NC budget impasse heads to Dec. 15 showdown as Hall digs in
House Speaker Destin Hall, R-Caldwell, stated Wednesday that the House will not support a budget that limits teacher and state employee raises to roughly 2%, citing limited recurring revenue as budget negotiations appear to continue with the Senate.
In a Dec. 3 op-ed, Hall wrote:
“In 2023, the General Assembly adopted a new policy: when the state hits certain revenue triggers, income taxes automatically drop another half-percent below 3.99% for each trigger hit. When that policy passed, President Biden had fifteen months left in office. During that time, Bidenflation soared, and our state’s population continued to grow at one of the fastest rates in the country. As a result, the 2023 revenue triggers no longer make sense. Independent forecasts now warn of deficits as early as 2027. Some say those projections are too pessimistic, and I agree. But for North Carolina to avoid major problems, they would have to be more inaccurate than they have ever been. That’s not a risk any fiscal conservative should take.”
Hall attributed the constrained revenue outlook to updated economic forecasts that now project possible deficits as early as 2027, making the automatic spending increases enacted in the 2023 budget no longer viable. He stated that the Senate has not yet presented a plan to close the projected revenue gap.
In the fiscal note prepared for the House Budget (SB 257), the General Assembly’s Fiscal Research Division had predicted the House’s revenue triggers would not be met under current revenue forecasts. For the first four months of FY 2025-26, General Fund revenue is $11.17 billion, on pace for about $33.5 billion, which would be short of the House’s trigger of $36.3 billion.
“This is very preliminary and does not take into account the annual ‘April surprise’ of revenue each spring,” said Brian Balfour, senior vice president of research at the John Locke Foundation. “We don’t have specific research for revenue forecasts three to four years out, but looking at forecasts just two years out finds them to be quite inaccurate. Looking back at the last seven revenue forecasts made two years out; on average, the projections underestimated revenue by nearly $1.7 billion per year or an average of 6.2%. Six out of seven forecasts were underestimates, typically because forecasters overestimated the impact of tax rate cuts on revenue. Forecasts made three and four years out would be even less reliable.”
The General Assembly has operated without a full biennial budget since July 1, 2025, relying instead on a mini-budgets and a 2016 state law that allows most existing budget spending levels to continue indefinitely. In June, the Senate passed a $5.4 billion stopgap funding measure that the House declined to take up in its entirety, opting instead for separate spending packages.
The prolonged stalemate has drawn criticism from within conservative circles.
“The lack of a budget creates too much uncertainty among state agencies and school districts,” said Balfour. “Moreover, there typically is significant policy included in a full budget bill, policies that need to be addressed like NCInnovation funds, Certificate of Need law repeal, and occupational licensing issues.”
Lawmakers are scheduled to return to Raleigh on Dec. 15 for a session expected to focus on the 2025-27 budget, possible veto override votes, and end of year housecleaning measures. It is not clear that lawmakers actually will return to Raleigh.
“I understand the frustration with the delay. I share it. But the House is fighting to make sure our state remains a beacon for education, business, and family values. Finishing a budget just to say we finished it would be a failure of our duty,” Hall stated in the op-ed.
“I have recently labeled the legislature ‘dysfunctional’ for its inability to come to a budget agreement, along with their finger pointing and squabbling over Medicaid funding,” said Balfour. “I think that label still fits. Rather than writing articles for the N&O to play the blame game, legislative leaders should be working with each other on doing their job of passing a budget.”
Senate leaders have not issued a public response to Hall’s latest comments. Senate President Pro Tem Phil Berger, R-Rockingham, has previously supported accelerating scheduled reductions in the personal income tax rate.
As of Dec. 3, no agreement has been announced between the two chambers.
“NC budget impasse heads to Dec. 15 showdown as Hall digs in” was originally published on www.carolinajournal.com.
