NC still doesn’t have a budget. Why a top GOP leader says ‘we’re on track’

North Carolina is inching ever-closer to a budget deal that has proven elusive for months.

For more than a year now, a tiny group of top Republicans leaders in the state House of Representatives and Senate have tried forging a deal on state spending. So far they haven’t produced a document that resembles a comprehensive spending plan. 

But they have announced the broad strokes of an agreement, a sign that they’re working past intra-party fights that have so far prevented new funding for more than a year.

That all could change in the coming weeks, though. Senate leader Phil Berger told reporters Thursday budget writers might have a final draft ready soon for him and House Speaker Destin Hall to review and, if necessary, negotiate any lingering disputes.

Berger and Hall met Wednesday, having set up that meeting anticipating a budget draft to talk about, but had to find other things to talk about. “We did not get into the details on any particular issues,” Berger said.

Berger said they still had plenty to catch up on. Hall’s son turned 1 recently, and the Carolina Hurricanes — whose chief executive, Brian Fork, is Berger’s former chief of staff — are in the middle of an exciting Stanley Cup finals, with a chance to clinch Sunday night in Game 6.

“We talked about a lot of things,” Berger said. “Talked about the Hurricanes, talked about the weather, had conversations about his newborn child, my grandchildren. Nice conversation.”

Democrats have been less than pleased at Republicans’ failure to pass a new budget. The lack of a budget has meant no raises for state workers, no new funding for state construction projects ranging from highways to universities, and uncertainty for many other programs. Top Democratic leader Sen. Sydney Batch, D-Wake, recently posted a video about it, expressing her self-censored outrage with bleeps over what appeared to be profanity. She also held a press conference to explain her frustrations in more G-rated terms.

“The people running this legislature have made a choice, every single day, to prioritize their own political agenda over the basic functions of your government,” she said. “And I know you have felt it in your paycheck, in your premiums, in your kids' classrooms, in your community.”

But with a budget deal possibly on the verge of materializing, here’s what we know so far:

One of the main hangups of the budget was how much of a raise to give state workers, and how to pay for it. The Senate originally wanted small raises, and to focus instead on aggressive new income tax cuts. The House wanted less in tax cuts with bigger raises for state workers.

In the end, they met in the middle. After WRAL broke the news of an impending deal last month, Republican leaders called a press conference to confirm the details: The new budget will contain a moderate income tax cut as well as small raises for many state workers, plus more substantial raises for others in certain jobs.

Many state workers would receive a 3% raise, lower than the rate of inflation in the past 12 months. State employees in prison or law enforcement jobs would get larger raises, ranging from 10.1% to 17.7% depending on their job. Teachers would get raises averaging 8%, with veteran teachers receiving less and early career teachers getting more.

The state’s revenues are growing, so lawmakers think they’ll be able to balance those new raises — plus higher costs, driven by inflation, for construction and other government needs — with new tax cuts.

Berger and Hall have said they’ll agree to lower the income tax rate from 3.99% to 3.49%, and also promote a new constitutional amendment that would ban future legislatures from ever raising taxes above that limit.

What’s less clear is how the legislature might raise revenue from other sources. The legislature’s own state budget analysts have said the income tax cuts are becoming too much and will soon lead to deficits, unless the state can find other ways to make money.

Lawmakers also likely to suggest cuts to state spending. While final details aren’t public yet, early versions of their budget drafts along with more recent developments show both chambers agree on:

• Taking money from NCInnovation
• Slashing millions of dollars from the UNC System
• Eliminating vacant state jobs
• Finding savings on healthcare, such as ramping up efforts to find Medicaid fraud.

Lawmakers have discussed a variety of ways to secure new revenue. Berger confirmed that GOP leaders briefly considered medical marijuana as part of budget negotiations. But he said they couldn’t figure out a way to avoid losing GOP votes for the budget if they did. The state Senate has voted to legalize medical marijuana several times in recent years but the House has never allowed it up for a vote. 

“We seem not to be able to cobble together enough votes to pass something that either addresses the additional revenue [from medical marijuana], addresses the limits on access, all of those things,” Berger said.

