North CarolinaHB 1252025-2026 SessionHouseWALLET

Continuing Budget Operations.

Sponsored By: Kyle Hall (Republican), Donny Lambeth (Republican), Erin Paré (Republican), Donna McDowell White (Republican)

Signed by Governor

ACCOUNTINGAGRICULTURAL INSPECTIONAGRICULTUREAGRICULTURE DEPT

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Bill Overview

Analyzed Economic Effects

51 provisions identified: 23 benefits, 9 costs, 19 mixed.

More aid for college students

The state provides $98,418,512 each year for need‑based scholarships at public colleges and universities. It also adds $9,500,000 each year to support reduced NC Promise tuition at Elizabeth City State, Fayetteville State, UNC Pembroke, and Western Carolina University.

More school money for students

The state boosts K–12 funding. It adds $10 million a year for textbooks and digital resources, plus $15.5 million in 2025–26 and $3.5 million in 2026–27 for classroom materials. It moves $18 million a year to school technology and $31,493,768 a year to driver education, and adds $186,041,640 in 2025–26 and $166,041,640 in 2026–27 to the State Public School Fund. It adds $104,248,624 each year for enrollment and salary-driven adjustments, and $9.4 million a year to improve the education data system. Lottery funds total about $1.083 billion in 2025–26 and $1.087 billion in 2026–27 for pre‑K, support staff, repairs, scholarships, and school transportation.

More broadband buildout and storm fixes

The state creates a BEAD Fund to hold federal broadband dollars and use them under federal rules. The Department can award GREAT grants to buy satellite installation materials for grantees’ own use, but not pay for subscriptions. It also can give emergency funding to rebuild broadband damaged by Hurricane Helene. Up to $50 million may be used from the Broadband Make Ready Accelerator, with no double-dipping with insurance, and awards may be capped and prioritized.

More Medicaid funding and fund shifts

The law adds $600 million each year (2025–2027) to keep Medicaid enrollment, services, and managed care running, including the Children and Families Specialty Plan targeted for December 2025. It moves $19.302 million one time in 2025–2026 from the Health Advancement fund to the Medicaid account. DHHS must deposit $171.4 million in 2025–2026 and $109 million in 2026–2027 as nontax revenue, and UNC Hospitals must deposit $31,365,305 in each of those years. State psychiatric hospitals (not UNC) must deposit amounts equal to what they get for uncompensated care. The law also sends Talc Settlement funds to Public Health: $7,000,905 in 2025–2026 and $13,475,394 in 2026–2027.

Core state services funded 2025–2027

The law funds the Governor’s Recommended Base Budget for 2025–2027, as later adjusted by the General Assembly. Agencies receive money up to the listed amounts to keep services running.

Major jobs project at Triad airport

If the Economic Investment Committee awards a qualifying grant, the law provides $118.1 million in 2025–2026 for an airplane manufacturer project in Guilford County. The business must invest at least $4.5 billion, create 14,000 jobs, and pay an average wage of $89,340, or repay a fair share if it fails. Lawmakers also plan $133.9 million in 2026–2027 and $198 million more over the next four years if contract targets are met. The 2025–2026 funds are split for land, site work, roadwork, water and sewer, renovations/FAA offsets, and a facility owned by the Airport Authority. The Department must report each September 1 while funds remain unspent.

Cap on State employee health funding

Beginning July 1, 2025, the State’s employer contribution to the State Health Plan is capped at $8,500 per covered employee for the 2025–2026 year, paid monthly. The law does not change employee premiums or benefits, but it sets a hard limit on the employer’s share.

Less state money for Medicaid

Medicaid support is cut by $19,302,000 one time in 2025–26. The Division of Health Benefits also faces a recurring $22,261,000 cut each year in 2025–27. With less state funding, some Medicaid services or access may be reduced.

Big cuts to college aid and waivers

Need‑based scholarships for UNC students drop by $74.97 million each year in 2025–2027. The Longleaf Commitment Community College Grant loses $12.375 million a year, and $125,000 more in UNC funding for Longleaf is eliminated. The state ends $3.5 million a year for nonresident graduate tuition waivers. The Children of Wartime Veterans Scholarship is cut by $11,070,964 each year. Community college nursing faculty salary adjustment funds are also reduced by $1,123,659 each year.

