NC Republicans have a deal on the overdue state budget, with raises and tax cuts

RALEIGH, N.C. — Almost a year late, North Carolina is headed toward having a new state budget.

House Speaker Destin Hall and Senate leader Phil Berger, both Republicans, had been at a stalemate since the summer of 2025, when they failed to reach an agreement on the amounts of tax cuts or raises for teachers and state employees. Hall and Berger are the top lawmakers in each chamber, which are controlled by Republicans.

The deal, on a framework lawmakers will use as a starting point to write a final budget bill, includes dropping the individual income tax rate to 3.49% in 2027, which is also what it would have been under the Senate’s prior plan for tax cuts. That would remain in place for three years.

But the tax rate would not drop further based on revenue benchmarks, as the deal eliminates those tax cut triggers. The agreement also includes putting a constitutional amendment on fall ballots that would cap the income tax rate at 3.5%.

Raises and bonuses for teachers, state employees

Republican leaders of the House and Senate outlined the deal to reporters late afternoon on Tuesday — after the House Republicans shared the news on social media with “Habemus budget deal,” which means “we have a budget deal.” It’s a play on the Latin phrase used to announce a new pope, “Habemus papem.”

They still have a lot of work to do working out the details, and top budget committee chairs are meeting this week to iron that out. A budget document is expected in the coming weeks.

Berger and Hall announced an agreement on average teacher raises of 8%. Starting teacher pay would be set at $48,000 without supplements.

A raise of 3% for state employees is also part of the deal, with some receiving higher raises, along with bonuses. Bonuses would be given out to account for no new raises this current fiscal year, which is nearly over. Employees making less than $65,000 a year would receive a bonus of $1,750, and a $1,000 bonus would be given for those making more than that.

Some in law enforcement would receive much higher raises than other state employees, with an average 20.3% raise for State Bureau of Investigation and Alcohol Law Enforcement officers, and 17.7% with step increases for State Highway Patrol officers. Local law enforcement officers would also receive a $1,750 bonus from the state.

Experienced teachers also would receive a bonus under the deal. Those bonuses would be $1,000 for teachers with more than 16 years of experience, and $500 for those with fewer years of service.

Retirees would receive a 2.5% bonus.

Much more work on the budget to come

“We have an understanding on a number of things,” Berger said, saying that “this is a starting point,” and calling the agreement a “good framework for moving forward.”

Both leaders had been dug in, with Hall pushing for higher raises than Berger wanted, and Berger wanting faster tax cuts than Hall. Those two major costs have been at the core of the stalemate, which slowly started to break as the legislative short session began three weeks ago.

A majority of House Democrats voted with House Republicans on their 2025 budget proposal.

Aside from three very small spending bills passed in the fall, negotiations stalled out until last month. At that point, lawmakers passed a bill, which Democratic Gov. Josh Stein signed into law, to fund Medicaid needs for the current fiscal year, which ends in June.

But raises have been on hold, and state agencies have been operating at the same levels as the last new budget. North Carolina’s state government does not shut down without a budget like the federal government does — instead, spending levels remain the same until new money is appropriated.

Hall and Berger said Tuesday evening after each chamber’s voting sessions that they expect a final budget bill to be passed as soon as mid-June. These major funding factors of spending and tax revenue had to be worked out first before they can iron out further details.

Berger said that he and Hall had come to a general agreement about a week and a half to two weeks ago. He said there wasn’t a big breakthrough in the past few days, but rather just sorting out last details before they announced the deal.

“I think right now, if things go smoothly, we could be in a place to have a vote on a conference report by the middle of June,” Berger said, meaning the final negotiated budget bill.

They also noted that the revised revenue forecast is due out in the coming days, and said they are confident that revenue and spending are in line.

Democrats want to see final budget raises, question tax rate cap

Stein praised the raises in the Republicans’ budget deal, but wants to see it finalized.

“It is past time that our teachers, state law enforcement officers, and state employees get a meaningful pay raise and recognition for their service to the people of North Carolina,” Stein said in a statement.

“Today’s announcement is only a framework, but if the final budget actually includes real salary increases, it would be welcome. The proof, however, will be in the pudding,” he said.

House Minority Leader Robert Reives also told reporters on Tuesday that the raises are “all well and good” but he wants to see it on paper.

“The thing that I did see that was incredibly concerning is talking about putting a cap on income tax through a constitutional amendment,” Reives said, adding that they shouldn’t limit future lawmakers’ ability to adjust tax rates.

Stein called the amendment proposal “a financial straitjacket that could wreak havoc on our public schools and public safety.”

“If we want to continue to be the best state to live, work, and raise a family for years to come, we must be fiscally responsible and not make working families bear an unfair burden,” Stein said.

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