New revenue forecast shows more additional revenue than originally expected
State economists expect North Carolina to collect $71.2 billion in revenue across the 2025 and 2026 fiscal years, according to an updated revenue forecast released Friday. That's an increase of about $1.3 billion since a March projection and about $2.7 billion from the state's certified budget. The projections come from the Office of State Budget and Management and the legislature's nonpartisan Fiscal Research Division.
Economists wrote that stronger-than-expected income tax collection drove much of that increase, with capital gains realizations boosted by a third consecutive year of strong stock market performance and "substantial corporate bonuses" driven by significant 2025 profits.
Senate Leader Phil Berger and Speaker of the House Destin Hall pointed to the upcoming revenue forecast revision this week when they rolled out a framework for the state budget, explaining that they planned to be able to both slash the personal income tax rate and boost state employee pay.
"We fully anticipate and expect that we're covering those pay raises without any real difficulty," Berger told reporters Wednesday, a day after he and Hall announced the agreement that will now lead to more granular budget talks.
Berger and Hall agree to continue the phase-out of corporate income taxes and slash the personal income tax rate from 3.99% this year to 3.49% for 2027 to 2029 before dropping it further. The plan does away with most upcoming revenue triggers to income tax rates, instead codifying planned cuts that take the personal income tax rate as low as 2.99% in 2033 and 2034 before reinstating triggers that could slash it another half-percentage point.
Without the updated budget agreement, forecasters said, revenue would have hit triggers in two consecutive years, dropping the income tax rate to 2.99% by 2028.
Republican lawmakers are planning to give an average 3% raises across state government, with teachers receiving an average 8% raises and state law enforcement poised to receive raises between about 10% and 20%, depending on the agency.
Berger and other Senate Republicans have long been wary of the revenue forecasts, believing they are overly cautious. In response to Friday's release, Berger, R-Rockingham, said in a statement, "For years, we’ve seen these revenue forecasts significantly underestimate our state’s economic outlook. North Carolina’s economy is strong, and we continue to bring in substantial revenue surpluses thanks to Republican-led tax and budget policies."
Sales taxes were higher than expected in April due to "a substantial increase" in federal income tax refunds, the forecast said, and corporate income tax collections remained high because of corporate success. And rising property and casualty insurance rates helped boost taxes collected from insurance premiums.
Governor Josh Stein, a Democrat, has called for the state to stop reducing the income tax rate, leaving it at 3.99% while North Carolina grapples with expected changes to state spending foisted upon it by last year's.
In response to Friday's release, Stein wrote, "With the strong stock market, revenues have exceeded our forecast. That is good news, but we can’t stake our future on stock market volatility. We need to make fiscally responsible decisions and continue to invest in what makes our state so strong: our people.”
The forecast warns that spiking fuel costs related to the United States' war with Iran could slow spending for consumers and investment for businesses, particularly because they've been the key driver behind inflation reaching its highest level since 2023. That's led to higher long-term interest rates, making it harder for businesses to borrow money and potential homeowners to find a mortgage.
Forecasters also warn that while "optimism in AI-driven earnings growth" is pushing up the stock market and, in turn, resulting in the state beating revenue expectations, that trend could turn quickly if the stock market were to plummet.
"As in the late 1990s and mid-2000s, however, a rising dependence on stock market gains raises the risk of a more significant drop in individual and corporate income tax revenues if stock prices were to fall persistently below recent highs," forecasters wrote.
License-Plate Scanners
Every point of entry to North Carolina could be covered by the watchful eye of an automatic license plate reader in the near future, according to a State Bureau of Investigation report prepared for members of the General Assembly. At least, that’s one goal of the SBI’s pilot program allowing the surveillance tech to operate along state-maintained roads, the report says.
Over 100 cameras have been set up on state rights-of-way from Raleigh to Ocean Isle Beach as of early April. And the cameras have captured over 150 million scans of plates, according to the report reviewed by The News & Observer. According to the N.C. Department of Transportation, there are only about 6.7 million passenger vehicles registered in the state. The program is overseen by the SBI and the NCDOT.
