A budget “framework” deal was announced by Senate and House Leadership on Monday– ending a long impasse between the two Republican-controlled chambers. It is high-level, and much will have to be ironed out over the coming months because many significant items remain unresolved.
The top-line agreement pertains to income tax reductions, the amount counties can increase property taxes and funding for teacher pay raises. Still not agreed to is the prospective Medicaid funding shortfall, Helene relief, NC Innovation funding, etc.
For legislators, the next step is passing the budget by the end of the fiscal year (June 30). It should be a fast and furious process, as many members need to get back to their districts to campaign in advance of the November mid-term election.
Tax Rates
Senator Phil Berger and Speaker Destin Hall announced Monday, as part of their budget agreement, that the personal income tax rate will decrease from 3.99% in 2026 to 3.49% in 2027-2029. The rate will drop to 3.24% in years 2030-2032 and to 2.99% in years 2033 and 2024. Further, the chambers agreed to pass a constitutional amendment (not subject to a gubernatorial veto) that caps the personal income tax rate at 3.5% and sets the maximum amount local governments may charge their residents as to property tax. The corporate tax rate is still on par to be phased out completely by 2030.
Repeal of Data Center Sales Tax Exemption for Electricity
Although neither chamber has disclosed the specific budget details, which will be negotiated going forward, the sales tax exemption that data centers enjoy for power purchases (electricity costs) is rumored to be on the chopping block. Data Centers are suffering through a public relations nightmare across the country and are considered fair game for lawmakers seeking to bolster public opinion before the November election.
Anticipated One-Time Revenue
Not discussed by either leader at Monday’s press conference, but projected, is the impending revenue update that is anticipated to be $3-4B for the coming fiscal year. The Senate purportedly insisted that infusion of cash be treated as a one-time spending versus the idea of increasing recurring budget needs and binding future years on line items. We will work with Transportation leaders at the General Assembly to ensure money is appropriated for significant projects.
House Transportation
The House Transportation Committee will meet this coming week to consider HB 1109– a bill requiring the NC DOT to study project delivery in the Strategic Prioritization Funding Plan and recommend changes to improve the process. If passed, the report would be due by November 2026– a short turnaround.
Confirmation Hearing
Daniel Johnson, Secretary of NC DOT, is expected to be confirmed at a Senate hearing on Wednesday.
Susan Vick, CRMCA NC Lobbyist
