Over the past year, the Carolina Journal has examined how “reserve funds” are used within the North Carolina state budget—billions of dollars appropriated outside of the General Fund’s top-line budget figure. These funds allow for significant spending while keeping the headline budget number comparatively lower.
How do these reserve funds work, and where are they being directed?
This time, the spotlight is on the “Stabilization and Inflation Reserve.” The Stabilization and Inflation Reserve was established in the FY 2022-23 budget. On its establishment, $1 billion in nonrecurring funds was put into the reserve as appropriated in the 2022-23 budget.
The reserve is to be used “only upon an act of appropriation by the General Assembly, funds available to be used for costs associated with inflation and other measures necessary to stabilize the State economy.”
The Senate outlines several appropriations in the 2025-27 biennial budget, which would appropriate $495.3 million out of the reserve in FY26 and $245.3 million in FY27. This is a total of $740.6 million, almost three-fourths of the $1 billion that has not been touched since the reserve was created.
“The Senate’s budget proposal would spend $740.6 million from the Stabilization and Inflation Reserve across the biennium and transfer another $16.4 million out of the account into other reserves,” Joseph Harris, fiscal policy analyst for the John Locke Foundation, told the Carolina Journal. In total, these allocations would reduce the Stabilization and Inflation Reserve’s balance to $243 million. In contrast, the House’s proposal opts to leave the reserve untouched, despite its diminishing real value.”
The NC Senate Appropriations/Base Budget Committee Report on the Current Operations Appropriations Act outlines the appropriations detailed from the Stabilization and Inflation Reserve. The Senate would appropriate $3 million in FY26 and $3 million in FY27 for PFAS research funding.
The largest appropriation in both fiscal years is $152.3 million to the Compensation Increase Reserve-Teachers and Instructional Support.
The 2025 Appropriations Act gives a more detailed breakdown of how this $152.3 million will be distributed.
In FY 26, the largest appropriation was $250 million, which would be appropriated for the Agricultural Disaster Loss Program. The program offers financial relief to farmers who suffered crop losses in 2024 due to Hurricane Helene, Tropical Storm Debby, drought, and other severe weather conditions.
Additionally, $55 million would be appropriated in FY26 and $55 million in FY27 for the PFAS Mitigation Fund.
Finally, $35 million would be appropriated in FY26 and $35 million in FY27 for school safety grants.
The Senate also appropriates $1 million to the Information Technology Reserve and $15.4 million to the Economic Development Project Reserve.
“Due to approximately 8.6% cumulative inflation from July 2022 to April 2025, North Carolina’s $1 billion Stabilization and Inflation Reserve has lost roughly $85.6 million in purchasing power,” said Harris. “To have the same purchasing power today as it did when it was established, the reserve would need to contain $1.086 billion.”
As lawmakers debate the use of reserve funds in the 2025–27 biennial budget, the Stabilization and Inflation Reserve has emerged as a key source of funding for a range of initiatives—from teacher compensation and school safety to disaster relief and PFAS mitigation. With the Senate proposing to draw down nearly three-fourths of the reserve’s original balance, and the House opting to leave it untouched, the coming negotiations will determine how—and whether—these funds are deployed in the final budget agreement.
The post Reserve Fund Spotlight: Stabalization and Inflation Reserve first appeared on Carolina Journal.