Governor Stein’s Budget: Supporting North Carolina’s Economic Growth
Budget leverages current momentum to make targeted investments while implementing policies to maintain fiscal balance as the population grows and the economy evolves.
Holly Springs, NC, Mar. 31, 2025 — Governor Josh Stein’s 2025–27 Recommended Budget is built on a strong economic foundation, supported by detailed revenue growth forecasts and demographic shifts. The budget outlines a stable near-term outlook for North Carolina’s economy, though it also warns of challenges in future years that could affect fiscal stability without proactive action.
A Steady Economic Outlook with Caution Ahead
The budget projects continued strength in North Carolina’s economy through fiscal year 2025–26. Personal income is expected to rise, employment levels remain high, and economic output is growing steadily. However, the state does face risks from high inflation, federal funding reductions, and the potential for slower growth in future years.
The forecast anticipates North Carolina’s economy will avoid a recession in the near term, but calls for careful planning to manage future uncertainty. In the words of the budget document, “revenues are adequate in the first year of the biennium, but by the time of the next year, we will face fiscal challenges.”
Revenue Forecasts Support Near-Term Investments
Total General Fund revenue is projected at $34.7 billion for FY 2025–26 and is expected to grow to $35.8 billion in FY 2026–27. This growth is primarily driven by personal income tax collections and continued consumer spending, though the budget warns that revenue growth will moderate as temporary factors fade.
A key factor in sustaining the state’s revenue position is the decision to halt scheduled cuts to income tax rates. Maintaining the personal income tax at 4.25% and the corporate income tax at 2.25% preserves an estimated $2.4 billion over the biennium, funding that will support public education, child care, housing, health care, and emergency preparedness.
The forecast also factors in modest gains from corporate profits and sales tax collections but assumes slower growth beyond 2027 without intervention.
Demographic Trends Shape Policy Priorities
North Carolina continues to experience significant population growth, adding more than 140,000 residents annually since 2020. The total population is expected to exceed 11 million by 2030, making North Carolina one of the fastest-growing states in the country.
Much of this growth is concentrated in urban and suburban areas, though many rural communities are also seeing increases due to housing affordability and job opportunities. The state’s aging population—more than 20% of North Carolinians will be over 65 by the end of the decade—is becoming more diverse.
These shifts present both opportunities and pressures. Demand for schools, transportation infrastructure, health care services, and housing is rising. The budget notes that the state must “invest in public schools, make child care more affordable, build our workforce, keep North Carolinians safe, [and] increase access to health care” to meet the needs of a changing population.
A Call for Long-Term Fiscal Planning
While the near-term revenue picture is healthy, the budget warns of a structural gap on the horizon if the state fails to adjust its tax and spending policies. Scheduled tax cuts and increased demand for services could result in multi-billion-dollar shortfalls within the next few years.
That’s why Governor Stein’s budget emphasizes “a balanced budget that serves North Carolinians, provides opportunity, and attracts people and businesses to our great state.”
Summary
North Carolina’s economic engine remains strong, but the state faces critical choices in the years ahead. Governor Stein’s budget leverages current momentum to make targeted investments while implementing policies to maintain fiscal balance as the population grows and the economy evolves.