If the budget passes the legislature without 100% Republican support, it’s possible Democratic Gov. Josh Stein could veto the budget and force GOP leaders to negotiate with Democrats on spending priorities, knowing that a fractured majority would have a difficult time overriding the veto.

Lawmakers are looking at other types of so-called sin taxes for additional revenue.

• Two bills moving through the legislature this month would hike taxes on pornography, and make strip clubs pay new fees to the state based on how many customers they get.
• The House is also weighing a proposal to let grocery stores sell certain liquor drinks — which, by moving sales out of ABC stores, could also shift tax revenue on those drinks from local governments to the state government.
• Lawmakers are also expected to hike taxes on sports betting companies, WRAL reported last week. Higher sports betting taxes wouldn’t directly affect bettors, and it could bring in millions for the state, so advocates of the idea see it as financially and politically smart. But it could have indirect effects, especially if betting companies decided to stop doing business in North Carolina, offer worse odds or pull back on promotional deals. 
• Lawmakers have also considered an additional tax to lottery sales and individual sports bets, WRAL previously reported. But taxes on lottery sales and individual sports bets could present enough logistical challenges and opposition from bettors to scuttle those proposals, people familiar with the negotiations previously told WRAL.

Increasing sports betting taxes on operators, rather than individuals, could be a simpler solution and easier pitch to lawmakers. “It's been tremendously successful policy in this state,” House Speaker Destin Hall said earlier this month. “A lot of people apparently like to do that sort of thing for one reason or the other. Got a lot of revenue to the state.”

Money for healthcare has been a top driver of budget issues. It’s a fast-growing industry that employs many North Carolinians, affects many more, and has also seen inflation pushing costs constantly higher.

GOP leaders already fixed the issue they created with Medicaid: Not having a new budget meant Medicaid was operating on years-old funding levels and was on track to run out of money this spring. The legislature stepped in to fully fund the program just days ahead of when state officials said the money would run out.

Separately, the legislature has agreed to put an additional $105 million toward a new children’s hospital to be built in Apex. They raided a fund for rural health care to pay for it, saying that the rural program — which was supposed to have been a joint effort by UNC and ECU — never got off the ground.

The legislature has also agreed to put some extra money toward the State Health Plan, but it’s unlikely that the final budget will have enough money to add back in coverage for GLP-1 drugs for state workers, or to fully avoid another round of premium hikes to their insurance.

Democrats have been shut out of the budget process. They don’t have enough seats in the legislature to make Stein’s veto a serious threat, so Republicans don’t have to negotiate with them.

Democrats have questioned why Republicans have forged ahead with other legislation on culture-war issues, or on suggesting new constitutional amendments that wouldn’t appear to actually change anything, since they would just further codify existing law.

The proposed amendments, ranging from taxes to anti-unionization rules to honoring farmers, are all topics that could help boost conservative turnout at the polls this year. Democrats are hoping to break the GOP supermajority and give Stein’s veto more power.

Batch and other Democrats have proposed higher raises for state workers, new investments in mental health care, a boost to public schools and other priorities. They propose paying for that spending by freezing tax cuts, and slashing taxpayer-funded private school vouchers.

“While Republicans have been busy stalling to hide the fact that they're ripping you off, Senate Democrats like us were doing the serious work,” Batch said. “We listened to the people of the state, we looked at what was broken, we identified who has been left behind, and we found the resources to pay to fix the challenges that we face.”

Berger said despite the lengthy delays to the budget, he’s still optimistic to have one made public and approved by the end of June.

The 2026 elections are fast-approaching, and lawmakers have indicated an eagerness to get out of Raleigh and hit the campaign trail this summer regardless of whether they’re able to pass a budget first. 

Berger said he and Hall are confident they’ll be able to reach a budget deal and get the legislative session done, so the campaigning can begin.“We both feel like we're on track to get the budget taken care of this month,” Berger said.

Hall also previously voiced confidence, telling reporters in early June that “I fully expect us to get a budget done very soon.”