RALEIGH — The North Carolina Senate failed to approve the House’s version of the budget last week, resulting in the appointment of a conference committee.
The House passed its version of the budget on May 22 after a flurry of more than 40 amendments by a vote of 86-20. On June 3, the Senate failed to concur, with 37 voting not to approve the House version and nine Democrats voting in favor.
Both the House and Senate versions propose spending approximately the same amount, around $65.9 billion. Gov. Josh Stein’s budget proposal called for spending $68 billion over the biennium.
Lawmakers assigned to the committee will hammer out differences in the bill, which will likely focus on reconciling tax policies related to revenue triggers and lowering personal tax rates.
The state’s current personal income tax rate is scheduled to drop to 3.99% in 2026. Under previous budgets, the tax rates would be automatically reduced if North Carolina’s total General Fund revenue in a specified fiscal year exceeds the “trigger amount” for that year.
The Senate’s version removes the previously established revenue trigger rates, which would allow them to fall to 2.99% by 2028 with a long-term goal of reaching a 1.99% personal income tax rate.
The House’s proposal keeps the 3.99% triggers in place for upcoming fiscal years through 2027.
Tax policy discussions are expected to address a recent May revision of $34.52 billion in revenue, a decrease of $180 million (a 0.5% drop) from the February estimate. The revised forecast is still above expectations for personal income tax collections. State revenue projections show North Carolina is expected to hit $620 million over the next three years.
Differences in pay raises for state employees and teachers are also likely to be points of discussion.
The House budget seeks to raise starting teacher pay to $50,000 by the end of the biennium and restores master’s pay for teachers, as well as giving an 8.7% pay raise over the two years.
Under the Senate’s plan, teachers would see an average increase of 3.3% across the biennium and a $3,000 bonus over the two years. The pay increase should bump the average teacher’s pay to $62,417.
Stein’s plan offers a 10.6% teacher pay raise over the biennium. In a prior statement, Stein said, “The House’s proposed budget isn’t perfect” but that he was “pleased” with the House’s teacher pay raise proposals.
For state employees, which includes the community college and UNC System, the Senate proposal includes a 1.25% raise along with a $3,000 bonus split into two payments over the biennium. The House offers a 2.5% across-the-board raise.
Additionally, state retirees would get a 1% cost-of-living bonus in the first year and a 2% bonus in the second year under the Senate’s budget.
The House would offer a 2.5% across-the-board raise, providing the same cost-of-living increase and bonus amount for retirees as the Senate.
The governor wants to see state employees get a 2% raise and a one-time $1,000 bonus, as well as a 2% cost-of-living bonus for retirees.
How quickly budget reconciliations are completed remains to be seen; however, House Speaker Destin Hall (R-Granite Falls) has said he believes the budget could be finalized soon.
“I’m hopeful, and frankly, optimistic, that we’ll be able to get a budget done this summer,” Hall said during the May 21 press conference unveiling the House proposal. “And it’s possible still that we’ll get it done in June. I know that’s my goal at the end of the day.”
