Well, it finally happened: after more than a thousand days, the North Carolina General Assembly is voting on a budget. So what’s in it?

There’s a lot to unpack. We can’t cover it all in one post. But here’s some of what grabbed our attention–and should grab yours. Below, you’ll find information about the biggest expenditures, the biggest cuts, and what kinds of policies and laws have been bundled into the budget.

General Assembly rules prohibit amendments to conference reports, and the majority party has issued this budget as a conference report, meaning it will receive a single yes-or-no vote and then, if passed, head to the Governor’s desk. He’ll have ten days to veto it. If he doesn’t, it will become law with or without his signature.

Big Ticket Items

At the end of the day, you can see what a government cares about by looking at where it spends money and where it makes cuts. Here’s what we saw in this budget

  • $528 million for teacher pay (mostly benefitting early career teachers) and $117 million for law enforcement pay.
  • $1.2 billion on Capital Projects for the State of North Carolina, from plane hangers to university facilities and law enforcement campuses
  • ~$1 billion on Medicaid, a joint federal and state program that provides healthcare for hundreds of thousands of North Carolinians
  • $722 million for Disaster Recovery, mostly for Hurricane Helene with some appropriations for Chantal and Matthew 
  • $208 million for a Children’s Hospital – which, because it will be owned by a nonprofit, is not part of the state capital projects
  • $321 million in net new Justice and Public Safety appropriations, almost half of which is for the Department of Adult Correction to address persistent shortfalls
  • $135 million in Economic Incentives to recruit JetZero, an advanced aircraft manufacturer, to North Carolina

Changes to State Workforce

The biggest winners of net new FTE lines are:

  • the Administrative Office of the Courts (+91, including 44 new deputy clerks, 18 assistant district attorneys, 12 indigent defense positions, and 14 admin staff for the new Council of District Attorneys)
  • the State Bureau of Investigation (+81, 54 of which are just a paper reorganization, while another 24 focus on drug and vape enforcement)
  • the Department of Natural & Cultural Resources (+74.5, including 54 for the new Asia complex at the Zoo, 22 for State Parks facilities, and 12 for the Fort Fisher Aquarium)
  • the Department of Environmental Quality (+25, including a paper reorganization of 15 for emissions inspections, plus new jobs for 9 marine patrol officers and 5 emerging contaminant researchers)
  • the State Auditor (+25 mysterious employees with no information)
  • and the Department of Health and Human Services (+24 for SNAP administrative requirements). 

The biggest losers: 

  • the Department of Adult Corrections (-574) 
  • DHHS (-365 vacant positions
  • the Department of Public Safety (-94)
  • the Department of Agriculture (-45)
  • the Department of Administration (-32.8)
  • the Department of Insurance (-25)
  • and the Department of Revenue (-16). 

Although some of these cuts, especially for Adult Corrections and DHHS, are the removal of positions that have been vacant for a while, those vacancies aren’t trivial. They’re a sign that agencies haven’t been able to offer competitive salaries for jobs that were approved across multiple budget cycles. 

Governance

More Legislative Control Over Appointments

The budget includes a significant restructuring of numerous boards and commissions. The effect of most is to reduce the power of the Governor, or of other Democratic members of the Council of State, and to increase the control of the legislature and of Republican members of the Council of State. We’ll release more comprehensive resources on this in the coming days.

National Guard Adjutant General Confirmation

Previously, the Governor had sole authority to appoint the North Carolina National Guard’s Adjutant General. The budget amends this authority. The NCGA must now approve the Governor’s nominee for Adjutant General.

