State lawmakers plan to return to Raleigh next month to kick off a new session, but there’s no indication Republican leaders in the state House and Senate are any closer to finalizing a budget deal than they were months ago when negotiations fell apart.
That led Democratic Gov. Josh Stein on Monday to lay out a $1.4 billion proposal to fund what he considers to be immediate needs. His request includes raises for state employees and funding for Medicaid, which provides health insurance for about one-third of North Carolinians but is on the verge of running out of money.
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“Medicaid undergirds the entire health system,” Stein said during a news conference. “We simply must save it.”
Republican lawmakers, who control the state's full $30 billion budget, agree with Stein that Medicaid needs additional state funding, and last year the House and Senate each introduced bills to fund it. But unrelated budget squabbles torpedoed the negotiations, and each chamber refused to pass the other chamber’s proposal, leaving the program under-funded.
North Carolina remains the only state in the country without a new budget plan in place, and Medicaid is just one of several state services facing financial stress.
“The General Assembly must pass a critical-needs budget,” Stein said. “We cannot wait on Medicare. We cannot wait to keep people safe. We cannot wait to value teachers, nurses and other public servants, and we cannot wait on many critical services like the SBI and the DMV.”
GOP response
Spokespeople for Senate leader Phil Berger and House Speaker Destin Hall each expressed concerns about Stein's proposal Monday, while also promising that they'll focus on passing a new budget when they return to session.
Hall spokesperson Demi Dowdy said Stein's plan lacks "basic cost controls" for health care spending, in part by allowing people on Medicaid to be covered for pricey GLP-1 weight-loss drugs.
"The House has committed to making necessary investments in healthcare, but it must be done in a way that ensures transparency and responsible stewardship of taxpayer funds," Dowdy said.
"Senate Republicans remain committed to addressing the state’s most pressing needs in a responsible, fiscally sound manner," Berger spokeswoman Lauren Horsch said. "Gov. Stein’s proposal is the opposite of that. It would create a recurring budget deficit and force the state to increase taxes on working families.”
Several years ago, the legislature voted to gradually reduce income tax rates for people and corporations through 2030. Last year, a bipartisan group of economists working for Stein and the legislature put out a report that said because of those planned tax cuts, the state will hit a deficit as soon as this coming fiscal year. Since North Carolina can't engage in deficit spending like the federal government, that would force the legislature to either rethink tax cuts or slash state spending.
During 2025 budget negotiations, House Republicans were open to freezing income taxes at their current rates, at least for now. But Senate Republicans strongly disagreed, pushing to forge ahead with the cuts and whatever spending reductions might be needed.
Stein said Monday that's a foolish strategy, and one that kneecaps the state's ability to keep up even with neighboring states in what it pays teachers, law enforcement officers and more.
"We are not a poor state," Stein said. "But we are making ourselves a poor state by reckless, pre-programmed tax cuts."
What no new budget means
When North Carolina doesn’t have a budget in place, it doesn’t enter a government shutdown. Instead, government operates under funding levels outlined in the most recently approved budget.
“Many things have changed,” since the last full budget passed in 2023, Stein said. “The state has added more than 300,000 people. The cost of living has increased by more than 6%, and the federal government is abandoning long-held commitments. Yet we have not had a full budget. So the state keeps operating at a baseline, limping along.”
But with inflation and a growing population, many programs and services are underfunded. Stein's budget request cites population increases in several of the requests for higher funding, including $46 million for the UNC System, $2.5 million for the State Bureau of Investigation and $319 million for Medicaid.
The lack of a new budget also means state employees have gone over a year without the raises politicians promised were coming. He proposes that all state employees receive at least a 2.5% raise, with higher raises for certain jobs including an average 5.8% raise for teachers and school support staff (5.8% average raise), and a 10% raise for all state health care workers, corrections officer and law enforcement personnel.
Stein singled out pay for the State Highway Patrol in particular, pointing to the state’s 49th-in-the-nation ranking for the starting salary for new state troopers.
“It should surprise no one that the State Highway Patrol now has more than 270 vacant positions,” Stein said. “We're losing out on talented, service-minded people to other states, local governments and other jobs, because we don't pay our troopers enough.”