North Carolina is still the only state without a budget. The current state funding is using budget numbers from 2023, the last time a budget was passed. The state passes a biennial budget which appropriates funds for two years.
Gov. Josh Stein proposed a $1.4 billion budget in March which would emphasize funding to Medicaid, investing in teachers and maintaining services. Communications Director for the NC Office of State Budget and Management Marcia Evans said this was a critical needs budget request, which is not the standard funding request.
“It’s really just for this current fiscal year, that we’re three-quarters of the way through,” Evans said. “There are things that we really need to fund and we don’t want to wait until next fiscal year to address.”
Senior Public Policy Analyst at the NC Budget and Tax Center Sally Hodges-Copple said school districts and getting access to healthcare are affected by the lack of a budget. State government employees have not received a change in pay in multiple years as well.
“It creates enormous uncertainty for state agencies and local governments, local leaders who are trying to plan and deliver well-being in their communities and are unable to do so because they do not have clarity about funding from the state level,” Hodges-Copple said.
The budget fight stems from disagreements between lawmakers in the state House and Senate over income tax cuts. North Carolina has cut income taxes for individuals and businesses since 2013. As part of that policy, Hodges-Copple explained future taxes would automatically be cut regardless of the state's current revenue or ability to provide the current levels of services. Hodges-Copple said if the legislature is not willing to stop the tax cuts, they may have to resort to spending cuts.
“The House is increasingly concerned that those automatic cuts are putting the state in an unsustainable financial position, whereas the Senate remains committed to those autopilot tax cuts,” Hodges-Copple said.
The Dec. 9 State Budget Update compiled by the OSBM stated that revenue growth has plateaued and there would be negative growth in the 2026-27 fiscal year. The update also states that in fiscal year 2027-28 the: “state revenues for the year will not be sufficient to sustain even the current budget with zero growth.
The state budget provides funding over the course of two years. The OSBM and the North Carolina General Assembly’s fiscal research division creates a revenue forecast for what they expect the revenues will be for the biennium. The governor will then put together a proposed budget and present it to the general assembly. Lawmakers will create their own budget and pass it back and forth between the House and Senate until they can agree on an appropriations act.
Once the general assembly approves a budget, the governor can sign it into law. The biennium starts on July 1 of an odd number year. In the second year of the biennium OSBM updates their revenue forecast and the governor will again introduce adjustments to the budget.
For the last four biennium, the legislature has not passed an appropriations act by the July 1 deadline. Evans said while there may not have been an act passed by July 1, budgets have been passed after the deadline.
“There have been many instances in the last eight years, when the legislature could not come to an agreement by the time the new fiscal biennium started,” Evans said.
The state legislature has passed a base budget which is the amount of money it takes to continue operations at the same level at the end of the last biennium.
The legislature has also passed three miniature budgets, which funds fewer services than an appropriations act. These budgets have provided funding for Medicaid, infrastructure projects and Hurricane Helene repairs.
“They have passed some bills that had impact on agency budgets, very targeted, very specific things,” Evans said. “They funded additional positions at the DMV, special projects, just a handful of things; nothing like you would see in a full appropriations act.”
Evans said the state can continue to operate without a budget because of a continuing resolution authority, which the legislature passed. State government agencies are operating their budgets on the previous allotted budget from 2023.
Members of both the House and Senate have acknowledged the need for a budget in the upcoming legislative session. In a press release, Senate Democratic Leader Sydney Batch called for bipartisan collaboration within the Senate and the House to finally pass a budget. House speaker Destin Hall has also made public comments saying getting a budget passed was a top priority for the House when it went back into session.