Council of State Exemptions

The budget provides new powers to the Republican members of the Council of State - but none of the Democrats. These include:

  • the power for the Labor Commissioner (currently Luke Farley) to exempt his department from administrative oversight on purchasing, contracts, maintenance, and office leases. This means they would no longer have to comply with normal state government rules for procurement, may negotiate and sign contracts independently, and may be exempt from normal oversight restrictions.
  • the power for the State Treasurer (currently Brad Briner) to exempt his department from the same administrative oversight on purchasing, contracts, maintenance, and office leases.
  • the power for the State Auditor (currently Dave Boliek) to also exempt his department from administrative oversight on purchasing, contracts, maintenance, and office leases, as well as the disposition of surplus property. This is an even broader authority than that given to the Labor Commissioner or the Treasurer.
  • Gives the State Auditor authority to assign resource prosecutors from the Council of District Attorneys to cases arising from his referrals.
  • creates a higher pay ceiling for “exempt” policymaking and managerial positions in every Council of State agency, moving from 10% greater than the State Human Resources max to 30% greater. These are the positions typically hired outside the normal structure, which can sometimes go to partisan appointees.
  • exempts the State Board of Investigation from the Department of Information Technology’s procurement and oversight.

Revenue and Taxation

New Income Tax Cuts 

This budget eliminates the trigger-based income tax cuts and switches over to a mandatory schedule. Income taxes will drop to: 

  • 3.49% in 2027
  • 3.24% in 2030
  • 2.99% in 2033 

The budget also establishes two new revenue triggers that could go into effect between 2035 and 2040 if the state produces enough revenue: one to drop from 2.99% to 2.74%, another to drop from 2.74% to 2.49%. 

This will hamstring the state’s ability to guarantee health, safety, and high quality public services to every resident–not to mention restrict a primary source of good-paying jobs and retirement security for North Carolinians.

Betting on Gambling

North Carolina is all in on gambling. This budget includes a tax hike on sports wagering from 18% to 23%. State law will now route millions more in gambling revenue to college athletics, including at UNC, NC State, Duke, and Wake Forest. This increased tax on wagers is accompanied by a new 6% tax on prediction markets. Finally, the budget incorporates a new provision allowing gamblers to deduct their losses to the maximum extent permitted by federal law. 

The state appears to have legalized gambling so that it could reduce income taxes on wealthy North Carolinians and partially replace them with a tax on gamblers. And it’s routing that gambling revenue to some of the richest athletic programs in the state. 

The Phantom Savings Account

Republican Majority Leader Brenden Jones tweeted that this budget includes over $3 billion in savings. In fact, the draft budget designates ~$3B into various reserve accounts, then pulls from those same reserve accounts to pay for new costs. 

It’s an accounting trick to make it look like money is going into a savings account, when in fact that money goes into the savings account, then comes right back out to be spent. 

Imagine that you put $1,000 into a savings account, tell your spouse you’ve just saved $1,000 dollars, then transfer the money to pay your rent, your mortgage, your insurance, and your electricity bill. It’s true that the money was in your savings account. But it’s also true that you didn’t really “save” the money. You spent it, right after saying you saved it.

That’s a lot of what’s happening here.

Sales Tax Exemption for Data Centers

The sales tax exemption on datacenters’ purchases of electricity are eliminated, but the exemptions are maintained for all other purchases of supplies (including software). That leaves a lot of taxable corporate commercial activity untaxed.

Pork

A (Not So) Random School Voucher Marketing Nonprofit

This budget sets aside a $750,000 recurring contract to pay a nonprofit, Parents for Education Freedom NC, that advocates for school vouchers, charter schools, and private schools. This contract appears in the UNC Board of Governors’ “Aid to Private Institutions” section–even though it concerns K-12 education. 

According to the organization’s Form 990 for 2025, the organization’s President Michael B Long, received $212,674 from the organization out of its $1.1 million budget, while the Vice President, Allison Guenther, received $108,120. One of the organization’s board members, Joel Ford, is a member of the UNC Board of Governors.

The End of a Minority Success Program

This program doesn’t really belong in this section, but it makes for a good financial comparison. The Minority Male Success Program was established to do pretty much what it says: help minority male students progress through and complete community college.

That program, which cost $810,000, was killed in this budget.

In other words, the budget swaps an investment in the careers of promising young men for a shady marketing appropriation to promote charter schools.

