Lawmakers return to sessions in Raleigh on Monday without the gift of North Carolina’s two-year budget expected to be in tow.Four committee meetings listed for Tuesday and Wednesday do not include ties to the budget, or a meeting of the 79 legislators appointed from the Senate (34) and House of Representatives (45) as conferees on the 2025 Appropriations Act. Senate Bill 257, as it is also known, has been without action since the respective June 3 and 5 appointments in each chamber.
The state budget, by statute, is to be enacted July 1 of odd-numbered years. North Carolina is the only state without one, having relied on the nine years old law that keeps spending levels the same as last passed and two bills since the deadline colloquially known as mini budgets.
The proposal of first-term Democratic Gov. Josh Stein was $67.9 billion, both chambers of the General Assembly came in at $65.9 billion, and the Senate and House of Representatives need compromise for their routes. Biggest disagreements are the Senate wanting to retain the scaled tax cuts structure while the House wants adjustment based on the Office of State Budget and Management forecast; and differences on pay raises for state employees and teachers.
“We won’t risk our record of success with reckless fiscal policy,” wrote Republican Reps. Julia Howard and Dean Arp in a published op-ed this past week. “State tax cuts must be structured to protect our economy and our citizens.”
Since the landmark 2010 midterms delivered Republicans to majorities in the General Assembly for the first time in 140 years, the state has had remarkable growth in the economy and population. The individual income tax rate of between 6% and 7.75%, dependent on income, is down to 4.25%.
The July 1 cut was to bring it to 3.99%. The Senate sought to go to 3.45% for 2026-27, and budget office is forecasting a $100 million gap between revenue and expenses.
The House wants the 3.99% for this year, and an updated formula tied to revenue, inflation and population growth.
Neither chamber wants to rely on the rainy day fund, also known as the Savings Reserve in the General Fund. With $1.104 billion allocated to the Hurricane Helene Disaster Recovery Fund, it is down to $3.62 billion as of June 30, according to the office of first-term Republican state Auditor Dave Boliek.
In fact, both chambers have expressed desire to allocate that amount back in. Fifteen years ago, the Grand Old Party inherited a budget deficit that ranged between $800 million and $1.2 billion. That’s a nearly $6 billion swing before Helene.
The corporate income tax rate of 6.9% in 2012 and 2013 is 2.3% this year, and goes to 2% for 2026 and 2027, 1% in 2028 and 2029, and to 0% in 2030.
Trigger amounts on individual income tax rates for the next eight fiscal years, under a 2023 law, could create three reductions – 3.99% to 3.49%, then to 2.99%, and then to 2.49%. If triggers are not met, the rate is to be 3.99%.
“North Carolina’s long-term financial health is at stake,” Howard and Arp wrote in conclusion. “We’re ready to negotiate. The Senate just needs to come to the table.”
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