Republican legislative leaders released a $34.4 billion spending plan on Tuesday, bringing to an end the lengthy and at times contentious stalemate between the House and Senate that left the state without a new budget for the entire 2025-26 fiscal year.
House Speaker Destin Hall and Senate President Pro Tempore Phil Berger, who reached an agreement on a budget framework in mid-May and spent the past two weeks completing final negotiations, said the long-awaited spending plan would provide “guaranteed tax relief for all North Carolinians” and deliver “historic” raises for teachers, state employees and law enforcement officers.
The revised income tax rate drawdown and raises package announced by Hall and Berger on May 12 remain intact in the 634-page final budget.
Following that framework, the budget would scrap existing income tax reduction revenue triggers and instead cut the current 3.99% rate to 3.49% in 2027, maintaining it in 2028 and 2029. The rate would further decrease to 3.24% in 2030, staying at that level through 2032.
Two additional cuts would be possible after 2032, to eventually bring the rate down to 2.49%, subject to revised revenue triggers.
Lawmakers initially considered going through the budget document in an appropriations committee meeting, but those plans were scrapped. The budget, released just after 10 a.m., will instead be taken up directly on the House and Senate floors. Both chambers plan to vote on the bill Wednesday and Thursday.
Major expenditures in the budget include $1.6 billion for capital projects across state agencies and the University of North Carolina System, $208.5 million in American Rescue Plan Act funds for the new, freestanding children’s hospital that will be built in Wake County, more than $700 million in additional Hurricane Helene relief money and more than $1 billion in Medicaid rebase funding.
Other significant and noteworthy funding items and policies include the following.
$1 billion in Medicaid funding
Lawmakers started this year’s short session by reaching an agreement to fund a pressing $319 million shortfall in the state’s Medicaid program. That money covered the program’s adjusted costs for the remainder of the 2025-26 fiscal year.
Discussions between health policy chairs and the Department of Health and Human Services on the program’s funding needs for the 2026-27 fiscal year had already begun by that point, and in March, Hall said he expected the state would need a $1 billion rebase in the coming year.
The budget now allocates $847 million in recurring funds and $200 million in nonrecurring money from the Medicaid Contingency Reserve to cover “the nonfederal share of Medicaid costs.”
More than $700 million in hurricane relief
A significant chunk of this funding — $450 million — will be used to cover the state and local obligations for multiple federal disaster recovery programs. Budget writers expect this contribution to unlock nearly $2.2 billion in federal matching funds, thanks to the federal government’s 90/10 matching rate.
The Hurricane Helene funding also appropriates $65 million for local disaster recovery capital projects that are ineligible for federal assistance, including up to $30 million for volunteer fire departments.
Other components include $43 million to nonprofit organizations undertaking housing and private roads and bridge reconstruction, $40 million for state-led housing recovery efforts, and $22 million for state-led reconstruction of private roads and bridges.
Replenishing the rainy day fund
The state’s rainy day fund, as of October 2025 held $3.6 billion. Allocating more money to the savings reserve, as it is officially known, was a top priority and a subject of final discussions between Berger and Hall.
Ultimately, GOP lawmakers agreed to replenish the fund with more than $450 million, bringing the reserve’s total to just over $4.2 billion.
Law enforcement and state worker raises
Law enforcement officers across state government are set to receive a 13% increase in their salary, while other agencies will see even higher raises.
State Bureau of Investigation and Alcohol Law Enforcement personnel will receive an average raise of 20%.
State Highway Patrol officers are set to receive an 18% raise along with step increases. Correctional officers will receive an average 15% increase.
Probation and parole officers will receive an average 10% increase. The budget outlines a one-time bonus of $1,750 for local law enforcement officers across the state.
All state employees are scheduled to receive a 3% salary increase and a bonus based on their salary.
State Employees Association of North Carolina Executive Director Ardis Watkins noted the adjustment doesn’t keep pace with inflation or cover increased healthcare costs.
“Legislators love to tell us how well North Carolina’s economy is doing, but this budget looks like the work of a state that's struggling,” she said in a press release. “This is what a business does when it’s in trouble.”
Across-the-board salary increases for educators
The budget outlines an 8% average raise for teachers at a cost of $598 million to the state. Base starting teacher pay is set to $48,000 and a one-time funding bonus of $1,000 is granted to employees with more than 16 years of experience. Teachers with less than 15 years of experience are set to receive a $500 bonus.
A $30 million salary supplement is also granted to educators serving in advanced teaching roles. An additional $2 million will allow more schools and districts to participate in the program, which permits teachers to remain in the classroom while taking on additional responsibilities.
Principals, assistant principals, central office staff and non-certified school personnel are set to receive an across-the-board 3% raise, along with one-time bonuses.
