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.
“In consideration of the removal of certain classes of property from taxation, which would otherwise have the effect of reducing
the tax base of cities and towns of the state, it is hereby declared to be the policy of the state to return a certain portion of the
general revenues of the state to the cities and towns for their unrestricted use…”
– Chapter 5, Laws of 1970
If you aren’t a regular reader of the obituary page, you may have missed the passing of a longtime financial supporter of local government who had been in rough shape for years.
RSA 31-A: Return of Revenue to Cities and Towns, more commonly known as revenue sharing, ceased to exist in New Hampshire law on July 1, 2025, when House Bill 2, the budget trailer bill signed by the governor, took effect.
In 1969, reform in how the state taxed businesses led to the implementation of the Business Profits Tax (BPT), which eliminated many antiquated taxes more reflective of the agricultural economy of the past. These taxes, however, were assessed and collected by municipalities and were part of the property tax base for municipalities, school districts, and counties.
Revenue sharing was intended to help replace lost local income. When RSA 31-A was enacted in 1970, it included a provision to increase revenue sharing by 10% annually. In testimony, then New Hampshire Attorney General Warren Rudman addressed concerns that future legislators may choose not to honor this commitment. “It seems quite doubtful to me that once this bill is passed that any legislator would go back on its pledge to return revenue to cities and towns that originally belonged to those cities and towns,” he stated, without irony. “And I might also add, in passing, that I could hardly see a Governor signing a bill which would deprive cities and towns of the revenue which they once had.”
Despite assurances, the 10% provision was short-lived and was reduced to 5% the following year, with further reductions in subsequent years.
This is not to say RSA 31-A wasn’t a lifeline for municipalities and school districts for decades. In 1999, total revenue sharing amounted to $47 million (the equivalent of $91 million in 2025 dollars).
In 2000, revenue sharing allocated to school districts was eliminated, with the money diverted to fund the state’s adequate education obligations. This left $25 million annually for general revenue sharing with municipalities and counties, a figure that remained constant through fiscal year 2009. However, since 2010, initially motivated by the impacts of the Great Recession, revenue sharing was suspended in every state budget, resulting in an annual loss of $25 million for municipalities and counties—a total of $400 million from fiscal years 2010 to 2025. It’s worth emphasizing again that this wasn’t a handout from the state—this was revenue cities and once had before their property tax base was reduced by law.
The story of a 55-year-old statute that never fully lived up to its promise is a sobering reminder that when we think of “State Law,” we must always remember that it is an impermanent thing, subject to the whims of our elected legislators.
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Some previous NHMA content on the history of revenue sharing was used in this article.