A New Children’s Hospital

$208.5 million in nonrecurring funds will flow to NC Children’s Health, a collaboration between UNC Health and Duke Health, to build a new hospital in the Triangle. This is a nonprofit entity, not a state facility like UNC Health. The hospital will include a behavioral health component.

Responsible Fatherhood NC Program

The budget appropriates $2 million for a “responsible fatherhood” program and directs the Division of Social Services to identify and contract with a nonprofit to administer the program. It does not stipulate a specific nonprofit.

Crisis Pregnancy Centers

The budget includes approximately $11.6 million (updated, with thanks to readers!) in appropriations for crisis pregnancy centers. These centers are operated by anti-abortion nonprofits and focus on persuading women not to end their pregnancies. 

Infrastructure and Economic Development

Housing Funds

The budget includes $10 million for the Housing Trust Fund and $25 million for the Workforce Housing Loan program. Both of these are critical funds for creating affordable home ownership and affordable rentals in North Carolina.

Jetzero Incentives

The budget allots $133 million to attract JetZero to the state.

Ferry System Tolls

NCDOT now has authority to levy tolls on all NC Ferry System routes. Previously, DOT only had authority to toll certain routes.

Water and Wastewater Infrastructure

The budget appropriates nearly $60 million in matching funds for federally funded water and wastewater programs. 

It also places a moratorium on surface water transfers, which has already prompted concerns from Charlotte Water.

Building Reserves

This year’s budget eliminates a $42.2 million recurring appropriation for building upkeep. Buildings won’t stop aging, but the state is apparently getting rid of a big savings account used to pay for maintaining them.

Education

A Controversial UNC School Keeps Limping Along

Republican State Auditor Dave Boliek, who has recently made headlines for pressuring county boards of elections to reduce access to polling places, blindsided then-Chancellor Guskiewicz at UNC Chapel Hill with a resolution creating the School of Civic Life and Leadership back in 2023. The school, which acts as a beachhead for conservative intellectual ideas at UNC, has limped through controversy after controversy, resulting in a culture so toxic that UNC had to pay $1.2 million for a 400-page investigation into its many failures.

The UNC administration has refused to release the contents of the report, and is currently fighting multiple media outlets seeking its release in court. That hasn’t stopped the legislature from forking over a new, $5 million recurring appropriation in this budget for the school. While creating a school by legislative fiat is unheard of, it’s even more unusual for the NCGA to stipulate that the school must hire 20 faculty members from outside of UNC.

Chancellor Lee Roberts UNC will also see $35 million in capital funds for planning and development unrelated to the School of Civic Life and Leadership at Carolina North, a satellite campus on the north side of Chapel Hill.

The Collaboratory

The Collaboratory at UNC Chapel Hill was created at the behest of Phil Berger in 2016. Jeff Warren, his former policy adviser, has led the organization for almost ten years. It should be no surprise, then, that it is raking in the dough:

$15 million for research to protect firefighters from PFAS exposure, $10 million to buy and adapt a K-8 math curriculum from another state, $5 million to a math support program pilot, $10 million to continue opioid research initiatives, $7 million for water safety research (another PFAS project), $5 million for a study on the approval process of surface water transfers, $4.5 million in operating funds, $500,000 for a study of literacy professional development for teachers in grades 9-12, $300,000 to create a workgroup that will propose a model to transition North Carolina to a weighted student funding model for K-12 education, and $225,000 to study student achievement, the Collaboratory will receive at least $57 million dollars in this budget.

At the same time, it will become a much less transparent organization than any normal university research institute. Collaboratory employees will now be reclassified as “legislative employees,” which means that their communications with legislators are no longer a matter of public record. Not only that, but all records attached to “sensitive” projects are totally exempt from public records–not just the records containing genuinely sensitive information.

Declining Enrollment Cuts Into Per-Student Funding

Part of the total school funding appropriation is determined using average daily membership (ADM). If ADM goes up, schools get more money. If it goes down, they get less. Enrollment is down, so the public school system will receive about $105 million less this year.

