North Carolina

The governor’s proposed “First in Opportunity” budget focuses on priority areas of education, economic development and workforce, physical and behavioral health, and a government equipped to meet the needs of a growing state.

Recommended Revenue Changes

• Implementation of a two-bracket rate structure at the $200,000 threshold for married filers and proportionally lower for other filing statuses (taxable income above $200,000 would continue to be taxed at 4.75 percent while income below that amount would benefit from decreases to 4.6 percent in 2024 and 4.5 percent in 2025), which would raise $69.0 million the first year and $222.0 million the second year of the biennium.
• Maintain the corporate income tax rate at 2.5 percent on a permanent basis, which would raise $65.0 million in fiscal 2025.
• Maintain the sales tax transfer from the General Fund to the Highway Fund and Highway Trust Fund at 2.0 percent of revenues (versus increasing to 6.0 percent by fiscal 2025 as in current law), increasing general fund revenues by $210.0 million in fiscal 2024 and $429.0 million in fiscal 2025.
  
  

Securing the State’s Human Capital

• Provides $573.0 million recurring in fiscal 2024 and $909.2 million recurring in fiscal 2025 to fund a 5.0 percent across-the-board salary increase in fiscal 2024 and an additional 3.0 percent increase in fiscal 2025 for net appropriation-supported state employees, receipt-supported General Fund employees, and certain state-funded local employees plus an additional 1.5 percent increase in the first year for employees on a step plan.
• Provides $250.9 million recurring in fiscal 2024 for recruitment and retention. These funds may be used at the discretion of the agency to address labor market concerns specific to the agency’s staffing needs. Allocates $648.8 million recurring in fiscal 2024 and $1.1 billion recurring in fiscal 2025 to increase teacher pay by an average of more than 18 percent, adjusting the teacher salary schedule to ensure all educators receive at least a 10.0 percent increase in fiscal 2024 and an additional 6.0 percent in fiscal 2025.
  • The proposed salary schedule minimizes plateaus for veteran teachers and increases starting pay to $46,000 in fiscal 2025.
• Provides $463.5 million nonrecurring in fiscal 2024 for state employee retention bonuses of $1,500 (employees making less than $75,000) or $1,000 (employees making more than $75,000).
• Adjusts annual leave and longevity pay to improve employee retention.

Ensuring a Sound Basic Education

• Provides $4.5 billion to meet an educational court order and pursue the policy and programmatic changes outlined in the Comprehensive Remedial Plan including:
  • $2.5 billion to provide fair and equitable distribution of financial resources.
  • $943.5 million to expand access to high-quality early childhood education for ages birth to five.
  • $170.5 million to develop a skilled educator pipeline and build educator/principal capacity.
  • $141.4 million to support low-performing schools and districts.
  • $102.0 million to create a guided pathway from high school to postsecondary education and career opportunities.
  • Invests $513.8 million for schools to hire nurses, counselors, social workers, and school psychologists to meet the physical and mental health needs of students.

Prioritizing Mental Health

• The budget anticipates Medicaid expansion is effective June 1, 2023, and recommends using expansion proceeds to invest $1.0 billion nonrecurring in fiscal 2024 to address the mental health crisis through the Improving Health Outcomes for People Everywhere (IHOPE) Fund.
• Invests $1.7 million recurring in fiscal 2024 and $3.9 million recurring in fiscal 2025 to increase the number of crisis stabilization beds for children at facilities.
• Provides $3.1 million nonrecurring in fiscal 2024 and $2.8 million nonrecurring in fiscal 2025 to expand evidence-based behavioral health supports and services for children in schools.
• Invests $4.0 million recurring to establish a crisis unit to serve juvenile justice youth with mental and physical health concerns.

Meeting Workforce Needs

• Provides $15.0 million recurring from the new Strategic Workforce Investment Trust Fund (SWFT) to fund competitive grants to workforce development boards to support employers hiring, training, and retaining employees.
• Provides $9.1 million nonrecurring in fiscal 2024 and $10.0 million recurring in fiscal 2025 for assistance grants for Short-Term Workforce Credentials at community colleges to help unemployed individuals enter the workforce more rapidly.
• Invests $500.0 million over the biennium from the Savings Reserve to stabilize and sustain the state’s childcare industry through compensation and fixed cost grants.
• Includes $100.0 million recurring to provide a statewide rate floor in the childcare subsidy program in lower wealth counties.
• Provides $107.9 million recurring in fiscal 2024 and $109.4 million in fiscal 2025 to support hard to staff industries such as skilled nursing, personal care services, and childcare.
• Invests nearly $232.8 million over the biennium for high-need workforce programs.

Enhancing Public Safety and Preventing Violent Crime

• Invests $15.0 million nonrecurring in fiscal 2024 for grant programs with $5 million available to expand the use of evidence-based programming for violence intervention and prevention and $10.0 million available to support the acquisition of body-worn cameras for law enforcement.
• Provides $13.2 million over the biennium to expand re-entry programming and community supervision services.
• Invests $7.6 million recurring in juvenile crime prevention.
• Provides $50.0 million nonrecurring in fiscal 2024 for school safety grants.