NC Lawmakers Unveil $34.4 Billion Budget Deal

North Carolina legislative leaders on Tuesday released a long-awaited $34.4 billion state budget agreement that would provide broad pay raises for teachers and state employees, continue personal income tax reductions, invest more than $700 million in Hurricane Helene recovery efforts, and expand funding for public safety, education, and healthcare programs.

The spending plan, negotiated by Republican leaders in the House and Senate after months of closed-door discussions, is expected to receive votes in both chambers on Wednesday and Thursday. If approved, the budget will head to Gov. Josh Stein, who can sign the measure, veto it, or allow it to become law without his signature.

The agreement arrives just hours before the start of the new fiscal year on July 1 and after lawmakers failed to adopt a comprehensive budget during the 2025 long session, leaving state government operating under spending levels approved in 2023.

House Speaker Destin Hall, R-Caldwell, said the budget focuses on affordability, public safety, and government accountability.

"This budget invests in the people of North Carolina," Hall said in a statement. "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."

Senate President Pro Tempore Phil Berger, R-Rockingham, described the proposal as fiscally responsible while continuing tax reductions and investing in education and public safety.

"Our state's fiscal health remains in great shape," Berger said. "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."

Teacher, State Employee and Law Enforcement Raises

The budget includes an average 8% pay raise for teachers over the two-year budget cycle, with legislative leaders saying the proposal would raise North Carolina's starting teacher pay to the highest level in the South. Teachers would also receive bonuses ranging from $500 to $1,000.

State employees would receive a 3% raise, along with one-time bonuses between $1,000 and $2,000. Some high-demand positions would receive additional compensation increases.

Law enforcement agencies would see some of the largest pay increases in the budget. According to legislative leaders, average raises include 20.3% for State Bureau of Investigation and Alcohol Law Enforcement officers, 17.7% for State Highway Patrol troopers, 15.4% for correctional officers, 10.1% for probation and parole officers, and 13% for other state law enforcement personnel, including State Capitol Police.

Local law enforcement officers statewide would receive a one-time bonus of $1,750.

Tax Cuts Continue

The agreement maintains North Carolina's planned corporate income tax reductions while further lowering personal income tax rates over the next decade.

Under the proposal, the state's personal income tax rate would drop to 3.49% from 2027 through 2029, decrease to 3.24% from 2030 through 2032, and fall to 2.99% from 2033 through 2034. Additional revenue triggers could eventually reduce the rate to 2.49%.

The budget also includes several business tax changes. Lawmakers would eliminate a sales tax reimbursement provision affecting large hospitals and their affiliates and repeal the state's sales tax exemption for electricity used by data centers.

In addition, the proposal raises the tax rate on sports wagering operators from 18% to 23% and revises how sports betting revenue is distributed, including additional support for athletic departments within the University of North Carolina system.

More Than $700 Million for Hurricane Helene Recovery

The budget dedicates more than $700 million in nonrecurring funding during the 2026-27 fiscal year to Hurricane Helene recovery efforts in western North Carolina.

The funding would support the state and local share of federal disaster programs, local government infrastructure projects, volunteer fire departments, housing recovery efforts, repairs to private roads and bridges, temporary relocation assistance, and other rebuilding projects.

The legislation also transfers previously appropriated disaster funds into the state's Helene Fund to streamline recovery spending.

Education and School Choice

The proposal maintains current funding commitments for the state's Opportunity Scholarship program, preserving North Carolina's existing school choice expansion.

Lawmakers estimate approximately $35.8 million in savings related to scholarship awards that were below the state's average per-pupil allocation during the 2024-25 and 2025-26 school years. Those savings would be redirected to support public schools.

Medicaid Oversight and Healthcare Changes

The budget includes more than $1 billion for Medicaid and establishes a $333 million Medicaid Contingency Reserve.

Lawmakers also propose increased oversight of several rapidly expanding Medicaid-funded services, including peer support services, community support services, and behavioral health programs.

The agreement places new requirements on applied behavior analysis, or ABA therapy, used to treat autism spectrum disorders. Under the proposal, assessments would have to be conducted in person, treatment plans would require approval from prepaid health plans or the Department of Health and Human Services, and cases involving more than 16 hours of therapy per week would face more frequent reviews.

The budget also releases $208.5 million in federal pandemic relief savings to support construction of a new children's hospital and behavioral health facility in the Triangle region.

Additionally, lawmakers included a repeal of certificate-of-need requirements for inpatient rehabilitation facilities and services, a long-debated issue among healthcare providers and free-market advocates.

Infrastructure and Capital Projects

The spending plan includes funding for PFAS and emerging contaminant cleanup efforts, economic development projects, election administration, and government oversight.

Among the largest investments is $133.9 million tied to the JetZero aviation manufacturing project at Piedmont Triad International Airport.

The proposal also funds additional positions at the State Board of Elections, provides $15 million to modernize the state's election management system, and increases funding for the Office of the State Auditor.

One high-profile proposal omitted from the final budget was a funding framework for a potential Major League Baseball stadium in Raleigh, which had become a major point of negotiation during budget discussions.

Building State Reserves

The budget would add more than $450 million to North Carolina's Rainy Day Fund, increasing the reserve to more than $4.2 billion.

Lawmakers also included a $1.325 billion Stabilization and Inflation Reserve, a $333 million Medicaid Contingency Reserve, and a $350 million State Emergency Response and Disaster Relief Fund.

Next Steps

Legislative leaders reached the budget agreement Sunday night after weeks of uncertainty over whether lawmakers could finalize a spending plan before the start of the fiscal year.

As recently as last week, Berger acknowledged the timeline remained uncertain.

"Next week's getting closer and closer, and we're still not there," Berger told reporters. "I don't want to say anything because I don't know anything specifically as to when we'll get things done. It's entirely possible that we could. It's entirely possible that we may not."

Because the budget was negotiated directly between House and Senate leaders, lawmakers are expected to consider the final package through an expedited process rather than through the traditional conference committee procedure.

If approved by both chambers this week, the budget will move to Stein's desk, where the governor will decide whether to sign the measure, allow it to become law without his signature, or veto it and potentially trigger an override vote in the Republican-controlled General Assembly.