Local law enforcement agencies decide whether to opt into the program. Thirty-two agencies across the state are in the program, which became effective in 2024. That list includes the Raleigh Police Department, Wake County Sheriff’s Office, Charlotte Mecklenburg Police Department and UNC Charlotte Police Department.
Along with seeking a program extension until 2028, the SBI is asking state legislators to provide grants to local law enforcement agencies to install the cameras. “The focus of these grants would be on major interstates and highways with the goal of covering all entrances and exits to North Carolina,” SBI Director Chip Hawley’s report said. The N&O reached out to lawmakers on the two committees that SBI submitted its report to for comment about what the expansion could mean for North Carolina. Staffers for two elected officials said Thursday they likely couldn’t comment given busy schedules. The rest have not responded.
Water Infrastructure
Gov. Josh Stein on Thursday called on Congress to send more money to western North Carolina to rebuild infrastructure that was damaged by Hurricane Helene. Standing in front of the former Pactiv Evergreen paper mill site in Canton, Stein highlighted $3.5 million that the town is receiving from the federal government to build a new wastewater treatment plant. The funding was announced in April.
In total, Washington has sent $861 million to help western North Carolina counties rebuild their water infrastructure post-Helene. But Gov. Stein says the money is far from enough.
“We need substantially more federal support,” Stein said. “The federal government has not appropriated any relief dollars for Western North Carolina since the Biden administration and the last Congress.”
Stein has asked Congress for an additional $540 million for water infrastructure and other environmental projects. That’s part of a total ask of $13.5 billion for continued recovery from Helene. Without that funding, Stein said some towns and counties won’t have enough funding to address urgent needs like sewer line repair or relocating wastewater treatment facilities to higher ground.
“I am urging the U.S. Congress and this administration to meet this moment and help western North Carolina get back on its feet,” Stein said. “We're obviously grateful for every dollar that we've received from the federal government. It's just, we need more.”
The governor was joined by Canton Mayor Zeb Smathers, North Carolina Department of Environmental Quality Secretary Reid Wilson and Preston Jacobsen, executive director of the Haywood Waterways Association.
Smathers said the construction of a new wastewater treatment plant marks a new chapter for the town. “Where you stand will be the home of our newest wastewater treatment plant,” Smathers said Thursday. “For the first time in our history, we will treat wastewater. We will control our own destiny.”
Constitutional Amendments
North Carolina’s Republican legislative leaders filed two new constitutional amendments Thursday, aiming to load up this fall’s ballot with proposals tailored to attract conservative voters to the polls.
The two new amendments were filed in the Senate and are already scheduled for an unusual Monday meeting of the Senate Agriculture committee. Senate Bill 1081 would guarantee North Carolinians the constitutional right “to engage in farming and forestry.” Senate Bill 1082 would guarantee a constitutional “right to work,” banning any requirement to join a labor union or organization.
The office of Senate Leader Phil Berger, R-Rockingham, did not immediately respond to NC Newsline’s inquiry about the reasoning behind the proposed amendments. However, in statements posted on social media late Thursday, the bills’ respective sponsors claimed both rights are under threat.
A third constitutional amendment, Senate Bill 1080, was part of the budget deal announced earlier this week by Senate Leader Phil Berger and House Speaker Destin Hall. It would cap the state’s income tax at 3.5% beginning in 2027. That bill will be heard in Senate Finance on Tuesday.
In the meantime, state House Republicans are backing House Bill 1089, a constitutional amendment to impose limits on property tax increases. It will likely be heard on the House floor next week as well.
All four, should they pass, would be on the ballot Nov. 3.
Meredith Poll director and political scientist David McLennan says it’s reminiscent of 2018, when Republicans were facing a blue wave in the midterm after Trump’s first election and responded by putting six constitutional amendments on the ballot.
“The cynic in me says this is just an attempt to ramp up Republican votes in the fall,” McLennan told NC Newsline. “The right to farm? I don’t know what that really means … there’s no big threat to it.”
McLennan noted that a Carolina Journal poll released Thursday shows Democratic U.S. Senate candidate Roy Cooper widening his lead over Republican nominee Michael Whatley to 11 points, while President Donald Trump’s approval rating in North Carolina slid to 41.5%, the lowest point the poll has recorded in Trump’s second term.
He said the amendments might be a bid to overcome what could be low GOP turnout in November.
