Beverly Perdue told reporters Tuesday that she'll go along with it.
"So after this long tough budget negotiation process I believe the state has to move forward," she said. "I am going to sign this budget, but I am going to do so with serious reservations."
The vote came straight down party lines, with Republicans voting against and Democrats voting for.
"Governor Perdue should veto this budget because it increases taxes in a recession," said Republican Senate Minority Leader Phil Berger.
The budget would raise taxes on almost everyone - cost some state workers their jobs - and force public schools, the public safety system, and mental health facilities to tighten their belts.
About 7,000 state workers will be out of work. But the budget spares employees from pay cuts or mandatory furloughs.
The governor said nearly 90 percent of North Carolina families are protected from an income tax surcharge, but an across the board sales tax increase will take its toll on everyone.