Gov. Charlie Baker plans to boost state spending next fiscal year by 3.5 percent, making targeted investments while holding the line on many government accounts despite back-to-back years of major jobs gains that are pushing up state tax collections by an estimated 4.3 percent.

With a strong focus on fiscal restraint, Baker's budget reflects the ongoing reality that fixed costs required for MassHealth, pensions, debt service and other expenses continue to consume large chunks of new revenue, limiting the areas where policy leaders can spend new dollars without turning to taxes or reserves.

The governor's $39.55 billion spending plan for fiscal 2017, which he intends to file Wednesday, further reduces the volume of one-time revenues in the annual budget to $250 million, down from $1.2 billion in the fiscal 2015 budget that Baker inherited from his predecessor, Gov. Deval Patrick.

The Baker administration plans to roll over between $400 million and $500 million in MassHealth payments, but is not counting those among its one-time revenue sources. And government accounts not targeted for discretionary spending increases or facing rising fixed costs will see an average increase in appropriations of 0.6 percent.

To address the risk of a credit rating downgrade, Baker plans to drive $206 million into the state rainy day fund and possibly another $76 million depending on whether the Massachusetts Gaming Commission issues a casino license in its southeastern Massachusetts region.

But in the face of a $635 million structural gap, the administration plans to sweep $150 million in excess capital gains taxes that would otherwise go to reserves into the general fund to cover expenses.

The MBTA will see about a $15 million increase in funding from dedicated sales tax revenues, but the administration said it would commit the same amount of discretionary subsidies - about $187 million - to the agency that it did in last year's budget. The governor's spending plan would deliver a total of $1.187 billion to the MBTA.

Administration officials said the spending plan is predicated on reducing enrollment growth in the massive MassHealth insurance program to its traditional rate of 3 percent, and limiting the growth in spending to 5 percent. The spending plan does not anticipate rate decreases to MassHealth providers or any reduction in benefits, but will increase rates by 1.5 percent for behavioral health providers and introduce protocols such as prior authorization to address an increase in long-term care services, including home health care.

If Baker and the Legislature use next year's budget to reduce one-time revenue use and to address MassHealth spending growth and rainy day fund concerns, it's possible that the scope of spending increases could expand in 2017 and 2018, when Baker is up for re-election.

Facing the $635 million gap between projected resources and spending demands, Lepore said the governor's budget relies on a mix of MassHealth savings, capital gains taxes, surplus land sales, such as the delayed sale of the Sullivan Courthouse in Cambridge, and administrative savings to balance spending.

After the Legislature last year rejected Baker's proposed changes to state employee health insurance plans, the administration will once again call for all employees to contribute 25 percent toward their health insurance premiums. Currently employees hired before 2003 contribute 20 percent to their coverage, but Lepore said the governor believes it's a matter of fairness that all employees be treated the same.

The state would realize an estimated $33 million in savings from plan design changes at the Group Insurance Commission, which would help offset the $75 million in additional spending required at the agency.

Lepore said that after reducing headcounts by more than 2,000 employees through an early retirement program last year, the governor's budget does not assume any new layoffs, and will, in fact, put money into targeting hiring.

The Department of Children and Families would receive a $30 million increase to hire 280 new employees, including social workers, and the Department of Transitional Assistance will be staffing up to meet the job training goals of a welfare reform law approved a few years back with new work requirements for beneficiaries.

Substance abuse treatments programs would receive a $40 million increase, in part to open 45 new treatment beds at Taunton State Hospital, and education aid, including higher Chapter 70 spending, would grow by $100 million overall, including an additional $20 million to fully fund the first two years of reimbursements to public schools under a revised charter school funding formula.

Since fiscal 2012, the average balance of state stabilization funds as a percent of operating budgets has steadily climbed, but in Massachusetts since fiscal 2013 the opposite has occurred. Lepore said the proposed deposit into reserves would halt that trend, raising the fund's balance to $1.54 billion, or 3.7 percent of the operating budget.