North Carolina Governor Josh Stein revealed his state spending plan, launching his first budget battle since taking office. The proposal includes more money for schools, Hurricane Helene recovery, and targeted tax cuts for working families.
In an effort to confront a looming budget shortfall, Gov. Stein also urged Republicans in the North Carolina General Assembly to roll back upcoming income tax rate cuts for the ultra-wealthy, as well as scale back private school vouchers that now can be received by high-income families.
“The truth is that we are in for some self-inflicted fiscal pain,” Gov. Stein said in asking to maintain the current income tax rates. Otherwise, the individual income rate is also likely to fall even further in 2027, thanks to programmed “triggers” in the law if the state surpasses certain annual tax collection totals.
Gov. Stein’s administration has warned that these triggers could mean the state falls billions of dollars short of the revenue necessary to provide services in light of population growth and inflation.
Democrats have argued that these rate cuts benefit the highest wage earners and corporations the most. In contrast, Gov. Stein proposes some targeted tax breaks for “working families,” including a state version of the federal earned income tax credit.
Republicans who will prepare and approve their own two-year budget in the coming months have downplayed forecast shortfalls, saying previous tax reductions have boosted the state’s economy and fiscal picture. GOP lawmakers are unlikely to back away from changes, but they may have to pay more attention to Gov. Stein given the GOP is currently short of a veto-proof majority.
Gov. Stein also proposed average teacher pay raises of 10.7% over two years, with an emphasis on helping early-career instructors. Gov. Stein said it’s part of a plan to raise North Carolina’s starting teacher pay from near the bottom in the Southeast to first in 2027. Essentially, Gov. Stein’s budget covers these increases by scaling back and ultimately phasing out taxpayer-funded scholarships for K-12 students to attend private schools.
The Republican-led General Assembly made the Opportunity Scholarship program universal in 2023 – meaning families of all incomes can now qualify.
NC House Speaker Destin Hall called Gov. Stein’s proposal to end the private school scholarships “a nonstarter with us.”
Nearly 80,000 students are receiving vouchers this school year. However, over $100 million in funding, which equates to roughly 44 percent of the voucher program, is going to upper-class families.