Cuts to school meals, supplies, buses

The state cuts $3 million a year that helped pay reduced‑price meal copays. It also cuts $2.5 million a year for classroom materials and another $12 million one time in 2025–2026. The State Public School Fund is lowered by $20 million one time in 2025–2026. School transportation funding drops by $160.8 million in 2025–2026 and $164.6 million in 2026–2027, which may reduce bus service or shift costs locally.

2024 farm disaster aid with guardrails

The state provides $142 million for 2025–2026 to cover verified 2024 farm disaster losses. It also sets aside $25 million only for verified farm infrastructure losses in the affected area. Recipients must try to get other money first (insurance, federal aid, or donations) and must return those funds up to the State amount if they later receive them. These duties are written into recipient contracts, and the Department must follow set reporting and compliance rules.

Major state building funds and UNC limits

The state provides $823.6 million one time in FY 2025–2026 for listed capital projects. The UNC Board must prioritize repair funds (UNC/R&R21), cap any single repair at $15 million except for listed exceptions, and keep funds on the same campus. The Board must report to lawmakers on these projects. The law also provides $1.6 million one time for temporary housing at the NC School of Science and Mathematics (project UNC/SSM25-1).

More DMV offices and staff

The state opens new DMV offices in Brunswick, Cabarrus, Fuquay-Varina, and Garland. It provides $1.84 million recurring and $11.47 million one time in 2025–2026, and $2.75 million recurring in 2026–2027. DMV adds 40 examiners in 2025–2026 and 21 more in 2026–2027. New offices get 24 full-time jobs in 2025–2026 and 12 more in 2026–2027. DOT can reclassify vacant or temporary jobs to staff these roles. DMV must sign operating contracts by October 1, 2025 and report contract details by December 1, 2025.

Free meals for reduced price students

Schools must give free meals to students who qualify for reduced‑price meals. “School meal” means lunch and, if offered, breakfast. If other funds are not enough, the state school fund can pay the cost.

More support for community colleges

Community colleges get a net $74,998,603 each year for enrollment growth in 2025–27. Wilson Community College’s biologics training center gets $10,000,000 one time in 2025–26. Universities get $2,867,222 each year and $516,664 one time for building operations and maintenance at NC State, UNC–Chapel Hill, and NC School of Science and Mathematics.

State funds employee benefits

The state provides $197,563,133 in recurring General Fund money in 2025–26 to pay employee benefit costs across agencies (for example, DPI $115,396,268; UNC $29,004,662). The Highway Fund adds $8,477,027 recurring in 2025–26 for DOT employee benefits.

State workers get steps and bonuses

Beginning July 1, 2025, state employees can move up salary schedules and receive automatic steps, merit pay, and bonuses as authorized. Teacher and principal bonuses continue under prior law. For 2025–26, employer benefit rates are set (for example, Teachers and State Employees total 24.67%). Agencies may adjust pay within existing personal‑services budgets using vacancy or turnover savings, without exceeding prior‑year levels or using these shifts for scheduled experience‑based raises.

Faster, cheaper pole work for providers

The Broadband Pole Replacement Program reimburses 50% of eligible costs, up to $10,000 per pole, and also 50% of eligible costs to place lines underground. Eligible costs include work paid or incurred after June 1, 2021. In unserved areas, city and co‑op pole owners must give cost estimates within 60 days (valid 14 days) and complete make‑ready work after payment in a reasonable time; multiple requests in 90 days can count as one application. Disputes under these rules go to the Utilities Commission for a decision within 120 days. The law clarifies who is a pole owner and that the broader definition of “pole” includes utility‑owned poles, though the make‑ready rules here do not apply to utility‑owned poles.

Broader broadband project eligibility rules

Projects that provide or restore internet in unserved or underserved areas can qualify, including after disasters. A project tied to a co‑op pole owner can qualify, but one tied to a city pole owner cannot get reimbursement; pole owners cannot pass reimbursed costs to unaffiliated providers and must schedule work fairly. Areas knocked offline by disasters now count as unserved, and certain grant areas are presumed unserved. The state also adopts federal BEAD definitions and requires a competitive, published scoring process for BEAD awards.

Election systems upgrade and staffing

The State Board of Elections receives $15 million one time to complete the SEIMS and campaign finance software upgrades. It must issue an RFP to move the SEIMS modernization forward. Seven exempt positions are funded with $1,193,979 each year in 2025–2027. Another $1.5 million one time is set aside for litigation and does not revert at year end.

