Gov. Josh Stein reveals budget proposal that includes Hurricane Helene recovery

RALEIGH, N.C. (WTVD) -- North Carolina Gov. Josh Stein has launched his first budget battle since taking office.

He revealed his state spending plan Wednesday morning.

The proposal includes more money for schools, Hurricane Helene recovery, and much more.

"North Carolina is strong because our people are strong, and we must work to maintain our strength so that future generations will continue to reap the benefits of our work," Stein said. "My budget is balanced and puts kids and families - their job opportunities, their education, their wallets, their health and their safety - first."

Stein, a Democrat, urged Republicans in charge of the legislature to roll back upcoming income tax rate cuts and scale back private school vouchers that now can be received by families of all income levels.

Stein, who took office in January after eight years as attorney general, made the comments while releasing his first two-year state government budget proposal. He wants to spend $33.65 billion in the year starting July 1 - about $2 billion more than planned for this fiscal year - then increase it by $700 million the following year.

"My budget ensures that we will be able to continue investing in our people, meeting their needs, and keeping North Carolina strong," Stein told reporters.

Stein said his budget is balanced, even as a forecast from his budget office and the General Assembly shows year-over-year operating revenues would drop by $825 million in the 2026-27 fiscal year.

How does he do it? In part by asking lawmakers to halt already enacted laws by Republicans that next January would reduce the current individual income tax rate of 4.25% and the corporate income tax rate of 2.25% even further.

"The truth is that we are in for some self-inflicted fiscal pain," Stein said in asking to maintain the current rates. Otherwise, the individual income rate is also likely to fall even further in 2027 thanks to programmed "triggers" in the law if the state surpasses certain annual tax collection totals.

Stein's administration has warned that these triggers could mean the state falls billions of dollars short of revenue necessary to provide services in light of population growth and inflation.

Democrats have complained that these rate cuts benefit the highest wage earners and corporations the most. In contrast, Stein does propose some targeted tax breaks for "working families," including a state version of the federal earned income tax credit.
Republican response

Republicans who will prepare and approve their own two-year budget in the coming months have downplayed forecast shortfalls, saying previous tax reductions have boosted the state's economy and fiscal picture.

With tax reform a major hallmark of the Republican agenda since taking over the General Assembly in 2011, GOP lawmakers are unlikely to back away from changes.

But they may have to pay more attention to Stein given the GOP is currently one seat short of a veto-proof majority in both chambers. That could give Stein more leverage compared to his predecessor Democratic Gov. Roy Cooper's last two years in office.

New GOP House Speaker Destin Hall opened the door to considering changes later Wednesday, telling reporters that inflation, which boosts numerical revenues, may have thrown "off our numbers just a little bit."

But "we're not going to raise taxes obviously," Hall said. Republican Senate leader Phil Berger's office said Stein's proposal raises taxes by preventing a lower tax rate.
Teacher pay vs. vouchers

Stein also proposed average teacher pay raises of 10.7% over two years, with an emphasis on helping early-career instructors.

Stein said it's part of a plan to raise North Carolina starting teacher pay from near the bottom in the Southeast to first in 2027.

Essentially Stein's budget covers these increases by scaling back and ultimately phasing out taxpayer-funded scholarships for K-12 students to attend private schools. The General Assembly made the Opportunity Scholarship program universal in 2023 - meaning families of all incomes can now qualify.

"We have to meet the needs of our public school students," Stein said.

The Riorden family from Lee County told ABC11 that they are strongly considering an alternative to the public school system.

"We were just having, we were just having a really good conversation about this and we don't want to put our kids in the education system," said Jeff Riorden.

He and his wife, Dr. Kyndal Riorden, have two children and are considering homeschooling because of the state of the public school system in North Carolina.

"It's terrible," he said. "Let's funnel the money and use this money to pour into the education system so our little people can grow up and actually pour back into the system."

Kyndal Riorden added, "At our district schools, (teachers are) not staying longer than a year or two max. And so the constant turnover and teachers leaving the system and the students and all of the things that kids don't have -- no consistency in leadership or even just at the classroom level."

Meanwhile, one family visiting North Carolina from Kansas City, Missouri, was debating whether to leave the Midwest and relocate to North Carolina.

"If your school system is poor or it's not well funded, then, you know, the kids are going to suffer eventually," said parent Jennifer Jones-Lacy. "That would absolutely weigh into my decision to move into any state or any city is to figure out what the public school system is."

State Treasurer Brad Briner was critical of the governor's budget proposal.

"We are disappointed the governor is proposing for only the second time in 83 years to not fully fund our state's retirement system. This proposal sent to lawmakers today would create a $206 million shortfall in the funds for our retirees over the next two years," Briner said.

Briner also said he was confident that legislative leaders would take the needs of the state's retirees "more seriously."

Hall said he certainly wants to raise teacher pay robustly, but called Stein's proposal to end the private school scholarships "a nonstarter with us." Nearly 80,000 students are benefiting this school year from the aid.

Stein's budget "rips educational freedom and parental choice from hardworking families," Berger spokesperson Lauren Horsch said.
More Helene requests will come later

Stein's budget didn't include a package to address the historic flooding and damage caused by Hurricane Helene in western North Carolina nearly six months ago. He said Wednesday he would issue another separate request in the coming weeks

The General Assembly has already appropriated or made available over $1.1 billion for Helene recovery activities, according to Stein's office. And a bill going to Stein's desk this week locates over $500 million more.

Stein, who plans to sign the bill into law, said Wednesday that he'll also "keep pushing Congress for meaningful help."

State officials have estimated the storm caused a record $59.6 billion in damages and recovery needs.

The Associated Press contributed.