New AI Programs

This budget includes $2.5 million each for Khanmigo and MagicSchool AI tutoring to students and curriculum design to teachers. It also appropriates $1 million for positions at Wake Tech to help implement the Lighthouse Math Project at East Wake High School and Knightdale High School and $500,000 for those two schools to work with Khan Academy to create a college math course that depends on Khanmigo’s AI. DPI receives $1 million to contract with Scholar Education to provide AI learning and teaching resources. There is also $400,000 in funding for AI training programs.

The budget requires an AI literacy standard for K-12 students and a model AI use policy for all public schools. 

Health

More Child Care Subsidies 

The new budget dedicates $100 million from federal block grants to increase child care subsidy rates. Carolina Forward has just released a child care research report that called for higher child care subsidies, among other things.

Child care subsidies reimburse providers for costs they can’t recover from clients. Without them, many childcare providers would not be in business, many North Carolinians would not find child care, and the ones who could would pay much more. Increasing subsidies is essential for providing affordable child care.

The Healthy Opportunities Pilot is Back

Some rare good news!

With $9 million in nonrecurring funds, one of North Carolina’s greatest experiments in healthcare returns for a second act. The Healthy Opportunities Pilot (or HOP) makes people healthier and reduces medical costs for individuals and taxpayers by connecting Medicaid beneficiaries to food, housing, and transportation. That efficient investment in preventive care and wellbeing fends off more expensive and dangerous illness, saving money for individuals and for taxpayers while improving the quality and length of life for recipients.

Hospital Sales Tax Refund Cap

Previously, large nonprofit hospitals could divide their holdings up across multiple “fiscal entities,” each of which was allowed to claim a refund of up to $31.7 million in sales tax revenue. This new law allows UNC Health to continue doing this, but no other nonprofits–hitting Atrium and Novant. 

This is a reasonable step, but the system needs to make other fixes to prevent Atrium and Novant from just passing these costs along to consumers when they renegotiate their commercial insurance rates.

Opioid Abatement Projects

This budget transfers $80 million to the Opioid Abatement Fund for opioid addiction treatment, prevention, and recovery.

Justice

Extending the SBI Director’s Term

The current SBI Director was nominated by Governor Roy Cooper and confirmed in 2024. His term is slated to end in 2030. The budget renews his term in 2027, extending it to 2033. This circumvents the normal appointment process, which runs through the Governor, insulating the role from the Executive Branch.

New Council of District Attorneys

A new Council of District Attorneys is established, independent of the Administrative Office of the Courts. While the Conference of District Attorneys was previously housed inside the AOC vertical, which answers to the Chief Justice, the District Attorneys will now have budgetary independence, a newly empowered council, and a direct line to the General Assembly.

This provision intersects with the State Auditor’s Office, which will be allowed to refer issues to the Council for prosecutorial support.

The budget includes 14 new positions in DA offices. 

Indigent Defense Services Expanded 

The state appropriated nearly $60 million to increase funding for Indigent Defense Services. This money funds court-appointed attorneys for people who can’t afford them. This is the largest increase to legal support for low-income North Carolinians in recent history.

The good news about Indigent Defense Services is offset by changes to IOLTA, the Interest on Lawyers’ Trust Accounts program. This program, which costs taxpayers no money at all, provides funding for high-quality legal services to people who cannot afford it. Basically, during lawsuits, people or entities who may have to pay other people or entities need to put money in escrow until the trial is concluded. That money generates interest.

Under the old rules, the State Bar Association received that interest and decided how to spend it on legal aid projects.

The new rules create an IOLTA Board of Trustees with nine members: three appointed by the State Bar, and two each by the NC Supreme Court Chief Justice, the House, and the Senate. 

Organizations that do any work whatsoever on immigration, gender transitioning, or lobbying are barred from receiving funds–even if they don’t spend those funds on any of those issues. 

More Ahead

Because the majority party has chosen to release this draft at the last minute, the full ramifications of this budget will only gradually become clear.

For now, wish your budget analyst a good night’s sleep to catch up from this mess!

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