Despite ongoing talks, NC budget might not be ready until after start of new fiscal year

RALEIGH — Six weeks after North Carolina’s Republican legislative leaders announced an agreement on raises for state employees and income tax rates, they still don’t have a comprehensive budget for the coming fiscal year — or even deal for one.

It appears increasingly unlikely that a budget deal will be voted on before July 1, when the 2026-27 fiscal year starts.

“The House announced that we were going to have it by May, and I certainly said I thought we could have it by June,” said Senate leader Phil Berger, R-Rockingham. “Clearly that has not turned out to be the case.”

North Carolina’s state budgets usually cover two years at a time. And North Carolina is the only state in the nation without a budget for the two-year period that began July 1, 2025. Republicans hold large majorities in both chambers and are negotiating between themselves. Democrats, including Gov. Josh Stein, are largely cut out of the process.

Several large issues remain unresolved, including whether to invest in a potential Major League Baseball stadium, funding for a planned children’s hospital in Wake County, and money for member-supported capital projects across the state. The Senate, led by Berger, is in favor of baseball and more funding for the children’s hospital, while the House has displayed more skepticism toward both projects.

“Even though those are sort of the big issues that are left outstanding, in my opinion, those are things that we ought to be able to get resolved relatively soon,” House Speaker Destin Hall, R-Caldwell, said Wednesday.

Lawmakers honored the Stanley Cup-champion Carolina Hurricanes, overrode several Stein vetoes  over the objections of Democrats and debated a bill that would change many election laws in committee this week.

Behind closed doors, Berger and Hall have been holding regular meetings as they try to finalize an agreement between the chambers. The leaders met until 10 p.m. Wednesday night and met again Thursday.

“I’m encouraged by the progress that we’re making,” Berger said. “The real challenge is the amount of time that we have, given the number of things that still need to be decided, exactly when we’ll get that finished.”

Even if Berger and Hall come to a verbal agreement, it could take days for staffers to turn their plans into a legal document. Then the House and Senate would both have to approve it before sending it to Stein for his consideration. Stein would have 10 days to approve it, veto it or let it become law without his signature. If he were to veto the Republican-led plan, lawmakers could be faced with additional negotiations if they can’t find the votes to override the veto. Lawmakers have indicated that the process could go past the July 4th holiday.

The House and Senate passed their own individual budget proposals in the spring of 2025, but never reached agreement on an overall deal.

The state-employee raises that were agreed upon last month — 3% for most state employees, 8% for teachers and larger increases for workers across many public safety agencies — are set to begin July 1 at the earliest, provided a budget has been approved by then. 

"As the legislature leaves teachers and law enforcement officers waiting for hard-earned and desperately needed pay raises, members of the General Assembly are stoking the culture wars that divide us rather than fulfilling their long-overdue responsibility of passing a budget,” Stein said in a statement after the veto overrides. “It's time for them to do their jobs for the people of North Carolina.”

Unlike the federal government, North Carolina’s state government doesn’t shut down when a budget isn’t passed — it runs on the most recently passed spending levels. Most state programs and agencies are operating under spending approved in the fall of 2023 when lawmakers passed a comprehensive $30-budget that included many Republican priorities but also Medicaid expansion — long a priority of then-Gov. Roy Cooper, a Democrat.