The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.
Despite a challenging state revenue picture, uncertainty over federal funding, and costly legislative priorities (pension changes, school voucher expansion), the $15.9 billion, two-year FY 2026-27 state budget adopted in June maintains most of the hard-won gains in state aid that municipalities achieved in recent years.
Here is a high-level summary of items in the budget impacting municipalities:
Meals and rooms tax: Various proposals to reduce 30% municipal share of meals and rooms tax were unsuccessful. Revenue from this tax has grown steadily and is projected to increase by $7.5 million in FY 2026 and by another $8 million in FY 2027.
Retirement system: New Hampshire Retirement System pension benefits for first responders in the system but not vested prior to January 1, 2012, were increased from current levels. The budget included a promise of at least $262 million in state funding through 2034, although only the $42 million to be paid in FY 26-27 is guaranteed. The budget also contained language that the state “shall pay the normal contribution and accrued liability contributions attributable to this act,” which is intended to prevent downshifting the cost of these changes to municipalities. If the state were to renege on its commitment, local retirement costs would skyrocket.
Revenue sharing: Although it has no current fiscal impact, the budget includes a repeal of municipal revenue sharing under RSA 31-A. Although this provision has been suspended since 2010, keeping the statute alive would have made it easier for a future legislature to revisit it.
SAG Grants: The budget included $2.5 million per year in funding for State Aid Grants (SAG), which provide 20% to 30% of eligible principal and interest payments for completed municipal infrastructure projects. The funding is still well below the $15 million per year included in the last budget.
Granite advantage: The state will introduce premiums for these health programs on a flat, per-family member basis. NHMA has concerns that new, out-of-pocket premiums for participants will have an adverse trickle-down impact on local welfare budgets.
Vehicle inspections: The budget eliminated motor vehicle safety inspections in 2026 and authorizes the state to work with the federal government regarding emissions testing. Because 12 percent of the motor vehicle fee revenue is distributed to municipalities, the Department of Transportation estimates this change would decrease municipal revenue by about $350,000 per year.
Housing Appeals Board (HAB): The budget includes funding for a modified version of the HAB, which the House wanted to eliminate. Under the new model, the HAB will share resources with the Board of Tax and Land Appeals (BTLA).
Right to know ombudsman: The ombudsman was converted to per-diem position attached to a newly created office of state and public sector labor relations, which led to the resignation of the incumbent ombudsman. The position, when filled, will continue to independently exercise the statutory jurisdiction conferred upon it.
Other: Despite multiple attempts, no funding was added to the budget for the Housing Champions program, and state funding for regional planning commissions was eliminated.
Overall, municipalities fared well in this budget when compared with other tight budget cycles over the past 20 years. This outcome is due in no small part to the advocacy of our members, who spoke out loudly and clearly when asked. Thank you again for your input, questions, and support throughout the legislative session.