NC lawmakers nearing deal to fund Medicaid as short session kicks off

North Carolina lawmakers are nearing a deal to preserve health care access for millions of North Carolinians, and they’re holding out hope they can agree on a broader budget plan, House Speaker Destin Hall and Senate leader Phil Berger said Tuesday as the legislature gaveled in for the first day of its 2026 session.

Legislative leaders have failed for more than a year to pass a new state budget, creating financial pressures for many parts of state government, including Medicaid, which provides health insurance for about one in every four North Carolinians.

The program is on track to run out of money within the next few weeks, state health officials have projected, raising questions about whether hospitals and doctors would refuse to treat the more than 3 million low-income and disabled people on the program. But that appears to have been diverted due to the deal Republican leaders announced Tuesday.

A vote could happen as soon as Wednesday.

The bill to authorize the funding, a newly rewritten version of House Bill 696,  fully funds the program at the level requested by Democratic Gov. Josh Stein — a $319 million infusion of cash. Berger and Hall also told reporters they pushed to add guardrails and oversight to ensure fraud and waste are being rooted out.

Republicans have questioned whether the Stein administration is doing enough to cut down on costs, questioning efforts to catch fraud or to ensure that only eligible people are receiving care.

“It will have some other provisions that hopefully will begin the process of trying to put some sort of constraints on how quickly Medicaid is growing,” Berger said before the bill became public. It has stricter reporting requirements for the state and for individuals on Medicaid — including new rules that will count people’s gambling winnings against their income eligibility for the program.

Hall is also concerned by the growing size and cost of the program. “The debates about all these other issues we're talking about are not going to matter, because Medicaid is going to swamp it all out,” Hall said. “So we've got to get our arms around it.”

Budget deal still not in sight

While Berger, Hall and their respective chambers of the legislature appear to be on the verge of approving that Medicaid deal, a broader budget agreement isn’t in the cards just yet.

Republicans lead both chambers of the state legislature and are locked in a year-long dispute over the state budget, leading to North Carolina’s status as the only state in the country without a new spending plan. The same issues that halted budget talks last year — namely, disagreements over tax policy, funding for a new children’s hospital and how big of a raise to give state workers — are still causing friction.

Stein, as a Democrat, has little sway over budget negotiations in the Republican-led General Assembly. But in general he sides with the House over the Senate on tax policy, the main sticking point between the two chambers.

The Senate wants to continue aggressively cutting the state’s income tax rate. The House prefers pausing those cuts and keeping income taxes at their current levels — to bring in more revenue to fund pay raises and other budget items — while at the same time reviving the back-to-school sales tax holiday that Republicans eliminated over a decade ago.

Stein on Tuesday issued a budget plan that also freezes income tax cuts, revives the sales tax holiday and creates new child care tax credits for families with young children.

“Budgets require choices,” Stein told reporters. “And with the choice between investing in our children's education and the health of our kids versus giving money to corporate shareholders — or, between cutting taxes for working families and cutting taxes for wealthy out-of-staters — I choose North Carolina's kids, families and future every time.”

School funding fight

Lacking a new budget, hundreds of thousands of state workers are going without the raises that both chambers have promised. The House wants to pay for heftier raises than the Senate, which would rather focus on cutting taxes — two disagreements that are at the heart of the budget stalemate.

In previous years when the state has gone months with no new budget, the raises for state employees that were eventually approved were made retroactive. Hall said Tuesday that there’s still discussion on whether to do that again this year, or perhaps to give state workers a one-time bonus instead.

As Republican legislative leaders lay out their priorities for the new session, Democratic leaders and interest groups are looking to highlight their own priorities. 

Stein gave a news conference Tuesday, ahead of the start of the session, during which he outlined his priorities, including many facing long odds in the Republican-controlled legislature.

Many of his priorities focused on education: Opening up more spaces in state-funded child care and Pre-K programs, paying teachers more, paying for free breakfasts at public schools and hiring more school nurses, counselors and psychologists.

