Proposed Budget - Fiscal Years 2026 - 2027
On April 21, North Carolina Governor Josh Stein introduced a biennial budget for fiscal years 2026 and 2027. The budget proposes $33.3 billion in general fund spending for fiscal 2026 and $35.4 billion for fiscal 2027, an increase of $2.2 billion, or 6.5 percent, above proposed fiscal 2026. The consensus revenue forecast estimates general fund revenues at $35.1 billion in fiscal 2026 and $34.7 billion in fiscal 2027, a decrease of 1.0 percent compared to the fiscal 2026 estimate. Available general fund revenues are estimated at $35.9 billion in fiscal 2027, factoring in the opening balance and proposed adjustments to revenues. In the month after the governor released his proposed budget, state revenue forecasters issued a revised consensus forecast that anticipates $609M in additional revenue in fiscal 2026 and $713M in additional revenue in fiscal 2027. The budget includes $5.8 billion in reserves for future needs, including $3.7 billion in the Savings Reserve, $531.0 million in the State Emergency Response and Disaster Relief Fund, and $500.0 million in Medicaid Contingency funding. The projected balance at the close of fiscal 2027 is $501.8 million.
Proposed Budget Highlights
The governor’s proposed budget maintains the state’s fiscal stability while making strategic, future-focused investments that expand opportunity for every community and family.
Revenue Changes
- Maintains the individual income tax rate at 3.99 percent and repeals the rate-reduction triggers. Under current law, the rate would be lowered to 3.49 percent in 2027 and 2.99 percent in 2028 based on the current consensus forecast.
- Maintains the corporate income tax rate at 2.0 percent, increasing revenues starting in fiscal 2028 relative to current law.
- Raises the standard deduction starting in 2027 by $1,000 (from $25,500) for married couples filing jointly, $750 for heads of households, and $500 for single filers and married couples filing separately.
- Establishes a refundable Working Families Tax Credit equal to 10 percent of the federal earned income tax credit starting in 2026. Families must have earned income to be eligible, and the credit varies by income, family size, and marital status.
- Establishes a refundable child and dependent care tax credit starting in 2026 equal to 30 percent of the recently expanded federal credit.
- Establishes a state sales tax holiday for school supplies and equipment to support teachers and families with school-aged children. The sales tax exemption would apply to school supplies, clothing, computers, and computer supplies below per-item limits over three days during the first weekend of August.
Public Education, Early Education and Child Care
- Raises starting teachers’ salaries to the highest in the Southeast and provides an average 11 percent raise for all educators.
- Provides a $1,000 bonus for all teachers and local education employees with an additional $500 bonus for those who make less than $75,000.
- Funds 360 new school health professionals, including nurses, counselors, social workers, and psychologists.
- Provides free breakfast to all public K-12 students.
- Expands access to higher education by funding enrollment growth in the state university system and community colleges.
- Raises the NC Pre-K reimbursement and provides recurring funds, in addition to block grant funding, to increase child care provider subsidy reimbursement rates and set a statewide subsidy reimbursement rate floor.
Economy and Workforce
- Invests in Propel NC to enhance community college workforce development programs for in-demand, high-wage sectors.
- Supports apprenticeship programs to create opportunities in advanced manufacturing, small business, aviation, the public sector, and rural communities.
- Fortifies workforce housing and makes Housing Trust Fund investments to leverage federal and private funds and create affordable housing, preserve existing rental units, and support home repairs.
Public Safety
- Funds a 10 percent salary increase for fiscal 2026 and an additional 5 percent for fiscal 2027 to address a critical shortage of public safety and law enforcement officers.
- Provides a 6.5 percent raise in fiscal 2026 for probation and parole officers and juvenile court counselors and an additional 3.25 percent raise for fiscal 2027.
- Addresses recruitment and retention efforts for local and state law enforcement agencies with funds for referral and retention bonuses.
- Provides funds to open two additional behavioral health units in state psychiatric hospitals, provides a 10 percent raise for state-funded nurses and health care technicians for fiscal 2026 plus an additional 5 percent increase for fiscal 2027, and provides for 50 new co-responder teams, pairing clinicians and law enforcement to better respond to behavioral health-related calls.
- Funds a school resource officer for every middle school along with new standards for officer training, plus funding for school safety grants.
- Health Care Investments
Recommends funds to strengthen Supplemental Nutrition Assistance Program (SNAP) and align the program with new federal requirements.
Fully funds the Medicaid rebase for fiscal 2027 and responds to changes in federal policy and service utilization.
Other Priorities
- Restores the purchasing power of unemployment insurance benefits and extends the benefits by six to eight weeks.
- Provides grant funds to respond to contaminated wells and distressed water and wastewater systems and recommends funds to expand PFAS testing.
- Supports state employees with a 2.5 percent raise for fiscal 2026 and another 2.5 percent raise for fiscal 2027. Provides a $1,000 bonus for all state employees with an additional $500 bonus for those making less than $75,000.