Proposed Supplemental Budget - Fiscal Year 2025
On April 24, North Carolina Governor Roy Cooper introduced budget adjustments for fiscal year 2025. The fiscal 2025 enacted general fund budget, which became law in October 2023 as part of the 2024-2025 biennial budget, totaled $30.9 billion and the adjustments would increase that amount to $34.5 billion, an increase of $3.6 billion, or 11.8 percent. The fiscal 2025 general fund certified revenue amount was $33.4 billion, and the Consensus Revenue Forecast April Revision increased that to $34.4 billion, an increase of 3.0 percent. The state is projected to have a beginning unreserved general fund balance of $2.5 billion at the start of fiscal 2025 and after recommended adjustments, there would be a general fund balance of $198.8 million.
Proposed Budget Highlights
The proposed budget adjustments, Securing North Carolina’s Future, builds on the state’s success as the top state to do business for two years in a row and responsibly invests a surplus to provide tax relief to small businesses and working families, along with investments in quality child care, job training, and clean drinking water.
Tax Changes
- Implement a two-tiered income tax bracket at the $200,000 threshold for married couples filing jointly (and 50 and 75 percent of this level for single filers and head of household filers), with income below these levels taxed at 4.25 percent in 2025 and 3.99 percent in 2026; income above the thresholds will be taxed at the current rate of 4.5 percent. This change increases revenues by $126.9 million in fiscal 2025.
- Maintain the corporate income tax rate at 2.5 percent, increasing revenues by $74.2 million.
- Maintain the sales tax transfer from the General Fund to the Highway Fund and Highway Trust Fund at the fiscal 2024 level of 4.0 percent of revenues, increasing general fund revenues by $236.9 million in fiscal 2025.
- Provide a refundable child and dependent care tax credit for families for eligible care expenses, decreasing general fund revenues by $57.8 million.
- Provide a non-refundable tax credit equal to 25 percent of the value of land donated for eligible conservation purposes, decreasing general fund revenues by $4.7 million in fiscal 2025.
Education
- Invest $730.3 million in public school students and teachers.
- Provide $322.7 million for an 8.5 percent average total raise for all teachers and minimize pay plateaus for experienced teachers. This makes starting pay the highest in the Southeast, increasing it to over $47,500.
- Invest $10.0 million to restore master’s pay and $25.4 million to improve recruitment and retention for school-based administrators.
- Provide $34.7 million to expand the Read to Achieve program to middle school students.
- Increase of $70.0 million for the newly combined At-Risk and Disadvantaged Student Supplemental Fund allotments.
- Provide $56.8 million to increase funding for the Children with Disabilities allotment.
- Provide $44.6 million to support school health personnel including school counselors, nurses, social workers, and psychologists.
- Recommend voters approve a $2.5 billion school construction bond on the November 2024 ballot to help address the $13.0 billion need for new school buildings.
Child Care and Early Education
- Invests $745.2 million to strengthen the state’s economy by investing in child care and early education workforce, sustainability, and access.
- Provide $200.0 million nonrecurring in child care compensation grants that support the workforce when federal support expires on July 1, 2024.
- Provide $128.5 million to create a statewide rate floor that will increase child care subsidy reimbursement rates in rural and lower wealth communities.
- Allot $26.0 million in educational attainment-based salary supplements to 4,000 additional child care teachers to help attract and retain highly qualified staff in early childhood programs.
- Provide $50.0 million nonrecurring in start-up and capital grants for Pre-K and child care centers to prevent closures and help create new education opportunities.
- Invest $197.0 million to raise Pre-K reimbursement rates in all settings to cover the full cost of care and raise the administrative rate from 4.0 percent to 10.0 percent.
State Workforce
- Guarantee at least a 5.0 percent across-the-board increase for all state-funded employees at a cost of $251.9 million.
- Provide $399.7 million nonrecurring in bonuses to net appropriation-supported state employees and state-funded local employees. This funds a $1,500 bonus to employees making $75,000 or less and a $1,000 bonus to those making more than $75,000.
- Provide $195.8 million for an Enhanced Labor Market Adjustment Reserve, equal to 2.0 percent of general fund payroll. This gives flexibility to agencies to address labor market concerns across all positions.
- Increase annual leave days for employees earlier in their career to help attract state workers and improve retention among employees with fewer years of service.
- Invest $109.6 million nonrecurring for a retiree cost-of-living adjustment.
Economic Development
- Provide $49.0 million to reduce unemployment insurance taxes for businesses with 500 or fewer employees.
- Increase the maximum weekly unemployment benefit to $450 from $350 for new claims, with annual adjustments for inflation.
- Create the Strategic Workforce Trust to expand and improve the state’s labor supply, with funding targeted at the health care workforce, job coaches, Job Ready grants, and local innovation technical assistance.
Natural Resources
- Invest $148.1 million to conserve land and water resources and build community resilience to disaster.
- Provide an additional $2.0 million recurring and $30.0 million nonrecurring to support improvements at state parks, matching grants for local parks, and access to beaches and coastline.
- Provide an additional $2.0 million recurring and $30.0 million nonrecurring to support the Land and Water Fund with grants for projects that protect and restore resources.
- Invest $20.0 million nonrecurring to support organizations working to reduce flooding across streams and waterways.
- Provide $20.0 million nonrecurring to bolster the State Fire Fund.