North Carolina sees slight surplus this year, $1B more next year

North Carolina Gov. Roy Cooper speaks with reporters after the Council of State meeting at the Department of Transportation headquarters in Raleigh, N.C., Tuesday, Aug. 1, 2023. Cooper said he's not convinced that details within a tax-cut agreement reached between Senate leader Phil Berger and House Speaker Tim Moore will protect the state from revenue shortfalls, (AP Photo/Gary D. Robertson)

RALEIGH — North Carolina’s government should collect higher revenues during this fiscal year and next than what is projected in the current two-year state budget, according to a new forecast released Wednesday.

Economists for the General Assembly and Gov. Roy Cooper’s state budget office now predict collections will exceed revenue budgeted for the year ending June 30 by $413 million, or a 1.2% increase. And state coffers will bring in $1 billion more in the fiscal year starting July 1 than what was anticipated, or a 3% increase.

“Today’s revenue forecast is a sign that North Carolina is on the right track,” said House Speaker Tim Moore (R-Kings Mountain) in a press statement on the one-time $1.4 billion surplus. “Our conservative approach to responsible spending has been effective in strengthening our economy and attracting business to our state. When those businesses bring thousands of jobs to NC and our economy is strong, all of North Carolina wins.”

The budget law enacted by the Republican-controlled General Assembly had planned for a slight decline in revenue from this fiscal year to the next, in part due to tax cuts.

A legislative staff economist’s email to lawmakers attributes the upgrade to stronger than anticipated individual income tax collections and modestly higher sales tax collections. The memo cites low unemployment, wage growth, additional consumer spending and rising prices.

The new forecast now expects $34.14 billion in state operating revenues this fiscal year and $34.37 billion next year. The legislative economist warned that April 15 income tax collections can be difficult to predict and that a revised forecast was possible after detailed numbers are received in early May.

Still, Senate Majority Leader Paul Newton of Cabarrus County said Wednesday the report “is a reaffirmation that the GOP is leading our state in the right direction, balancing all the needs of residents, of educators, of job creators, of people that want to move somewhere they can achieve more — they’re coming to North Carolina.”

The news gives legislators more wiggle room to address financial needs as the General Assembly returns starting next week for this year’s chief work session.

The legislature’s primary job during the “short” session in even-numbered years is to adjust the second year of the two-year budget. Lawmakers already are being asked to address an upcoming loss of federal funds for child care and to fund more scholarships for K-12 students to attend private schools.

Cooper, a Democrat barred by term limits from running again this year, will propose his own budget adjustments. The governor has cited clean energy and biotechnology job investments and national accolades as evidence that his policies are benefiting the economy.

Cooper allowed the current two-year budget to become law without his signature, turning away from all he disliked within it because the proposal finalized the Medicaid expansion he had sought for years. Some budget provisions speed up individual income tax cuts.

A.P. Dillon contributed to this report.