Yesterday, the state Senate unveiled its 2025-27 Fiscal Biennium budget, which includes additional tax relief for all North Carolinians, pay increases for state employees and teachers, funds for hurricane recovery needs, and targeted reductions to rein in unnecessary government spending. 

The first year of the budget spends about $32.6 billion, and the second year spends about $33.3 billion. This modest increase allows us to replenish our state’s Rainy Day fund and address the most pressing needs.

“Our state has faced significant challenges over the last year, in part because of the devastating impact of Hurricane Helene; this budget reaffirms our commitment to Western North Carolina and continued economic growth,” Senate Leader Phil Berger said. “We took a critical look at all state spending to find opportunities to cut obsolete or outdated programs to better reflect today’s needs and continue to provide tax relief for North Carolina’s people and small businesses.”

Some top highlights of the budget include:

• Funding to replenish the Rainy Day fund to $4.75 billion, putting it back to what it was prior to Hurricane Helene.
• Setting aside $700 million for Hurricane Helene Recovery needs, plus $633 million in temporary and permanent repurposing of funds within the Department of Transportation to support recovery.
• An across-the-board 1.25% pay increase in the first year of the biennium for most state employees, plus a $3,000 bonus over the biennium. 
• Teachers will receive an average 2.3% pay increase in FY 25-26 and an average increase of 3.3% over the biennium, plus a $3,000 bonus over the biennium.
•  On average, teachers will receive additional compensation of 8.9% over the biennium.
• A $3,000 bonus over the biennium for local law enforcement officers across the state.
• Initiating guaranteed tax relief for all North Carolinians by cutting the personal income tax rate to 3.49% in 2027 and 2.99% in 2028.
• Adjusting the tax rate revenue triggers, with the goal of reaching a 1.99% personal income tax rate.
• Increasing support for NC Children’s Hospital, a partnership between the UNC and Duke health systems to build the state’s first and only freestanding children’s hospital, by $638.5 million and exempting it from certificate of need reviews.

“For the last 14 years, the Republicans in the General Assembly have kept their promise to be good stewards of your hard-earned tax dollars, and we’re not going to change course anytime soon,” Senate Appropriations Chairman Sen. Brent Jackson said. “This budget positions North Carolina to remain competitive and attract new residents and businesses for generations.”

Senate Appropriations Chairman Sen. Ralph Hise said, “It’s imperative that we continue our efforts to modernize our state government, and this budget makes incredible headway on that front. We’re also taking clear steps to address the skyrocketing cost of healthcare by repealing our state’s archaic certificate of need laws and implementing other healthcare reforms.”

Senate Appropriations Chairman Sen. Michael Lee said, “Our K-12 public schools, UNC System campuses, and community colleges are incredible assets to our state, and our budget recognizes that by increasing pay, supporting student outcomes, and improving workforce development offerings. We’re also taking concrete steps to help local governments monitor and remove PFAS from their water supply and assist with additional research opportunities.”

More details of the Senate’s budget proposal can be found below. 

Hurricane Helene

• Thus far, we’ve put more than $1.4 billion toward Helene recovery, and this budget bill puts another $700 million into the Hurricane Helene Reserve. Of that $700 million:
• $8 million is provided to the UNC System to allocate to Appalachian State University, UNC-Asheville, Western Carolina, and the North Carolina Arboretum to improve emergency response capabilities.
• $2.5 million is provided to the Community College System to aid colleges that experienced enrollment losses after Hurricane Helene.
• $5 million is allocated to the Division of Community Revitalization at the Department of Commerce.
• $10 million is allocated to the Governor’s Recovery Office for Western North Carolina (GROW NC).
• The remainder of the funds will be available for additional recovery needs, especially as we wait to hear what Congress will do for recovery.
• Within the transportation budget, several temporary and permanent cuts were made to secure funding for Western North Carolina’s recovery. Altogether, those changes provide more than $630 million over the biennium to ensure continued recovery in Western North Carolina.
• The budget also directs various state agencies to prioritize Helene-impacted counties in certain grant programs for this biennium.
• Collectively, those grant programs represent more than $750 million in the budget.
• The budget appropriates $685.6 million in federal Clean Water and Drinking Water State Revolving Funds for repair and replacement of drinking water and wastewater infrastructure damaged by Hurricane Helene.

