North Carolina lawmakers return to Raleigh this week still without agreement on a state budget nearly six months after the legal deadline passed. Despite scheduled committee meetings, the long-delayed 2025 Appropriations Act—Senate Bill 257—remains stalled, with no sign of imminent action from the House-Senate budget conferees appointed in early June.
By law, North Carolina’s two-year budget is to be enacted by July 1 of odd-numbered years. Yet the Tar Heel State stands alone as the only state in the nation still without a full budget, relying instead on nine-year-old legislation that keeps spending levels frozen and two temporary “mini budgets.”
The divide hinges largely on tax policy and pay raises. Democratic Gov. Josh Stein proposed a $67.9 billion budget. Both Republican-led chambers came in at $65.9 billion but remain split on key issues. The Senate wants to continue scheduled income tax cuts, reducing the personal rate from 3.99% to 3.45% by 2026-27. The House is calling for a more cautious approach—holding the 3.99% rate for now and tying future reductions to revenue growth, inflation, and population benchmarks.
Pay increases for teachers and state employees are also in dispute. The Senate has favored more restrained raises, while the House is pushing for higher adjustments based on budget forecasts.
“We won’t risk our record of success with reckless fiscal policy,” wrote GOP Reps. Julia Howard and Dean Arp in a recent op-ed defending the House’s cautious approach. “State tax cuts must be structured to protect our economy and our citizens.”
North Carolina’s fiscal record under Republican leadership since 2010 has been a point of pride. The individual income tax rate, once as high as 7.75%, is now 4.25%. The corporate tax rate, 6.9% just a decade ago, is scheduled to phase out entirely by 2030 under current law.
However, this year’s budget forecast includes a projected $100 million revenue shortfall. Neither chamber is willing to dip into the $3.62 billion rainy day fund, particularly after $1.1 billion was recently committed to Hurricane Helene disaster recovery.
Despite their differences, both chambers have expressed a desire to replenish the reserve fund and maintain North Carolina’s long-term financial stability. The House insists the Senate must come back to the negotiating table.
“North Carolina’s long-term financial health is at stake,” Howard and Arp concluded. “We’re ready to negotiate. The Senate just needs to come to the table.”
