On Thursday, June 26, the full New Hampshire Legislature convened to vote on the Committee of Conference’s proposal for House Bills 1 and 2, the two components of the State Budget. They also approved compromise language attached to a separate bill, House Bill 282, that would modify provisions related to certain police and firefighter benefits and school funding that are in House Bill 2, effectively ensuring that different versions of those policies take effect. On Friday, June 27, the Governor signed all three bills into law.

These votes by both the New Hampshire House of Representatives and Senate were the final legislative step in a months-long process, which began with State agencies submitting budget requests last fall followed by the Governor’s proposed budget introduced earlier this year. The House and Senate then each crafted and passed their own versions of the budget, later forming a Committee of Conference to resolve differences in their proposals and create final versions of House Bills 1 and 2. While some policy adjustments were made during these final votes, both legislative bodies ultimately passed the new State Budget agreement, which is set to take effect on July 1.

This blog post highlights the changes made to the final State Budget by the Legislature on Thursday following last week’s Committee of Conference agreement. That agreement followed proposals, and NHFPI analyses, from the Governor, House, and Senate. In the weeks ahead, NHFPI will publish a full breakdown comparing the final new budget to the previous State Budget. Want it delivered straight to your inbox? Subscribe to NHFPI’s email list here.

Relative to the Committee of Conference’s budget proposal, the amendments to the State Budget that will be made with the enactment of House Bill 282 add funding for certain police and firefighter personnel who had their benefits changed by a 2011 law. The change shifts retirement benefit levels for these individuals from the Committee of Conference’s position closer to the Senate’s position and the Governor’s original proposal from February.

Relative to the Committee of Conference, total funding for these benefits would increase from $30 million during the upcoming biennium to $42 million, drawing from dollars that would have been devoted to the Rainy Day Fund under the Committee of Conference proposal.

The changes in House Bill 282 will also alter proposed benefit changes in the Committee of Conference report. These changes include:

• capping total annual compensation at no more than 100 percent of the retiree’s final average compensation or $145,000 annually, whichever is lower, a potential increase from the prior proposal of a $125,000 cap
• expanding the scope of potential beneficiaries from those who were not vested into the retirement system by January 2012 to those who were not vested before January 2013, which is closer to the Governor’s proposed cutoff of September 2013
• redefining the limits on the compensation that can be counted toward retirement benefit calculations to the highest-compensated five years in an employee’s career
• keeping the service length requirement for certain benefits at 20 years, rather than extending the required service length to 22 years as proposed by the Legislature’s version of House Bill 2
• removing a proposal to reduce the limit on number of creditable years for benefit calculations from 42.5 years down to 40 years
• restoring, from the Senate’s budget proposal, a schedule of annuity adjustments that had been removed in the Committee of Conference
• removing proposed definitions of “vested” and “average final compensation”

Benefit changes would be implemented starting in January 2026, six months into the biennium. After State Fiscal Year 2026 is completed with $14.5 million allocated in funding, appropriations would increase to $27.5 million in State Fiscal Year 2027.

The changes in House Bill 282 preserve a section of House Bill 2 that limited benefits associated with retiring from service, rejoining, and retiring again to only the benefits from the first round of retirement. House Bill 282 supersedes a section of House Bill 2 that would have raised the cap on critical injury benefits for first responders from $500,000 to $750,000, and instead would increase the cap to $1,000,000.

Language from the Committee of Conference final budget report regarding Fiscal Capacity Disparity Aid to school districts was moved to an amendment in House Bill 282. This aid would be allocated to municipalities that have relatively low taxable property values per student and would total up to $1,250 per student. The policy language creates a sliding scale that reduces this aid as property values increase, with aid disappearing for municipalities with more than $1.6 million in taxable property value per pupil. This aid will be in addition to the existing Extraordinary Needs Grants in the education funding formula, which is based on both relative property values and the number of students eligible for free and reduced-price meals.

These two forms of targeted aid would be capped for the largest communities in the state. In municipalities with more than 5,000 resident students, the total amount of Extraordinary Needs Grants and Fiscal Capacity Disparity Aid combined would be limited to $3,750 per student. Currently, only the cities of Nashua and Manchester exceed 5,000 resident students, and only Manchester would have been impacted during the upcoming budget cycle, with a reduction of approximately $10.2 million in State Fiscal Year 2027. The amendment, however, delays the enactment of the adequacy grant calculation revision until State Fiscal Year 2028, which, if the change remains in State law, will give the Manchester School District and Manchester taxpayers more time to adjust to the funding reduction.

In a floor amendment to House Bill 115, the Senate passed a continuing resolution to fund services beyond June 30 in the event the State Budget did not pass the full Legislature. The resolution would have funded services at 90 percent of the current State Fiscal Year 2025 Adjusted Authorized amounts for six months, requiring a State Budget agreement to be reached before January 1, 2026. After the Senate passed the State Budget, the House initially voted down House Bill 1, tabled House Bill 2, and approved the continuing resolution. Both House Bills 1 and 2 were later brought back unchanged for reconsideration, and the House narrowly passed the State Budget bills during a second set of votes.

After passing both the House and Senate, the State Budget bills went to the Governor and received her signatures. Now that it is law, this budget will fund most State operations and services from July 1, 2025 until June 30, 2027.

Although the operating budget provides the framework for state spending, changes to appropriations can be made by the Joint Legislative Fiscal Committee, which meets regularly during the two-year period to address any needed funding adjustments. State lawmakers can also pass separate bills during the 2026 Legislative session that make changes to appropriations either within or outside of the State Budget. State officials and lawmakers will begin discussions around the next budget cycle as early as next summer in anticipation of the State Fiscal Years 2028-2029 biennium.