N.C. legislature one step closer to passing pay raises, tax cuts

Axios

21-05-2025

North Carolina's Republican-controlled House released its full state budget proposal Monday, teeing up what's expected to be weeks — or even months — of negotiations between legislative leaders over what to include in their final spending package.
Why it matters: Teachers and state employees will receive pay raises and bonuses, income taxes will decrease, and thousands of vacant positions in state government will be eliminated if the state House and Senate can reach an agreement on how to spend state dollars.
Yes, but: Whether they'll reach a deal is unclear. Though both chambers are led by Republicans, their visions differ on how to spend taxpayer dollars and on issues like when and how to cut income taxes and whether to fund a new children's hospital.
Driving the news: The House's more than 500-page proposal, detailed in a press conference Tuesday morning, would bring North Carolina's starting teacher salary to $50,000 by 2026 — above the national average — reinstate a tax-free holiday, cut 3,000 vacant government jobs, exempt the first $5,000 in tips from state income tax, and increase standard deductions.
Zoom in: In one of the most significant differences from the Senate's budget, the House proposes offsetting its spending by delaying scheduled income tax cuts, which could be a major sticking point in negotiations.
The House and Senate both proposed cutting vacant positions, though the House proposed more cuts, and both chambers also proposed increasing college tuition and cutting higher education spending and diversity, equity and inclusion programs.
The intrigue: The House's proposal does not allocate any additional funds to the planned Duke and UNC children's hospital, as the Senate's does.
The House's plan would also yank funding from NCInnovation, a nonprofit the state helped form for university research, and instead allocate it to Hurricane Helene relief. The Senate, meanwhile, proposed restructuring its funding model for NCInnovation.
State of play: First-term House Speaker Destin Hall and Senate leader Phil Berger will have to work out all of these differences in budget negotiations in the coming weeks if they want to hit their goal of passing a spending plan before July, when the new fiscal year begins.