What you need to know

North Carolina’s state budget is typically approved every other year. But this year, it will likely not be finalized. Legislators failed to come to an agreement and recently wrapped up what were possibly their final votes of the year.

Budget decisions are important because they impact everyone across the state and how taxpayer dollars are spent. The state budget for the last two years has hovered around $30 billion per year.

Passing a budget after the deadline isn’t unusual, but lawmakers have typically reached an agreement by fall. The last time the state went without a new two-year budget bill was 2019.

How is the budget funded?

North Carolina generates revenue through taxes, mostly individual income taxes, which account for nearly 52% of all taxes collected in the state. Sales and use taxes account for 34% of the money collected, followed by corporate income taxes at nearly 5% and other smaller tax revenues. 

How does the budget process work?

Many government agencies, such as the Department of Public Instruction and Department of Health and Human Services, are funded through the state budget. The budget covers everything from public services and public employee salaries to tax rates, education funding, infrastructure and health care.

When lawmakers fail to pass a budget before July 1, the state operates on a continuation budget. Agencies get the same level of funding as the previous year, but there are two limitations – they don’t get the previous year’s one-time “non-recurring” funding and their budgets are not adjusted for population increases, inflation or other sources of increased need.

In North Carolina, the budget operates on a biennial schedule, meaning it covers two fiscal years beginning on July 1 and ending on June 30 two years later. Adjustments can be made for the second year. 

Before lawmakers vote, the North Carolina Office of State Budget and Management and the General Assembly’s Fiscal Research Division create a Consensus Revenue Forecast. The plan projects the upcoming state revenue for the fiscal years covered by the budget. 

State agencies submit budget requests to the budget office, which reviews the proposals along with the governor’s office. The governor then recommends a budget based on the agencies’ requests and his or her own priorities. 

From there, the General Assembly deliberates and passes a budget in a measure known as an appropriations act. The governor can sign or veto it. If the governor signs the act, it becomes law. If the governor vetoes it, the legislature can try to override the veto. 

If the override is successful, the appropriations act becomes law without the governor’s signature. If the legislature does not override the veto, the state will operate under a continuing resolution until a new appropriations act is passed and signed into law.

After the budget is law, the budget office certifies each agency budget in accordance with the appropriations act, and agencies can then operate with the new budget.

Why is it taking so long this time around?

The Republican-led House and Senate have failed to come to an agreement due to debates over state employee raises, tax cuts, funding for a new Apex children’s hospital and a Medicaid funding shortfall.

This isn’t the typical partisan fighting between Democrats and Republicans. Instead, Republicans in the House and Senate disagree about how to move forward with a budget. 

The Senate’s top budget writers released a statement in late October calling for House Republicans to “stop playing politics and come to the negotiating table.” However, House Republicans said the Senate’s proposed tax cuts are too steep and unrealistic. 

Without a final budget, cuts to Medicaid rates are expected to impact doctors and hospitals, teachers and state employees will continue working without raises and new construction projects will be delayed. 

The legislature is scheduled to reconvene in mid-November, but lawmakers are not expected to take up the budget again until the next short session begins in April 2026.

What can I do?

If you’d like to share feedback about the state budget, the best way is to contact members of the legislature, according to Marcia Evans, communications director for the budget office. 

You can find phone numbers and email addresses for all representatives or search by your address to find your specific representatives. 

Representation in the N.C. House and N.C. Senate is determined by district, and each resident has one representative in each legislative body.

What else do I need to know?

Lawmakers passed mini budget bills in July and September, which included minor spending for things such as step increase raises for some state agencies. They passed another mini bill in October for step increase raises and spending for the State Highway Patrol.

Find out more

• Open Budget allows you to explore current and past state budgets and spending information.
• The State Budget Manual explains how state agencies develop and manage their budgets.
• Learn how North Carolina’s revenue forecasting works.