Salaries and Benefits

• Most state employees will receive an across-the-board 1.25% raise in the first year of the biennium and a $3,000 bonus over the biennium.
• Correctional Officers will receive an additional 5.25% raise, for a total raise of 8.9%, including step increases.
• Probation and Parole Officers will receive an additional 2% for a total raise of 6.9%, including step increases.
• State law enforcement officers, State Capitol Police, and law enforcement officers within the Division of Marine Fisheries, Forestry, Parks, and Wildlife Resources, will also receive an additional 5.25% raise, for a 6.5% total raise.
• Allocates $8.9 million to standardize the experience-based law enforcement salary schedule and provide an additional 5.25% raise for sworn members of the State Highway Patrol, State Bureau of Investigation (SBI), and Alcohol Law Enforcement (ALE), who are included in this new salary schedule.
• SBI and ALE officers moving back to this step schedule will result in an average salary increase of 14.4%, including step movement. State Highway Patrol officers will receive an average salary increase of 9.2%, including step movement.
• To show our appreciation for the hardworking men and women who put their lives on the line to protect us, this budget provides a $3,000 bonus over the biennium for local law enforcement officers.
• Juvenile Justice will receive $1.2 million recurring to implement increases to the salary schedule and an across-the-board salary increase to help with salary compression issues.
• Administrative employees at the State Bureau of Investigation will receive an additional 4.5% raise in the first year of the biennium.
• The North Carolina National Guard will also receive $1.5 million nonrecurring to provide recruitment and retention bonuses to its members.
• State-funded Registered Nurses, Licensed Practical Nurses, and certain Health Care Technicians will receive an additional 2% raise on average, for a total 3.25% raise. 
• Teachers will receive an average 2.3% pay increase in FY 25-26 and an average increase of 3.3% over the biennium, plus a $3,000 bonus over the biennium.
• On average, teachers will receive additional compensation of 8.9% over the biennium.
• A $3,000 bonus over the biennium for local law enforcement officers across the state.
• Under this proposal, average teacher pay will be $62,407.
• There’s also an additional recurring appropriation of $30 million for the state-funded teacher supplement. The revised amount in the budget for this program is now $230 million, and the maximum supplement a teacher can receive is $5,000.
• This budget increases the Line of Duty Death Benefit for public safety employees to $150,000.
• It also increases the Fire and Rescue Squad Benefit and the National Guard Benefit.
• Finally, it includes an additional Special Separation Allowance for state and local law enforcement officers with at least twenty years of experience.

Economic Development

• Reserves a total of $319 million in the Economic Development Project reserve over the biennium for future projects using transfers from other reserves and some General Fund appropriations. After these transfers, a total of $942 million will be available for future appropriation.
• Provides $20 million nonrecurring in each year of the biennium to the Economic Development Partnership of NC, split equally between business marketing and travel/tourism marketing.
• Removes the interim 70% carbon reduction goal to preserve power reliability and affordability.

Education

• In addition to the across-the-board raises and state-funded supplement, there is $16.2 million in the first year and $20.1 million in the second year for salary supplements of up to $10,000 for teachers serving in advanced roles in districts participating in the Advanced Teaching Roles Program.
• This budget also expands the Advanced Teaching Roles program by increasing available grant funding to $6.5 million, supporting its continued growth and implementation across the state.
• This budget builds on the General Assembly’s successful early literacy initiatives by extending key supports to students in grades 4 and 5, mirroring those already in place for K-3 students.
• We also increase the state match for the teacher signing bonus program to strengthen local teacher recruitment efforts.
• This bill reimagines our Teacher Apprenticeship Program by moving it under ApprenticeshipNC at the Community College System.
• The program would allow districts participating in Advanced Teaching Roles to employ apprentices under the supervision of a mentor teacher.
• This budget provides additional funds to the N.C. Promise program to ensure the growing enrollment is fully funded.
• Tuition for out-of-state students at N.C. Promise institutions will increase slightly from $2,500 per semester to $3,000 per semester, which allows us to continue to prioritize the needs of North Carolina students.
• Expands the Cheatham-White Scholarship to increase the number of merit-based scholarships at N.C. Central, N.C. A&T, and brings Winston-Salem State University into the program.
• We also provide an additional $10.6 million starting in FY 2026-27 to N.C. A&T to support its Agriculture Research and Extension Services Program.
• Increases the total recurring appropriation to the Patriot Foundation to provide scholarships to children of members serving in the Armed Forces, disabled veterans, and their families.
• This budget also allows the UNC System to offer discounted tuition to individuals receiving military tuition assistance.
• We direct the UNC Board of Governors to review all centers and institutes across the UNC System to identify and eliminate any low-performing, redundant, or those that conflict with federal or state law, ensuring alignment with the System’s overall vision and purpose.
• We also instruct the UNC Board of Governors to conduct a comprehensive review of academic programs across the UNC System, with the goal of reducing costs and improving student outcomes.
• This budget appropriates $36.5 million to the N.C. Community College System to increase funding for pathways related to healthcare, engineering and advanced manufacturing, trades and transportation, and information technology at community colleges statewide through the Propel NC initiative.
• It also provides $12 million over the biennium to the Community College System to support the implementation of new workforce programs in high-demand career fields that require significant startup funds.
• This budget also has $3.85 million in recurring funds to expand the number of colleges participating in the training program for students with intellectual and developmental disabilities to help them enter the workforce. The total allocation for the program will now be $7.8 million annually.

