Governor Josh Stein budget proposal includes a $35.24 billion plan to pause tax cuts, scale back school vouchers, raise teacher pay, and increase funding for public education and Medicaid.
RALEIGH, N.C. — Governor Josh Stein rolled out a $35.24 billion state budget proposal Tuesday that could reshape how North Carolina handles taxes, education funding, and public services over the next two years.
The plan comes as lawmakers return to Raleigh without a full two-year budget in place since 2023, setting up a likely clash between the Democratic governor and the Republican-controlled General Assembly.
One of Stein’s proposal is a push to pause scheduled tax cuts. Current law would continue lowering the state’s individual income tax rate and eventually eliminate the corporate income tax by 2030.
Stein argues that continuing those reductions could create a major funding gap. State projections cited in the proposal show a potential $5 billion shortfall in the coming years if the cuts move forward as planned.
Under his plan, the individual income tax rate would remain at 3.99% and the corporate tax rate would stay at 2%.
Instead of broader tax reductions, Stein is proposing about $380 million in targeted relief, including:
- A higher standard deduction
- A refundable child care tax credit
- A working families tax credit
- A back-to-school sales tax holiday
SCHOOL VOUCHER PROGRAM COULD BE PHASED OUT
Another major part of Stein’s proposal is a rollback of North Carolina’s Opportunity Scholarship program, which provides state-funded vouchers for private school tuition.
Stein’s plan would gradually phase out the program, allow lower-income students currently enrolled to continue receiving support and redirect funding back into public education.
According to data highlighted in the proposal, a large share of voucher recipients have not previously attended public schools, raising concerns about how funds are being distributed.
The phase-out is projected to save $7.5 billion over the next decade.
EDUCATION FUNDING AND TEACHER PAY
The budget places a strong emphasis on public education, including a $2.3 billion investment aimed at improving teacher pay and student resources.
Key proposals include:
- An average 11% pay raise for teachers
- $1,500 bonuses for most educators
- Free breakfast for all public school students
- Expanded child care and early education funding
North Carolina currently ranks near the bottom nationally in per-pupil spending and teacher pay, according to figures cited in the proposal.
The plan also outlines increased spending across several other areas:
- Pay raises for state employees, including law enforcement and health workers
- More than $970 million for public safety and health care programs
- Continued Medicaid funding for over 3 million residents
- $448 million for workforce development and job training programs
Additional funding would go toward mental health services, child welfare system improvements, and infrastructure upgrades such as DMV technology.
Republican lawmakers have generally supported continuing tax cuts, while some have expressed openness to slowing them to avoid future deficits. Early reactions suggest the governor’s plan may face resistance, particularly on taxes and school vouchers.
The General Assembly will now work to draft its own version of the budget during the current short session.
