NC budget deal reached; lawmakers aim to vote this week on spending plan, sources say

North Carolina lawmakers — who spent the weekend deliberating over proposals in a long-awaited state budget — have reached a budget deal and aim to vote on the spending plan this week, people familiar with the deal told WRAL News late Sunday. 

The deal, reached Sunday evening, is expected to leave intact the framework leaders of the state House and Senate agreed to last month. The framework includes raises for all state employees, with sizable bumps for teachers and law enforcement officers, and an accord on scheduled income tax cuts. But it won’t include some big-ticket items, such as a mechanism to fund a Major League Baseball stadium in support of a possible expansion bid in Raleigh. 

Lawmakers, who have been at odds over spending priorities for more than a year, previously announced the broad strokes of an agreement. But Senate leader Phil Berger and House Speaker Destin Hall have spent the past few weeks negotiating lingering disputes over budget priorities.

North Carolina is the only state that hasn’t passed a comprehensive budget for the two-year fiscal cycle that began on July 1, 2025. So most state agencies have been operating under spending levels approved in October 2023. 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. 

The House and Senate would still have to vote on the deal before sending it to Democratic Gov. Josh Stein for his consideration. While lawmakers hope to approve the plan this week, Stein would have 10 days to sign 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. 

Here are some highlights of what’s expected to be in the budget, and what’s out. 

Raises for teachers, state workers. The new budget will contain 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. None of the raises would be retroactive for the current fiscal year; they would only begin in the next fiscal year, which starts in July. In the meantime, teachers and state employees would be given a one-time bonus for this year. The deal provides for $1,000 bonuses for those making more than $65,000 a year, and $1,750 for those making less.

Income tax cuts. Lawmakers have sparred over whether to keep scheduled income tax cuts in place. 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 the 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.

Money for children’s hospital. The legislature agreed to put an additional $105 million toward a new children’s hospital to be built in Apex, bringing the state’s total commitment to north of $425 million. They were expected to raid 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. As part of the 2023 state budget, the legislature promised nearly $320 million to the children’s hospital. The $3 billion hospital, to be built in Apex through a partnership between UNC Health and Duke Health, is expected to create 8,000 jobs and conduct cutting-edge treatments and research into rare or hard-to-treat pediatric disorders. It’s a top priority for state Senate leader Phil Berger. But House leaders have questioned the wisdom of spending so much money when pediatric care already exists in the Triangle and while hospitals in areas far less wealthy are struggling to keep their doors open.

Increased taxes on betting operators. The budget is expected to increase the rate at which it taxes sports gambling operators. The state collects 18% of gross wagering revenue from eight legal and regulated operators. It has collected more than $287 million in taxes since the March 2024 launch of online sports betting, far exceeding initial projections. The budget would increase the rate to 23%, WRAL previously reported. Lawmakers have also considered an additional tax to lottery sales and individual sports bets, WRAL previously reported. Operators have warned that beneficiaries of gambling revenue could lose out if taxes are raised on bettors or betting operators and bettors turn elsewhere, even to illegal options, if it becomes more expensive to bet legally in North Carolina.

Tax revenue sharing for UNC, NC State. The University of North Carolina and NC State University would get a cut of the revenue from sports gambling taxes under the new budget. UNC and NC State, the state's largest and most popular public school athletics departments, have been left out of distributions from taxes on sports betting operators that have flowed to the other 13 UNC System schools. The budget would include the Triangle rivals in a revamped distribution model. The schools — along with other Football Bowl Subdivision Appalachian State, Charlotte and East Carolina — could receive up to $5.8 million annually beginning July 1, 2027, according to a budget proposal reviewed by WRAL.

No baseball. Lawmakers excluded a framework for a $1.7-billion Raleigh stadium — a plan that would support a Major League Baseball expansion bid, people familiar with the matter said. The proposal was supported by the Senate, but the House leaders opposed public funding for the project. The proposal called for $500 million in state funding with the rest of the stadium money coming from local revenue sources, sports gambling taxes, personal income tax withholdings from players and performers at the facility and the creation of a sports and entertainment taxing district. Lawmakers could revisit the idea outside of the budget process or in a future budget.

Closing tax loopholes. The budget is also expected to close certain tax loopholes and exemptions for data centers and nonprofits, including some hospitals and affordable housing developers — provisions that could save the state tens of millions of dollars annually.  

WRAL reporters Brian Murphy and Will Doran contributed to this report.