North Carolina State Budget FY2026 Analysis

North Carolina spent $34.4 billion across all funds in FY2026, or $3,072 per resident. All-funds spending counts the general fund, federal grants, and dedicated state funds together — the fairest basis for comparing states, since they differ widely in how much they route outside the general fund.

The general fund — the discretionary portion the legislature actually debates — was $34.4 billion, or 100.0% of total spending. The remainder is largely federal grants (Medicaid above all) and dedicated revenues such as fuel taxes earmarked for highways.

Reserves in the rainy day fund stood at $4.2 billion. Because nearly every state is constitutionally required to balance its operating budget, reserves rather than borrowing are how states absorb revenue shortfalls in a downturn.

North Carolina's 2026 Appropriations Act (Senate Bill 257, S.L. 2026-41) ended one of the longest budget stalemates in recent state history: signed July 7, 2026 by Gov. Josh Stein, it is the first full budget since 2023 — more than 1,000 days — after the Republican House and Senate deadlocked over raises and the pace of tax cuts. The $34.4 billion General Fund plan for FY2026-27 passed with bipartisan 92-23 and 37-12 votes. Compensation drives the spending side: average 8% teacher raises ($528 million, weighted toward early-career educators) billed as the largest in 15 years, 3% across-the-board state employee raises with $1,000-$1,750 bonuses, and at least 13% for state law enforcement. Education spending exceeds $19 billion, $1.1 billion above the 2023 budget. The act fully funds the Medicaid rebase at over $1 billion, adds $700 million for Hurricane Helene recovery in western North Carolina, and directs $208 million in ARPA funds to a children's hospital in Apex, plus $1.2-1.6 billion for capital projects. On taxes, it locks in a personal income tax reduction schedule — 3.49% for 2027-29, 3.24% for 2030-32, 2.99% in 2033 — while raising the sports wagering tax from 18% to 23% and taxing prediction markets at 6%. The Savings Reserve grows $450 million to just over $4.2 billion. Offsets include 755 eliminated vacant positions, and analysts project a roughly $1.1 billion structural shortfall by FY2028 as the rate cuts phase in.