RALEIGH — The North Carolina Senate unveiled and passed its $65.9 billion budget proposal last week. The bill now goes to the House for consideration, and negotiations are likely.
The 2025 Appropriations Act allocates $32.6 billion in the first year and $33.3 billion in the second year. Gov. Josh Stein’s budget proposal has roughly $68 billion in spending over the biennium.
Senate Leader Phil Berger (R-Eden) led the press conference rolling out the Senate’s budget proposal on April 14. Berger said the budget would likely not be finalized until June.
After a flurry of amendments, the Senate passed the measure 31-16 on April 16. Four Democrats voted in favor: Sens. Dan Blue (Wake), Paul Lowe (Forsyth), Gladys Robinson (Guildford) and Joyce Waddell (Mecklenburg).
“North Carolina’s economy is stronger than ever before,” Berger said in a press release following the bill’s passage. “We have an incredible opportunity to build on the last 14 years of successes with this budget by providing additional tax relief, supporting teachers and state employees, and continuing our hurricane recovery efforts. And we can do all of that while taking on unnecessary bureaucratic bloat.”
Key spending priorities include Hurricane Helene recovery, replenishing the Rainy Day Fund to $4.75 billion, pay increases for state employees and teachers, income tax cuts, $638.5 million for the state’s first freestanding children’s hospital and health care reform.
A key provision repeals Certificate of Need (CON) laws, with a section dedicated to repealing CON laws for North Carolina’s Children’s Health, Inc.
In North Carolina, CON laws are a regulatory mechanism requiring health care providers to get permission from the N.C. Department of Health and Human Services before offering new services and acquiring equipment.
Two bills, Senate Bill 370 and a companion bill, House Bill 455, were filed this session to repeal the state’s CON laws.
Another key provision adds Berger’s DAVE Act, giving the state auditor $6 million to set up a division examining state agency spending and vacant positions.
Salaries
Teachers will receive an average 2.3% pay increase for fiscal year 2025-26 with an average increase of 3.3% across the biennium. Teachers would also see a $3,000 bonus over the two years. The average teacher pay should rise to $62,417 under the proposal.
A recurring appropriation of $30 million is included for the state-funded teacher supplement. Per Berger’s press release, the revised budget amount for that program is now $230 million with a maximum teacher supplement of $5,000. Teachers serving in advanced roles in districts participating in the Advanced Teaching Roles Program can receive up to $10,000.
Stein’s plan gives a 10.6% teacher pay raise over the two years, costing more than $1.047 billion. Stein said the increase would raise the average salary to $53,000 by 2027, making the state’s teachers the highest paid in the Southeast.
Most state employees would see a 1.25% raise along with a $3,000 bonus split into two payments over the biennium.
Under the governor’s plan, state employees would see a 2% raise, and retirees would get a 2% cost-of-living bonus. There’s also a one-time $1,000 bonus for most state employees.
Additional raises in the Senate budget were included for correctional officers (8.9%), probation officers (6.9%) and law enforcement (6.5%) on top of the previously mentioned $3,000 bonus.
Education
Restrictions on wireless devices in classrooms are included, and school districts are directed to develop a corresponding policy. Exceptions include use authorized by a teacher or staff, use for documented medical issues or a device needed to support a student accommodation plan.
The Science of Reading and the use of literacy diagnostics for kindergarten through third grade are expanded to grades four and five.
For each year from 2025-27, the UNC Board of Governors must cut at least $33.66 million from centers and institutes at UNC schools that are underperforming, duplicate other programs, fail to attract federal grants, or conflict with laws or university policies.
The Senate also addressed complaints about NCInnovation, a nonprofit set up to accelerate university research’s path to the marketplace. Under the Senate’s proposal, NCInnovation’s $500 million endowment funding would be taken back and redistributed.
Helene funding
The legislature has invested $1.4 billion toward Helene recovery so far. The Senate proposal adds $700 million to the Hurricane Helene Reserve.
Of that, $685.6 million would be allocated in federal Clean Water and Drinking Water State Revolving Funds for the repair and replacement of drinking water and wastewater infrastructure.
Another $8 million would go to the UNC System for Appalachian State, UNC Asheville, Western Carolina and the North Carolina Arboretum to improve their emergency response ability.
The Community College System would receive $2.5 million to assist with enrollment losses after Hurricane Helene. Another $5 million would go to the Division of Community Revitalization at the Department of Commerce, while $10 million would be allocated to the Governor’s Recovery Office for Western North Carolina (GROW NC).
Taxes and finance
The proposal adjusts the tax reduction and rate trigger schedules. Under current law, personal income tax rates are 3.99% and will drop to 3.49% in 2027 and drop to 2.99% in 2028. Tax rates would be automatically reduced if North Carolina’s total General Fund revenue in a specified fiscal year exceeds the “trigger amount” listed in the proposal’s table. The triggers were adjusted with the goal of reaching a 1.99% personal income tax rate.
A tax increase for sports wagering operators doubles the current rate of 18% to 36%.
Other notable budget items include $1.5 billion in federal funds for rural broadband, $319 million added to the Economic Development Project reserve, $40 million allocated for business and tourism marketing, removal of the interim 70% carbon reduction goal, and an unemployment insurance benefits increase from $300 to $450 for claims filed on or after July 6, 2025.