Another reason, McLennan said, might be to circumvent Stein’s veto. Constitutional amendments, once passed by a three-fifths vote of the state House and Senate, are not subject to the governor’s veto. If they’re approved by a majority of voters, they become law.
Even conservative amendments, however, don’t always guarantee a boost to Republicans’ odds. In 2018, voters passed four of the six constitutional amendments on the ballot: voter photo ID, a 7% income tax cap, victims’ rights and a constitutional right to hunt and fish. But Democrats still broke the Republican supermajority in the state House that year.
It’s also not clear whether the House will agree to vote on the Senate’s amendments or vice-versa. Each chamber has passed amendments in recent years that the other chamber has declined to consider.
Goodyear Closure
The massive Goodyear Tire & Rubber Co. factory on Ramsey Street north of Fayetteville is set to close in 2027, the company said on Tuesday. “After extensive efforts to make the Fayetteville, North Carolina facility competitive, Goodyear is in discussions with the United Steelworkers to close the facility by the end of 2027,” Kylie Ulanski, the senior director of Global Manufacturing & Supply Chain Communications, told CityView by email. Efforts to reach United Steelworkers Local 959 were unsuccessful on Tuesday. The plant has about 1,700 hourly and salaried employees, Ulanski said. Goodyear this month announced that it lost $249 million in the first quarter of 2026. The Fayetteville factory opened in late 1969 after the Kelly-Springfield Tire Co., a Goodyear subsidiary, chose Cumberland County for the plant. The companies merged in 1996. In 2005, the plant took on the Goodyear name, Tyrepress.com reported. Goodyear has long been one of Cumberland County’s largest and better-paying private employers, and a relatively rare manufacturing operation in a community with an economy dominated by lower-wage retail, rental, real estate, and service businesses that cater to the military families and defense workers of Fort Bragg, one of the largest military bases in the world. In a joint press release from the Fayetteville Cumberland County Economic Development Corporation, local elected leaders said they are preparing for the loss.
I-77 Tolls
The Charlotte City Council voted Monday night to withdraw its support for the proposed Interstate 77 toll lanes from uptown to the South Carolina line, a stunning reversal on the multibillion-dollar highway expansion. In a 6-5 vote, council members directed the city’s representative on a regional transportation planning board to rescind Charlotte’s backing for the project. Council member Renee Johnson made the motion to stop the current version of the plan. “Leadership means having the courage to revisit decisions when new information, new technology and new concerns demand it,” Johnson said. “Our responsibility isn’t to defend outdated assumptions. Our responsibility is to the people we serve.” Council members Johnson, Malcolm Graham, J.D. Mazuera Arias, Joi Mayo, Victoria Watlington and LaWana Mayfield voted in favor of rescinding support for the project. On the other side, council members Kimberly Owens, James Mitchell, Ed Driggs, Dimple Ajmera and Dante Anderson voted against the motion. The toll lanes project has drawn criticism over the past six months, both for the effect adding two lanes in each direction would have on largely Black neighborhoods west of uptown and for the NCDOT's perceived lack of transparency about the design and planning.
I-77 Warning
North Carolina Department of Transportation Secretary Daniel Johnson warned Charlotte Mayor Vi Lyles that if local leaders withdraw support for the Interstate 77 toll lane project, the state would be required to remove it from a long-term transportation plan, potentially sending hundreds of millions of dollars elsewhere. The Charlotte City Council unexpectedly voted 6-5 on May 11 to withdraw support for using a private contractor to build toll lanes on I-77. The vote surprised some transportation officials and prompted Johnson’s response. In a letter sent to Lyles on May 15, Johnson said federal law would require the NCDOT to remove the I-77 project from the Statewide Transportation Improvement Program if local backing is pulled. The roughly $600 million set aside for the project would then be redirected to other transportation priorities. Johnson wrote that local transportation leaders could pursue a different version of an I-77 project. However, he cautioned that the state would have to restart the yearslong planning and environmental review process. A reworked project could still be eligible for state funding, he said. Meanwhile, Charlotte City Council member Ed Driggs, who supports the toll lanes, told WCNC that “conversations are ongoing” to persuade one council member to change their vote and reverse last week’s decision.