Massachusetts is 2025’s Most Improved State for Business boosted by financial independence from D.C.

The state is less dependent than most across the U

On federal funding, a new metric that helped imve its Economy ranking as President Trump oversees big cuts across the country

But Massachusetts still has serious competitive issues

Costs are high, and federal grant cuts threaten to curtail re and innovation

Paul Revere statue in Boston Freedom Trail, a national landmark and major tourist attraction in Boston, Massachusetts

The Bay State is America's most imved state in this year's rankings, rising 18 spots to No. 20 overall, after staging the biggest drop — falling 23 places — last year

Massachusetts was able to make that U-turn thanks to its relative independence from Washington

With federal budget cuts looming, this year's CNBC study considered their potential impact on each state's economy

In addition, Massachusetts' federal workforce of 25,000 people makes up only half a percent of its total workforce, according to data from the Congressional Re Service

That makes the state's federal workforce the eighth-smallest in the country relative to the total. "We tackle hard blems in Massachusetts

Wicked hard stuff sometimes," Gov

Maura Healey, a Democrat, said in her State of the Commonwealth speech in January

She pointed to $1. 5 billion in state funding for child care to make up for federal cuts after the pandemic. "We were the only state to fully replace federal support that went away," she said

Massachusetts still lags the nation in access to affordable child care, according to Child Care Aware of America, but it imved its performance this year, helping the state to an eighth-place finish in the Quality of Life category

Trump, innovation at riskBut independence only goes so far, even in Massachusetts

The state is the third-largest recipient of federal health and science re grants, after New York and California

The Trump administration has taken aim at those grants nationwide, but nowhere more directly than in Massachusetts

The school has sued to block the cuts, citing the First Amendment, and the university's own efforts to curtail antisemitism on campus

But Christopher Anderson, president of the Massachusetts High nology Council — a organization that has been advocating for the state's industry since 1977 — said Harvard is not the only institution threatened by the federal cuts. "We do have a large number of re institutions that are critically important to generating and contributing to our innovation economy here," he told CNBC. "Everyone's feeling the pinch," he added

As of mid-June, the university said it had already received $29 million less in federal re awards than at the same time a year earlier

But that money is a drop in the bucket, with the university normally receiving $180 million a year in federal re support, including $44 million in so-called "indirect" funding for facilities and administration that the administration has sought to sharply reduce

Watch now3:0303:03North Carolina becomes America's Top State for Squawk BoxBudget pressures, high costs"Unfortunately, the commonwealth is really not in a position to play the role of savior as perhaps it could if it had been managing its state budget more appriately," Anderson said

Anderson said that 15 years of what he called "unsustainable" growth in state spending have hobbled Massachusetts at the worst possible time. "At exactly the time when the federal government is cutting back, we find ourselves unable to invest quickly or effectively in the key economic development jects that are driven by powerful innovations artificial intelligence," he said

Anderson also pointed to the Mass Leads Act, signed into law by Gov

Healey last year, which the High nology Council supported

While the law sets a goal of $4 billion for economic development, Anderson said only $251 million of that is currently funded due to state borrowing caps. "It doesn't allow Massachusetts to keep up," he said

While Massachusetts imved its overall ranking in the CNBC study, it still has some serious issues beyond its budget pressures

It is the second-most-expensive state to do in, behind Hawaii

Wage costs are the highest in the nation; utility costs are the third highest

And the state ranks No. 42 for Friendliness, with a heavy regulatory hand

Anderson said the long-term solution to the state's competitive issues might be to take that independent streak a bit further, encouraging re institutions to work more closely with the private sector rather than relying on state support. "This could be the beginning of a new era of collaboration between private sector companies and these institutions," he said

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