Eighty-million dollars are appropriated for a 3% salary increase for most employees of the community college system.
Major education initiatives funded
Propel NC, a major initiative of the community college system that aims to couple state funding with workforce demand in highly-needed sectors rather than enrollment numbers, is set to receive $57 million. Legislation in 2025 sought $93 million to fully fund the overhaul.
SparkNC, an initiative that helps schools move away from traditional classes to more flexible learning environments that foster interest in cybersecurity, software development and artificial intelligence, will receive $4.5 million as a pass-through grant through the state budget.
North Carolina A&T University will receive over $10 million to increase research spending and its number of granted doctoral degrees in order to achieve an R-1 designation, the highest tier of research universities, under the Carnegie Classification of Institutes of Higher Education.
NC State will receive nearly $39 million to fund the demolition and reconstruction of Poe Hall through the 2026-2027 fiscal year. Total dollars authorized for the project now reach $185 million.
The UNC-Chapel Hill School of Civic Life and Leadership will receive an additional allocation of $5 million.
The UNC Collaboratory will be tasked with various research initiatives that includes the impact of toxic chemicals on firefighters, additional opioid research funding and an examination of a to-be-determined state's mathematics curriculum to compare with North Carolina.
A successful Individuals with Developmental Disabilities Workforce training initiative is now prepared to expand to 10 community colleges with a $3.8 million allocation. Five million is also directed toward the implementation of a digital credential virtual wallet program across all community colleges.
A biologics training center at Wilson Community College will be supported by a $12 million allocation. The North Carolina Center for the Advancement of Teaching will receive $4.1 million as part of its Cullowhee campus expansion.
The UNC System Office is granted $750,000 in recurring funding to contract with Parents for Educational Freedom in North Carolina, Inc. for marketing and outreach services.
A first-of-its-kind student attendance early intervention pilot program will be funded at $75,000.
Each university, apart from NC State and UNC-Chapel Hill, will receive nearly $3 million in additional revenue from sports wagering to go toward their athletic programs.
DMV services support
Base starting pay for Driver License Examiners is increased to $51,980 from $44,210. The boost costs the state an additional $5.2 million. Twenty-three newly created positions will help address extended weekday and year-round Saturday hours at high-volume offices.
Three million dollars in recurring funding is outlined for 30 additional compliance and oversight support positions at the DMV, 21 of which involve licensing.
A new office in either Wake Forest or Rolesville will receive just over $1 million in funding to support staffing, operational expenses and capital needs.
The state is set to save $2 million each year by eliminating funds to print registration cards and license plate decal stickers.
SNAP funding
Lawmakers are allocating $9.2 million to cover a loss of federal funding due to changes in cost-sharing requirements for the Supplemental Nutrition Assistance Program mandated by the federal One Big Beautiful Bill Act.
Starting Oct. 1, the state obligation for SNAP will increase to 75% from 50%.
The budget also includes $2.5 million in one-time funding to improve the state’s electronic case management system for SNAP, with the goal of reducing the state’s payment error rate and complying with other federal rules.
The state plans to “integrate SNAP error screening tools and Artificial Intelligence-based guidance to improve accuracy” and reduce the payment error rate, budget writers said.
State match for SUN Bucks program
Answering a request from Gov. Josh Stein, lawmakers are providing $5 million in an administrative match for the SUN Bucks program, an initiative of the U.S. Department of Agriculture that helps low-income families cover grocery costs to provide their children with nutritious food when schools are out in the summer.
Stein announced in January that the state would receive $125 million in federal funding after a public-private philanthropic partnership helped cover the state’s $5 million obligation. He called on lawmakers to fund the match going forward, to ensure the program’s continuity.
The $5 million allocated by lawmakers for next summer is expected to be matched with $60 million in federal funding, according to budget writers.
Other items of note
- Public school funding will decrease by just over $100 million due to a decline in the average daily membership adjustment. There will be a projected 1.5 million enrolled students during the 2026-2027 fiscal year.
- Funding for a technology device refreshment cycle for public schools was not secured in the state budget.
- $54 million is directed toward the Agricultural Development and Farmland Preservation Trust Fund for conservation efforts.
- A net appropriation of $27 million will go toward new and existing enterprise cybersecurity tools under the Department of Information Technology.
Car Registrations
North Carolina’s car registration methods could be switching entirely to digital. A provision in the proposed state budget would eliminate physical motor vehicle registration cards and renewal stickers and replace them with an electronic system. The move is intended “to reduce administrative costs, streamline vehicle registration processes, and enhance efficiency,” according to the North Carolina General Assembly’s proposed budget.
Per state law, drivers in North Carolina are currently required to keep a printed copy of registration inside the vehicle. The proposed budget instructs the North Carolina Division of Motor Vehicles, under the Department of Transportation, to develop and maintain a “secure and user-friendly vehicle registration system” that allows drivers and law enforcement to “access and verify registration status without the need for physical registration cards or renewal stickers.”