Health and Human Services

• This proposal includes the necessary funding to cover the Medicaid Rebase —changes in Medicaid costs resulting from changes in enrollment, the enrollment mix, service, and capitation costs.
• It also includes the funding for the contracts necessary to operate the state’s Medicaid managed care program.
• In addition to our efforts earlier this year to reduce unnecessary regulatory burdens on childcare providers, our budget seeks to make positive change in the current childcare crisis.
• This proposal appropriates an additional $80 million — $45 million recurring from federal block grants and $35 million recurring from the General Fund — to increase childcare subsidy rates to the recommended level from the most recent 2023 Market Rate Study. The revised requirement for the subsidy program is $572.3 million each year.
• Increases the Medical Examiner fees paid to county Medical Examiners from $200 to $400 per case.
• The budget also directs the DHHS to move ahead with seeking a work requirement for Medicaid recipients.
• Additionally, it repeals the state’s archaic certificate of need laws that drive up costs for patients by stifling competition.
• It also includes provisions from a previously passed bill to lower healthcare costs for all patients.
• These provisions shine a light on every part of the healthcare system by addressing billing transparency, fair billing and collections practices, and prohibitions on charging facilities fees.

School Safety

• School safety remains a priority for the General Assembly.
• The budget includes $35 million in both years of the biennium for school safety grants.
• These grants can be used for services for students in crisis, school safety training, safety equipment in schools, and subsidizing the School Resource Officer Grants program.

Justice and Public Safety

• This budget supports the needs of the Voice Interoperability Plan for Emergency Responders (VIPER) system, providing $15.3 million over the biennium.
• This budget also provides resources to support our law enforcement agencies, including funding for equipment, like body cameras for Alcohol Law Enforcement, and specialized safety equipment for the State Highway Patrol.
• The budget provides an additional $3 million for positions for the State Highway Patrol to support its needs now that it is a standalone agency.
• The budget includes funding for new positions to meet local needs based on the Administrative Office of the Court’s workload formula.
• Those new positions include full-time magistrates, deputy clerks, assistant district attorneys, and victim-witness legal assistant positions.
• The budget allocates $25 million over the biennium to the Office of Indigent Defense Services to increase Private Assigned Counsel (PAC) rates and continue program operations. 

Other Items of Interest

• Provides $250 million for verifiable 2024 agricultural disaster crop losses.
• Allocates $20 million over the biennium for the N.C. Agriculture Manufacturing and Processing Initiative to incentivize the development of food processing facilities across the state.
• Allocates an additional $15 million to the Viable Utility Reserve, a grant program for distressed water systems.
• Provides $110 million across the biennium to the Department of Environmental Quality to provide grants to local governments and water/sewer authorities for PFAS sampling and monitoring, and the installation or upgrade of water treatment technologies for PFAS removal as part of the Water Safety Act.
• It also provides $6 million across the biennium to the NC Collaboratory to research PFAS.
• The proposal provides the State Auditor with $6 million to establish the Division of Accountability, Value, and Efficiency, which will assess whether state agencies and vacant positions within agencies are still needed.
• The budget includes $13 million to complete the Statewide Election Information Management System and the Campaign Finance Software upgrade.
• Appropriates an estimated $1.5 billion in federal funds for rural broadband.
• Creates the North Carolina Investment Authority to take over investment responsibilities previously held solely by the State Treasurer, transitioning our state away from the sole fiduciary model.
• Provides $6.25 million in recurring funding to the Youth Outdoor Engagement Commission, which promotes outdoor education, environmental stewardship, and youth leadership opportunities statewide.
• The budget makes important investments in our airports, including a statewide expansion of the aviation program at Elizabeth City State University to build our aviation workforce for the future.
• Funding for the State Transportation Improvement Program (STIP) is increased by $21.6 million in the first year and $100.8 million in the second year to pay for new transportation infrastructure.