Senate Republicans unveil $66 billion budget plan for 2025–27
- Carolina Journal
- 17 minutes ago
- 5 min read
Brianna Kraemer
Carolina Journal
North Carolina Senate Republicans released their proposed $66 billion biennial budget Monday evening, outlining major funding priorities for the 2025–27 fiscal cycle. Key provisions in the 439-page proposal include pay raises for public employees, hurricane recovery investments, tax cuts, and other policy changes.
The first year of the budget allocates $32.6 billion, with $33.3 billion planned for the second.
“This is a relatively modest increase compared to Gov. Josh Stein’s recent budget proposal, which recommended increasing spending by approximately $2 billion or to $33.6 billion in FY 2026,” explained Joseph Harris, fiscal policy analyst at the John Locke Foundation.
The budget proposal is slated to go through three Senate committees by Tuesday afternoon, with a floor vote expected by the end of the week. After the Senate passes its budget, negotiations with the House will begin, which could take weeks or many months.
Key areas receiving funding in the Senate’s proposed 2025–27 budget include:
K–12 Public Education (DPI): $24 billion
Supports teacher pay, school operations, literacy programs, and student services across North Carolina’s public schools. Continuing to fully fund opportunity scholarships.
Health Benefits (Medicaid): $13 billion
Covers Medicaid and health insurance for low-income residents, including managed care and program expansions.
UNC System (all institutions): $10 billion
Funds academic and health programs across 16 public universities, including UNC-Chapel Hill and NC State.
Adult Correction: $4 billion
Supports prisons, correctional staff salaries, and rehabilitation programs for the state’s incarcerated population.
Transportation (Highway Fund + Trust Fund): $12 billion
Invests in road maintenance, new highway construction, rail, aviation, and public transportation infrastructure.
“By protecting the funding for Opportunity Scholarships in this budget, they are not only honoring parental demand for this program, but they are reinforcing what we have continued to say all along: education funding should follow the child,” said Mike Long, President of Parents for Educational Freedom in North Carolina. “As North Carolina continues to shift the paradigm from ‘funding systems’ to ‘funding students,’ today’s budget announcement is yet another example of lawmakers placing the needs of students and families first.”
The Senate proposal includes a 1.25% across-the-board raise for nearly all state employees with a $3,000 bonus over the biennium. Teachers specifically will receive an average 2.3% pay increase in 2025–26 and an average increase of 3.3% over the biennium, plus a $3,000 bonus over the biennium. Correctional officers, law enforcement, and probation officers will see additional increases, with some totaling up to 14.4%, in addition to a $3,000 bonus over the biennium.
Key highlights include a $700 million investment in recovery efforts for Hurricane Helene, $633 million in temporary and permanent repurposing of funds within the Department of Transportation, and restoring the Rainy Day Fund to $4.75 billion, which now sits at $3.61 billion.
“As we’ve been saying since Helene struck western North Carolina back in the fall, recovery efforts are going to take time, and funding will be allocated over several vehicles,” said Sen. Ralph Hise, R-Mitchell. “We remain hopeful that the federal government will provide increased and expedited reimbursements, but we must prepare to fend for ourselves.”
The bill aims to claw back over $100 million in unused funds from the Department of Transportation for Hurricane Helene relief. The unused funds include over $100 million that was appropriated for DMV IT modernization in 2013 and $28 million allocated for debris removal and highway repairs from Hurricane Dorian in 2019. Altogether, DOT funding changes provide more than $630 million over the biennium to ensure continued recovery in Western North Carolina.
The lengthy draft also offers tax cuts for North Carolinians, including the income tax rate and the franchise tax, an annual tax on a business’s net worth. The Senate’s proposal would raise the franchise tax cap, exempting the first $5 million of a business’s net worth—up from the current $1 million threshold.
The budget proposal also lowers the personal income tax rate to 3.49% in 2027 and 2.99% in 2028, eliminating trigger-based cuts and adding in a long-term goal of lowering the income tax rate to 1.99% if certain revenue benchmarks are met.
“Gov. Josh Stein’s proposal suggested halting further reductions to the personal and corporate income tax rates,” Harris said. “The Senate’s budget proposal maintains the plan to eliminate the corporate income tax in 2030 and adds to the cuts to the personal income tax rate.”
Meanwhile, sports betting companies would see their tax rates rise from 18% to 36%, which is still well below the 50% rate in states like Delaware, New Hampshire, and New York.
The proposal allocates $638.5 million to North Carolina’s first children’s hospital in a partnership between UNC and Duke Health Systems, increasing the state’s total contributions to $855 million. The bill exempts the hospital from certain Certificate of Need laws to eliminate any potential barriers.
“We also look ahead to initiatives that will build on North Carolina’s already stellar reputation among the states,” said Senate Leader Phil Berger. “That includes supporting the North Carolina Children’s Hospital, which is a partnership between UNC Health, Duke Health and those systems are going to build North Carolina’s first free-standing children’s hospital.”
Meanwhile, the proposal requires NCInnovation to return $100 million to the State Treasury and transfer the remaining $400 million to the UNC Board of Governors to be used for North Carolina Children’s Health.
“By changing the funding model, we are freeing up funding to go to other priorities, like the NC Children’s Hospital,” said Hise.
Instead of an endowment model, NCInnovation will move to a cash flow model, receiving $25 million annually for four years to the existing, but empty, NCInnovation Reserve Fund.
The State Auditor is appropriated $6 million to establish new positions within the Division of Accountability, Value, and Efficiency (DAVE), which is being pushed at the state level to assess government waste.
The proposal allocates an additional $80 million to boost childcare subsidy rates, aiming to address the ongoing childcare crisis and improve access for working families.
The budget also includes several policy efforts that have been advancing through the General Assembly in different bills.
Carbon plan—The proposal would remove the state’s interim 70% carbon reduction goal by 2030 to preserve the power grid’s reliability and affordability.
Medicaid – The budget directs DHHS to move ahead with seeking a work requirement for Medicaid, which could see cuts at the federal level.
CON – Certificate of Need laws, which legislators said drive up costs for patients by stifling competition, are repealed.
Investment Authority – The budget bill includes the creation of the North Carolina Investment Authority. This new body, functioning independently from the Department of State Treasurer, is tasked with managing and executing investment programs for various state funds. The Authority may invest in digital assets only after approval by its Board of Directors.
North Carolina’s two-year budget cycle starts on July 1, which means the General Assembly and the governor aim to finalize and pass the budget by June 30. Reporters asked if the proposal could change if funding cuts within the federal government impact the state.
“We’re midway through April. The budget is not going to be finalized until sometime maybe in June,” Berger said with his fingers crossed. “So I think we’ll be able to, if necessary, make adjustments. It’s our belief that we have adequate reserves to address any scenario that is likely to occur.”
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