To pay for it all, he proposes slashing a top priority of Republican politicians: Taxpayer-funded vouchers for private school families. “If we're serious about the success of North Carolina's 1.5 million public school students, we should not be taking money away from them to pay for wealthy parents to send their kids to unaccountable private schools,” Stein said.

Teachers and their supporters were rallying outside the legislature as Stein spoke down the street, soon to be followed by a press conference by Democratic lawmakers regarding education funding. State Rep. Julie von Haefen, D-Wake, filed bill to enact a spending plan that had previously been proposed — as part of the decades-long Leandro lawsuit over schools spending — until that lawsuit was shut down earlier this month by the Republican-led state Supreme Court.

“The judicial branch has essentially washed its hands of the issue and thrown it back to the legislature,” bill sponsor Julie von Haefen, D-Wake, said Tuesday at a news conference. “Well fine, then let's own it it's our responsibility now" 

Her bill, House Bill 1017, would increase funding by billions of dollars for things such as teacher pay,  special education services, school facilities, as well as more counselors, nurses and other employees. Von Haefen has introduced a bill every year for seven years to fund the Leandro Plan, but it hasn’t advanced in the Republican-led legislature. GOP lawmakers have been skeptical of the price tag and question how well the plan would work.

Stein urged Republicans to reconsider the state’s level of education funding, noting that North Carolina now trails other Southern states despite once being considered among the forefront in education in the Southeast. South Carolina and Mississippi each now spend billions more on public schools every year than North Carolina does, Stein said, even though their populations are much smaller. North Carolina should be embarrassed by that, he added.

“If you had told me, as a young man in this state, that South Carolina and Mississippi would invest more than North Carolina does — let alone so much more — I simply would not have believed you,” he said. “Let us right this wrong.”

Not just the budget

A proposed new constitutional amendment targeting property taxes — as well as renewed efforts to ban government-backed diversity efforts or eliminate the state’s concealed-firearm requirements — are also among the issues lawmakers could take up as they return for a new session Tuesday.

Some lawmakers, despite their difficulties passing a state budget, are also eager to use this session to wade into local city and county budget discussions. The State House of Representatives is proposing a constitutional amendment, backed by House Speaker Destin Hall, to limit cities’ and counties’ ability to set their own property tax rates.

The measure could be put on the ballot in November for people to vote on, if it wins enough support in the legislature.

Beyond questions of state spending, Republican leaders are also expected to advance bills tackling social issues.

House Majority Leader Rep. Brenden Jones, R-Columbus, has said he’s drafting legislation to ban books with LGBTQ themes from elementary school libraries. The state legislature already banned elementary school teachers from assigning books that contain LGBTQ themes, but that law didn’t explicitly ban libraries from having such books, which is something Jones wants to rectify. “We’re going to put some real teeth in this bill this coming session, so there will be no cloudy areas and no gray areas,” he told WRAL. 

Several hotly contested bills from the 2025 session also remain in flux, awaiting possible veto override attempts.

In the state Senate, Republicans control a supermajority — allowing them to override Stein’s vetoes even with zero Democratic support — and have successfully voted to override Stein’s veto on every bill that’s come up in that chamber. But the House is different. Democrats broke the GOP supermajority in that chamber in 2024, but just barely, and a handful of more moderate Democrats have helped Republicans override some but not all of the vetoes that have come up in that chamber.

Still awaiting action from the House — in votes that could come anytime while the legislature is in session — are bills Stein vetoed last year to eliminate the state’s rules for carrying a concealed firearm, to crack down on diversity, equity and inclusion policies and to require state agencies and local governments to work with federal immigration officials, among other topics.

The House put all of those veto overrides on its calendar to be voted on Tuesday, but a vote didn’t materialize. Republicans are only likely to call a vote if enough Democrats are absent one day, or if they can make a deal to convince enough to switch sides.

Adding to the complexities of what GOP leaders may choose to prioritize during their limited time back in session: Their potential loss of supermajority power.

The November elections are fast-approaching, and polls show a favorable year for Democrats. If Democrats flip even a few seats in the state legislature, they could effectively cement Stein’s veto power.

If Republicans want to pass policies into law that they suspect Stein will veto, this could be their last chance in at least a few years.