities spending final fiscal 12 months. That made Massachusetts the 14th least dependent state on Washington (Wyoming was the least dependent at 19%; Louisiana was probably the most at 50%). As well as, Massachusetts’ federal workforce of about 25,000 folks makes up solely about half a p.c of its complete workforce, based on knowledge from the Congressional Research Service. That makes the state’s federal workforce the eighth-smallest within the nation relative to the whole.

“We sort out onerous issues in Massachusetts. Arduous stuff. Depraved onerous stuff generally,” Gov. Maura Healey, a Democrat, stated in her State of the Commonwealth speech in January.

She pointed to $1.5 billion in state funding for little one care to make up for federal cuts after the pandemic.

“We had been the one state to totally change federal assist that went away,” she stated.

Massachusetts nonetheless lags the nation in entry to reasonably priced little one care, based on Child Care Aware of America, however it improved its efficiency this 12 months, serving to the state to an eighth-place end within the High quality of Life class.

However independence solely goes thus far, even in Massachusetts. The state is the third-largest recipient of federal well being and science analysis grants, after New York and California. The Trump administration has taken intention at these grants nationwide, however nowhere extra straight than in Massachusetts.

Since April, the Trump administration has moved to freeze $3.2 billion in grants to Harvard College and to terminate one other $100 million in federal contracts with the 389-year-old establishment, accusing the college of liberal bias and of harboring antisemitism. The school has sued to dam the cuts, citing the First Modification, and the college’s personal efforts to curtail antisemitism on campus.

However Christopher Anderson, president of the Massachusetts Excessive Expertise Council — a enterprise group that has been advocating for the state’s tech business since 1977 — stated Harvard is just not the one establishment threatened by the federal cuts.

“We do have a lot of analysis establishments which might be critically essential to producing and contributing to our innovation economic system right here,” he instructed CNBC. “Everybody’s feeling the pinch,” he added.

In Could, the College of Massachusetts directed division heads to develop finances situations that embody 3% and 5% cuts. As of mid-June, the college stated it had already acquired $29 million much less in federal analysis awards than on the similar time a 12 months earlier.

To blunt a few of the influence of the cuts, the college established an identical fund that it says has dedicated greater than $700,000 towards salaries and analysis funding that might in any other case be reduce. However that cash is a drop within the bucket, with the college usually receiving $180 million a 12 months in federal analysis assist, together with $44 million in so-called “oblique” funding for services and administration that the administration has sought to sharply cut back.

“Sadly, the commonwealth is basically not able to play the function of savior as maybe it might if it had been managing its state finances extra appropriately,” Anderson stated.

Anderson stated that 15 years of what he known as “unsustainable” development in state spending have hobbled Massachusetts on the worst potential time.

“At precisely the time when the federal authorities is slicing again, we discover ourselves unable to take a position shortly or successfully in the important thing financial improvement initiatives which might be pushed by highly effective improvements like synthetic intelligence,” he stated.

Anderson additionally pointed to the Mass Leads Act, signed into law by Gov. Healey final 12 months, which the Excessive Expertise Council supported. The four-year financial improvement invoice purports to incorporate lots of of tens of millions of {dollars} in funding for all times science, local weather expertise, and synthetic intelligence.

Whereas the legislation units a purpose of $4 billion for financial improvement, Anderson stated solely $251 million of that’s at present funded attributable to state borrowing caps.

“It would not permit Massachusetts to maintain up,” he stated.

An evaluation by the National Center for Science and Engineering Statistics discovered Massachusetts roughly in the midst of the pack in the case of state assist for analysis and improvement, rating twenty second in 2023.

Whereas Massachusetts improved its general rating within the CNBC examine, it nonetheless has some critical points past its finances pressures.

It’s the second-most-expensive state to do enterprise in, behind Hawaii. Wage prices are the very best within the nation; utility prices are the third highest. And the state ranks No. 42 for Enterprise Friendliness, with a heavy regulatory hand.

Anderson stated the long-term answer to the state’s aggressive points is likely to be to take that unbiased streak a bit additional, encouraging analysis establishments to work extra carefully with the personal sector quite than counting on state assist.

“This might be the start of a brand new period of collaboration between personal sector firms and these establishments,” he stated.

Be a part of the dialog. Did not see your state talked about? You’ll be able to see the place it ranked general, and in all 10 classes of competitiveness, in the full rankings of the 2025 America’s High States for Enterprise.