Marty Homan, the communications manager for the Department of Transportation, said the DMV did not ask for those changes. “We don’t necessarily have an opinion,” he told The News & Observer. “We do what the law requires. I think the DMV is agnostic on this change.”
I-77 North Tolls
Even as Charlotte pushes back on new toll lanes for Interstate 77 South, the state is considering adding more express lanes to the north. The N.C. Department of Transportation said it’s in talks with toll lane operator Cintra to add another toll lane through north Mecklenburg and south Iredell Counties. The proposal would add a second toll lane for seven miles — from the Catawba Avenue exit in Cornelius to N.C. 150 in Mooresville. Congestion is still heavy in that section because it has only two general-purpose lanes and one toll lane in each direction. If the DOT approves the plan, Cintra would collect the new toll revenue and allow heavy trucks into the toll lanes. The company also says it will consider public benefits, such as lowering tolls on the existing lanes. The state has until October to approve or reject the plan. The I-77 north toll lanes remain controversial nearly seven years after opening. Drivers continue to complain about high tolls and persistent congestion around Lake Norman at rush hour. Cintra has generated nearly half a billion dollars in toll revenue so far and has 43 years remaining on its contract.
Quarry Expansion
A construction materials company’s proposal to expand its limestone quarry in northern New Hanover County threatens more than 140 acres of mostly high-quality wetlands and vital fish habitat, environmental groups say. Martin Marietta’s preferred plan to enlarge its Castle Hayne quarry would permanently destroy 143.46 acres of pristine wetlands and 9.7 acres of open water that connect to those classified as primary nursery area, strategic habitat area, and essential fish habitat, the groups argue. The proposed expansion of the 1,700-acre quarry that sits between the Northeast Cape Fear River and Holly Shelter Road could also decrease natural flood defenses, environmentalists say. Advocates are pushing regulators to deny the company’s first-choice plan, arguing that other options Martin Marietta has identified to source limestone to meet the demand of future construction needs carry fewer ecological consequences. In a May 22 letter to the Army Corps of Engineers, the groups, including the Southern Environmental Law Center, Cape Fear River Watch, Carolina Wetlands Association, Coastal Plain Conservation Group, North Carolina Sierra Club, North Carolina Wildlife Federation, and Save Sledge Forest, said Martin Marietta’s permit application does not include a thorough analysis of the project’s impacts to environmental resources, including wetlands.
Ferry Tolls
An Eastern North Carolina Republican lawmaker voted against the GOP-drafted budget because of the inclusion of a provision that would require tolls on all ferry routes starting in January. In an initial vote, the lawmaker, Sen. Bobby Hanig of Powells Point, was joined in his opposition by Sen. Norman Sanderson of Minnesott Beach. They were the only two Republicans across both chambers to vote against the bill Wednesday. Several Democrats joined the GOP in support.
Hanig, on Wednesday, said the toll could be called a “fee, but it is a tax.” He was absent for the final vote on Thursday.
Sanderson, before the vote, said he was “in the valley of indecision” and would make his final decision during the five seconds that senators are given to vote. He voted no. On Thursday, Sanderson voted yes.
The budget, which now heads to Democratic Gov. Josh Stein’s desk, would add tolls to the four ferry routes that are now free. Fares are already charged on the two routes serving Ocracoke Island, the route to Fort Fisher, and the seasonal Ocracoke Express passenger ferry.
The budget requires the Department of Transportation, which houses the Ferry Division, to establish tolls for all ferry routes. It does not specify toll amounts but says they must be set at levels sufficient to fund passenger vessel replacement costs.
“No North Carolina citizen should have to pay a toll to ride on a ferry,” Hanig said. “I made a promise to my constituents a long time ago that I would not vote for a ferry tax,” and ”so for that reason, I have to be no on this budget,” he said.
Sanderson, similar to Hanig, asked his Senate colleagues to reconsider the ferry tolls. He said a complete audit of the ferry system could find savings elsewhere. The House on Thursday passed a bill previously approved by the Senate directing the Office of the State Auditor to conduct a performance audit of the Ferry Division. The audit will examine, among other things, the feasibility of a percentage-of-revenue funding model, under which funding would be based on income, such as ticket sales, rather than appropriations.
Republican House Speaker Destin Hall told The N&O as he talked with reporters after the vote on Wednesday evening that “on our side we had a strong vote today, so it really wasn’t an issue,” unlike in the Senate. “I understand for the members that are in coastal districts, in particular, it can be a hot-button issue, but at the same time, it’s critical that we provide those ferries, and we do it in a way where they’ve got reliable equipment,” he said.