RALEIGH — The nonpartisan Fiscal Research Division released its March 2026 Consensus Revenue Forecast last week, showing North Carolina expects significantly stronger tax collections than projected last May.
For the current fiscal year (FY 2025-26), general fund revenue is now forecast at $35.079 billion — $370 million (1.0%) higher than the May 2025 estimate of $34.709 billion. For FY 2026-27, the forecast rises to $34.72 billion, up $951 million (2.8%) from $33.769 billion.
Collections through February ran above target for personal income tax, business taxes and nontax revenue, though sales tax is slightly below. Forecasters boosted projections for the state’s personal income growth to 6.7%, up from 5.2%, and state GDP to 5.6%, up from 5.3%.
The upward revisions follow a decade-long trend of forecasters predicting deficits that have not come to pass by underestimating revenues and economic growth, as noted by the conservative John Locke Foundation last April.
The forecast also notes shifting risks like oil-price volatility from the U.S.-Iran conflict and hedges based on April tax returns.
The higher revenue will automatically trigger some personal income tax rate cuts under a 2023 law. FY 2025-26 collections exceed the first threshold, dropping the 2027 rate to 3.49%.
FY 2026-27 hits the second threshold, reducing the 2028 rate to 2.99% — the second reduction in two years. A possible third cut to 2.49% could follow later.
“Today’s forecast once again confirms that Republican-led pro-growth fiscal policies have transformed North Carolina into an economic juggernaut,” said Senate Leader Phil Berger (R-Eden). “As we prepare for the legislative session, this forecast provides a roadmap to continue those efforts and ease the tax burden for hardworking North Carolinians.”
House Speaker Destin Hall (R-Granite Falls) called the surplus announcement “a demonstration of the success of the fiscally responsible policies enacted by our Republican majority.” However, he warned that the entire $370 million increase this year will be consumed by a projected billion-dollar Medicaid rebase.
“This program must be reformed in order to preserve our ability to fund public safety, education, and other priorities,” Hall said, urging quick passage of a responsible budget and continuing the state’s gradual tax-cut model, which has lowered the top rate from 7.75% to 3.99%.
Gov. Josh Stein warned of a possible future budget gap of $2.8 billion if the legislature doesn’t “hit pause on outdated, irresponsible tax triggers.”
“North Carolina has found a recipe for success, but if we fail to act now, we’re going to be several ingredients short,” Stein said.
