(The Center Square) – Senators in North Carolina on Thursday afternoon took the final steps to sending a one-year late state budget to the governor.
Passage on final reading was 35-10 in the upper chamber. Earlier in the day, passage was 88-21 in the House of Representatives. No Republicans in either chamber opposed the $34.4 billion spending plan for fiscal year 2027 at final passage.
First-term Democratic Gov. Josh Stein has been “reviewing the budget closely” since it emerged earlier in the week from conference reports. He’ll have 10 days to sign into law, veto, or allow to become law without his signature; day of presentation is Day 0 in that process.
The two-year budget is due to be enacted on July 1 of the Legislature's long session that happens in odd-numbered years. When that didn't happen last summer, the same spending plan for fiscal year 2025 remained in place for fiscal year 2026, though lawmakers did make some appropriations – often called mini-budgets – in the interim.
“Our state’s fiscal health remains in great shape,” said Sen. Phil Berger, R-Rockingham, the president pro tempore of the chamber, in earlier comments. “This is a responsible spending plan that takes aim at bureaucratic bloat without endangering core services. This keeps our promise to reduce the tax burden for all North Carolinians, while expanding access to incredible educational opportunities, keeping our communities safe, and solidifying North Carolina’s status as the best state in the nation.”
The $34.4 billion outlay for fiscal year 2027 will expand Hurricane Helene relief with $700 million and add $450 million to the Savings Reserve in the General Fund – often called the rainy day fund – to lift its balance to more than $4.2 billion.
The state’s rapidly growing population of 11.2 million will get billions of dollars in tax cuts; have 8% average pay raises for teachers amid increases across the board for all state employees; and send more than $1 billion into funding the state’s Medicaid program.
Sales tax exemptions on electricity for data centers are repealed.
There is new taxation for vape shops and polymarkets. Also new, and first in the nation, is forgoing civil legal aid by using interest on attorneys’ trust accounts to fund criminal defense.
“This is not the budget that House Democrats would have written, and as with many of the bills we pass in this General Assembly, it’s a mixed bag," said Rep. Robert Reives, minority party leader in the lower chamber. "But this much is true: North Carolina has gone more than 1,000 days without a comprehensive state budget. We were the only state in the nation without one for the entire fiscal year."
For context, the two-year budget Democratic former Gov. Roy Cooper allowed to become law without his signature in fall of 2023 covered spending through June 30, 2025. Thursday was Day 367 late.
"As grocery prices climbed and health care became less affordable, this General Assembly failed to act," Reives said. "Leaving working people out to dry for more than a year while a small group negotiated a budget is not the way to govern one of the largest and fastest growing states in the nation. North Carolinians deserve responsive leadership that shows up to work and actually fights for everyone, not just the well-connected and wealthy.
“Any support given for this budget was because we cannot afford further delay and many of the priorities from the House budget I supported last year were maintained.”
Budget writers have appropriated $12.5 billion to the Department of Public Instruction. In higher education spending, there is $5.03 billion to the University of North Carolina System and $1.86 billion to the North Carolina Community College System.
Education – K-12 and higher ed combined – is appropriated $19.43 billion from the General Fund.
The individual income tax system once with 2010 rates of 6%, 7% and 7.75%, with potential for a surtax on higher earners, is guaranteed to be down to 2.99% by 2032 with revenue triggers to eventually drop it to 2.49%.
“This budget invests in the people of North Carolina," said House Speaker Destin Hall, R-Caldwell. "It delivers historic raises, keeps taxes low, strengthens public safety, and protects taxpayer dollars by making targeted investments to crack down on waste, fraud, and abuse. Every dollar reflects our commitment to build a North Carolina that is a better and more affordable place to live, work and raise a family.”
Budget writers released $208.5 million for the North Carolina Children’s Hospital from ARPA Temporary Savings Reserve.
The budget will fulfill a commitment to JetZero at Piedmont Triad International Airport, sending $133.9 million for improvements at the project site.
