North Carolina House leaders unveiled their state budget proposal on Monday, which aims for significantly higher salaries for teachers and other state employees.
Like the Senate’s proposal last month, the House’s budget will cost $66 billion over the next two fiscal years, but where exactly the money would go varies greatly under each chamber’s wish list.
The House aims to bolster pay for many taxpayer-funded jobs. To do so, House leaders plan to reallocate savings from government efficiency efforts, like defunding DEI programs, which will bring in over $10 million. In a forthcoming amendment on Tuesday, they also plan to instruct agencies to cut a percentage of vacant government positions.
“We’re committed to investing in the people who invest in North Carolina,” said House Speaker Destin Hall, R-Caldwell. “From raising salaries for teachers and state employees to cutting taxes and slashing bureaucracy, we’re focused on getting the greatest return on North Carolinians’ hard-earned tax dollars while putting more of those dollars back in their pockets.”
Pay Raises
The House’s proposal would provide a 2.5% across-the-board pay raise for state agency employees, community college staff, and UNC System personnel. It also provides state retirees with a 1% cost-of-living bonus in year one and a 2% bonus in year two.
Teachers would see an 8.7% increase in their salary over two years, which would put starting teacher salaries at $56,593 by the end of the biennium.
Under the House budget, a first-year teacher would start at $4,800 per month beginning this July, with an increase to $5,000 next July. The House plan would make North Carolina the number one state in the Southeast for entry-level teacher pay.
In contrast, the Senate plan offers $4,151 per month for first-year teachers, with no increase, and doesn’t reach the House’s starting pay level until a teacher has been in the classroom for eight years.
“The House’s proposal aims to increase average teacher compensation by 8.7% over the biennium. This increase would be notably larger than the 3.3% average pay raise in the Senate’s proposal last month,” said Harris in a comment.
The plan would also restore master’s pay to reward teachers who have pursued graduate school. The additional pay for teachers was previously funded up until 2013.
The NC House budget delivers some of the largest teacher pay raises in state history — because we’re serious about investing in our classrooms, not just talking about it. pic.twitter.com/3VnZKyxTnG
— Rep. Brenden Jones (@BrendenJonesNC) May 19, 2025
Taxes
The House wants to slow down the pace of income tax cut scheduled for the next few years in a diverging move from the Senate. As Harris explained, the personal income tax rate is scheduled to decrease from 4.25% to 3.99% next year, with the possibility of further reductions to 2.49% by 2029 if specific revenue targets are met.
“However, the House’s budget proposal recommends substantially increasing the revenue trigger amounts. For example, the trigger amount for FY 2026 would increase from about $33 billion to $36.3 billion. In contrast, the Senate’s proposal recommended eliminating the triggers to 2.99% and implementing further trigger-based cuts down to 1.99%,” Harris said.
Still, House leaders point to other areas for further tax breaks. As the Carolina Journal reported last week, the budget would exempt the first $5,000 in tipped wages from personal income tax. Leaders also want to reinstate the back-to-school sales-tax holiday weekend.
“Though these targeted cuts may have political appeal, they fall short of the broader tax policy represented by the Senate’s proposal of further reducing the personal income tax rate to 1.99%,” Harris added.
NC Innovation clawback
The budget directs NC Innovation to transfer back to the state $500 million that had been previously allotted to the nonprofit, which was originally intended to bolster commercialization of research across the UNC System.
“Both the House and Senate propose scaling back NCInnovation; however, the House adopts a more aggressive stance,” explained Harris. “While the Senate proposes reclaiming NCInnovation’s $500 million endowment and returning $100 million over four years via annual appropriations, the House calls for recouping the full amount and permanently severing ties with the nonprofit. The House’s proposal would transfer the $500 million to the Hurricane Helene Disaster Recovery Fund.”
The funds will be reallocated toward Hurricane Helene recovery efforts in a new bill set to be voted on this week, according to the Speaker’s office.
“Being Committed to Carolina means meeting today’s challenges head-on,” said Senior Appropriations Chair Rep. Larry Strickland, R-Johnston. “Repurposing NCInnovation funds to help communities still recovering from Hurricane Helene proves that fiscal prudence and compassionate response can go hand-in-hand.”
Savings Reserve
Also in line with disaster recovery, the House wants to replenish the savings reserve that has been depleted through recovery aid to help western North Carolina.
“Since Hurricane Helene, the state’s Savings Reserve balance has decreased from $4.75 billion to $3.61 billion. Prudently, both the House and Senate recommend replenishing the account to its pre-Helene level by allocating more than $1.1 billion in FY 2026,” Harris said.
A significant item not included in the House budget that the Senate passed through is the new children’s hospital. The Senate allocated $638.5 million to North Carolina’s first children’s hospital in a partnership between UNC and Duke Health Systems.
Other provisions in the budget include:
- DMV Privatizaiton Pilot: Funds dozens of new positions at the NC DMV and authorizes a pilot program to test private-sector license renewal services.
- Disaster Recovery: Redirects NCInnovation funding to ongoing relief and recovery efforts for Hurricane Helene.
- School Safety: Invests $50 million in grants to improve safety and security in schools across North Carolina.
“We evaluated every area of the state budget, cutting wasteful spending wherever we found it to fund significant pay raises for our teachers and other state employees with no tax increase,” said Senior Appropriations Chair Rep. Dean Arp, R-Union. “What we have proposed is a sensible, credible plan that invests in our people and reflects the priorities of the people of North Carolina.”
House Republicans will hold a press conference on Tuesday morning to discuss the budget in more detail. Three committees will also vote on the budget on Tuesday, and a floor vote is anticipated by the end of the week.
Now that the House and Senate have both released their budget proposals, the two chambers will meet to negotiate a final budget to send to Governor Josh Stein. The House budget will be heard in committees on Tuesday, with anticipated votes on Wednesday.
Once the House passes its budget, the Senate is expected to vote not to concur, which will set up the conference process between the two chambers. They will meet to negotiate differences before finalizing a budget to send to Governor Cooper.
The budget committee report can be viewed HERE, and the bill text of the budget can be viewed HERE.
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