RALEIGH, N.C. (AP) — North Carolina Senate Republicans have advanced a two-year budget for the ninth-largest state that spends less than what the new Democratic governor requested and doubles down on already enacted income tax cuts.
Largely along party lines, the GOP-controlled Senate gave initial approval Wednesday evening to a proposal to spend $32.6 billion for the fiscal year starting July 1 and $33.3 billion for the following year.
Gov. Josh Stein, in his first budget pitch last month, wanted legislators to spend roughly $1 billion more each year than what the Senate decided in part by locating money through halting broad tax rate cuts.
But Republican senators are content with their balance of spending, taxes and cost-cutting. They’ve earmarked over $1.3 billion more for Hurricane Helene aid and seek to eliminate hundreds of vacant state government positions.
Bill approval marks the next step toward enacting a final budget.
Taxes would keep falling
Stein’s budget asked the legislature to freeze the current individual income tax rate at 4.25% and the corporate rate at 2.25%, rather than let them fall even further. Previous laws are set to lower rates further in 2026 and later.
Stein said times are fiscally tight, and a consensus forecast from his budget office and General Assembly economists predicting state revenues would actually drop in the 2026-27 fiscal year from the lower rates shows GOP policies are “threatening a self-inflicted fiscal pain.”
The Senate budget not only would let the individual income tax rate continue down to 3.99% next year but also fall to 3.49% in 2027 and 2.99% in 2028.
Senate Republicans dismissed arguments that lowering rates even more would be fiscally irresponsible. They said tax cuts this past decade have helped actually raise revenues.
“Notwithstanding those cries of gloom and doom, what we have seen is the state’s economy continue to grow and flourish,” Senate leader Phil Berger told reporters this week. “It is our belief that these tax reductions will continue to grow North Carolina.”
Eliminating vacancies, raising pay
Following the cost-cutting trend in Washington, Senate Republicans also seek to eliminate unfilled state government positions and consolidate programs.
The Senate budget directs that 850 vacant government positions be eliminated, according to Berger’s office, citing the legislature’s Fiscal Research Division. About half are state Department of Health and Human Services positions vacant for more than 12 months. About 14,000 vacant positions in state government would remain.
The state community college system was also told to cut $57 million in spending by consolidating certain administrative functions. And the University of North Carolina system must reduce spending by targeting campus centers or institutes that in part are “low-performing, redundant” or in conflict with federal or state law.
Employee raises lower
The Senate budget gives workers raises that are generally lower than what have been enacted in recent years.
Public schoolteachers on average would receive 3.3% raises over two years, while rank-and-file state employees could only count on a 1.25% raise in the first year. But in addition, teachers and employees would also receive bonuses totaling $3,000, and adjustments could be made next year. State law enforcement officers would see higher permanent raises.
In contrast, Stein proposed average teacher pay raises of 10.7% over two years, and offered a 2% raise for rank-and-file workers, along with a $1,000 bonus.
Closing agencies
The Senate budget eliminates some state agencies. They include the North Carolina Innocence Inquiry Commission, which began operating in 2007 to examine and evaluate claims of wrongful convictions.
The commission’s work has resulted in 15 people being exonerated, according to its website. A budget document explaining the elimination says “other non-state entities provide similar opportunities for individuals to seek legal guidance and case review.”
The budget also would eliminate funds for a community college initiative designed to help minority male students complete their degrees and abolish a program that works to help minority- and women-owned businesses land state contracts.
Democratic response
Democrats who hold 20 of the Senate’s 50 seats blasted the budget proposal for the small raises, accelerating tax cuts they say benefit the wealthy and for keeping billions of dollars in reserve, rather than using them for critical needs or potential federal spending cuts.
“This is a cheapskate budget, and we are not a cheapskate state,” Democratic Sen. Graig Meyer said. “Democrats continue to be disappointed at the ways that Republicans are making choices that they’re bragging about, but are leaving North Carolinians behind.”
Republicans used parliamentary maneuvers to block votes on well over 20 Democratic floor amendments — several of which tried to spend money otherwise going for private-school vouchers or to corporate tax filers.
What’s next?
The Senate must give the plan another affirmative vote Thursday before it goes to the House. After the House approves its competing proposal later this spring, the two chambers will attempt to work out differences in hopes of getting a final budget enacted by July 1.
House Republicans have signaled a desire for higher teacher pay increases or expressed concerns that tax rates could fall too quickly.
Stein said Wednesday the “Senate budget falls short” and that he wants to work with lawmakers to improve the spending plan: “We need to do much more to compensate teachers, support community colleges, and protect public safety.”
The threat of a Stein veto also could wield more influence over a final budget because Republicans are one seat short of a veto-proof majority. However, Republicans have located some Democratic support for past final budget bills.
