Senate Republicans release 2025 budget plan

Bill text release marks the start of budget negotiations

Raleigh, N.C.— On Monday, North Carolina Senate Republicans announced their budget for the 2025-2027 Fiscal Biennium. This event marks the biannual budgeting process in which the North Carolina House and Senate work to appropriate funds to operate the state government.

Fiscal status and taxes

• The draft budget spends $32.6 billion in the first year and $33.3 billion in the second year. This drop in direct spending allows North Carolina to replenish its Rainy Day fund to at least $4.75 billion.

  • The Rainy Day fund provided a critical resource for the state after Helene struck, allowing the state to quickly appropriate money to help with disaster response instead of waiting on the slow federal response.

• The Senate’s budget lowers the state personal income tax rate to 3.49% in 2027 and 2.99% in 2028, down from the current rate of 4.50%. Additionally, the legislation provides a pathway to drop state income taxes to 1.99%.

  • Perspective: North Carolina’s top economic development competitors—Texas and Florida—have no personal income tax, which provides them an edge in recruiting businesses, especially since so many small business owners file their business earnings on individual tax returns.

• Works to limit and possibly eliminate the franchise tax. The Senate budget caps the franchise tax on the first $5 million a business makes, protecting small businesses from what the NC Chamber calls a “duplicative and burdensome levy.”

Helene recovery efforts

• The draft Senate budget provides an additional $700 million for Helene recovery needs. This is in addition to the $1.4 billion already appropriated to address recovery issues.

• Here are some of the specific items funded in the Senate’s draft budget:

  • $8 million is provided to the UNC System to allocate to Appalachian State University, UNC-Asheville, Western Carolina, and the North Carolina Arboretum to improve emergency response capabilities.

    $2.5 million is provided to the Community College System to aid colleges that experienced enrollment losses after Hurricane Helene.

    $5 million is allocated to the Division of Community Revitalization at the Department of Commerce.

    $10 million is allocated to the Governor’s Recovery Office for Western North Carolina (GROW NC).

• The draft budget also appropriates $658.6 million in federal Clean Water and Drinking Water State Revolving Funds to repair and replace drinking and wastewater infrastructure damaged by Hurricane Helene.

What they are saying

• Senate Appropriation Chairman Sen. Brent Jackson (R-Sampon) said, “For the last 14 years, the Republicans in the General Assembly have kept their promise to be good stewards of your hard-earned tax dollars, and we’re not going to change course anytime soon. This budget positions North Carolina to remain competitive and attract new residents and businesses for generations.”

• Minority Leader Sen. Sydney Batch (D-Wake) said, “The Senate Republican budget is a blueprint for neglect and cowardice. Instead of investing in the people who make this state work, Republicans are continuing to hoard taxpayer dollars in a rainy day fund— undermining critical agencies and ducking their responsibility by kicking tough decisions over to the House of Representaives.”

• The NC Chamber said, “The NC Chamber is pleased to see Chamber-backed policies included in the budget released by the N.C. Senate this week.”

State employee raises

The Senate budget provides a 1.25% raise in the first half of the biennium with an additional $3,000 bonus.

Here are some of the specific positions the Senate’s budget funds over the general raise for all state employees.

• Law enforcement

  • Correctional Officers will receive an additional 5.25% raise, for a total raise of 8.9%, including step increases.

  • Probation and Parole Officers will receive an additional 2% for a total raise of 6.9%, including step increases.

  • State law enforcement officers, State Capitol Police, and law enforcement officers within the Division of Marine Fisheries, Forestry, Parks, and Wildlife Resources, will also receive an additional 5.25% raise, for a 6.5% total raise.

  • An additional $3,000 bonus for local law enforcement officers across the state.

• Teachers received a 2.3% pay increase in the first year and a 3.3% pay increase over the biennium. Additionally, they will receive a $3,000 bonus for a total increase in compensation of 8.9%.

  • The average teacher pay under this proposal will be $62,407

Projects to keep on the radar:

North Carolina budgets also fund numerous projects across the state. Here are some of the key items to keep an eye on in the Senate budget.

• The proposal provides the State Auditor with $6 million to establish the Division of Accountability, Value, and Efficiency, which will assess whether state agencies and vacant positions within agencies are still needed.

• Reserves a total of $319 million in the Economic Development Project reserve over the biennium for future projects using transfers from other reserves and some General Fund appropriations. After these transfers, a total of $942 million will be available for future appropriation.

• Increasing support for NC Children’s, a partnership between the UNC and Duke health systems to build the state’s first and only freestanding children’s hospital, by $638.5 million and exempting it from certificate of need reviews.

What’s next

The budget will go through the Senate committee process, where various amendments and changes will be proposed. Eventually, the Senate will pass its version of the budget. The North Carolina House will likely announce its version of the budget