Tighter controls on disaster funds

The Governor cannot use Section 1.3 funds for budget adjustments or reallocations under the cited statutes. Spending must not harm eligibility for federal disaster aid and should avoid paying costs likely covered by federal funds. OSBM must add these appropriations to its reports. The State Auditor must include all Section 1.3 funds in required reports and on the public dashboard.

Cuts to mental health services

The state cuts $15,675,205 a year for inpatient psychiatric care in 2025–27. It also cuts $18,562,645 a year in single‑stream funds for mental health, developmental disability, and substance‑use services. The Mental Health and Substance Use Task Force Reserve Fund is reduced by $10,000,000 a year. Child case management loses $4,875,000 a year in receipts and gets only $3,447,205 a year from the General Fund to partly replace it.

Cuts to long-vacant state jobs

Agencies must eliminate positions that were still vacant at the end of FY 2024–2025 by October 1 each year in 2025–2027. The law sets General Fund cuts, such as DPI $1.85 million each year and DEQ $2.26 million in 2025–2026. Agencies must report details and amounts to the Fiscal Research Division by December 1 each year.

Child care aid shifts to TANF

The state cuts $8,000,000 a year in state funds for child care subsidies in 2025–27 and replaces it with federal TANF money. Families on subsidies should see no change now, but stability depends on TANF receipts.

Yancey schools get $25M; funding shifts

Yancey County Schools receive $25 million for new or upgraded school buildings, effective June 27, 2025. Statewide, the Public School Fund gets more receipts of $41.36 million in 2025–2026 and $5.01 million in 2026–2027. The General Fund line for DPI goes down by the same amounts. In 2025–2026, the receipts include a one‑time $40 million transfer from the State Textbook Fund and some sales tax proceeds.

Emergency Management runs its own IT

The Division of Emergency Management manages its own IT and is exempt from oversight by DPS and DIT. This pilot runs through June 30, 2027.

Mental health services steady, funding cut

LME/MCOs must keep at least the same overall service use across their areas as in 2024–2025 during 2025–2027. This does not guarantee the same level of care for any one person and creates no new lawsuit right. The state also moves the Task Force Reserve Fund balance and then cuts single‑stream funding by at least $41.8 million for 2025–2026.

Surgery centers’ charity care rules

Starting November 21, 2025, qualified urban ambulatory surgical facilities must ensure at least 4% of earned revenue comes from self-pay and Medicaid cases, using the law’s Medicare-based formula. They must also report that percentage each year to the Department. Facilities in counties with more than 125,000 people that were licensed before November 21, 2025 are exempt from the 4% rule and the annual report.

New health fund transfer rules

At the start of each quarter, the Department of Revenue transfers insurance tax money to the Health Advancement Receipts Special Fund. If the offset is negative, no money moves that quarter and the negative amount carries forward. DHHS also deposits health‑advancement receipts each quarter, minus the State retention, plus the Revenue transfer. The state updates the reconciliation formula to subtract the quarter’s actual transfer. DHB receivables from FY 2025–2026 and FY 2026–2027 are counted as nontax revenue when collected, and any federal dollars follow 2 C.F.R. Part 225.

More Lifeline phone providers allowed

The Utilities Commission can designate mobile providers as eligible carriers for Lifeline after a petition. It may adopt rules. This can increase options for low-income households using Lifeline discounts for phone or internet.

Historic sites open Sundays in season

The state starts a pilot to open 13 historic sites on Sundays during each site’s peak season. The Department must publish and update the new hours. Reports are due October 1, 2026, April 1, 2027, and October 1, 2027. The program gets $114,000 per year (nonrecurring) in 2025–2026 and 2026–2027.

Broadband program reports and back pay

After money is added to the program’s special fund, the Department must post reports within 60 days and then every quarter. Reports must show applications received, processed, and rejected (with reasons), amounts paid, and the fund balance. The law also keeps reimbursement rights for expenses incurred on or after June 1, 2021, if funds were already encumbered. These rules take effect when the law takes effect.

Firefighter pension boost and QEBA rules

Starting July 1, 2025, the State adds $350,000 a year to the Firefighters’ and Rescue Squad Workers’ Pension Fund, for a total of $20,752,208 in 2025–2026. The Retirement Board sets yearly employer payments for the QEBA, and those payments go into a separate QEBA fund. Up to 0.01% of the employer retirement contribution rate may be deposited into that QEBA fund each year.

Funds to open readiness centers

The law provides $421,544 recurring starting in 2025–2026 and $5.266 million one time in 2025–2026 to open the McLeansville Readiness Center in January 2026. It also provides $400,000 one time in 2025–2026 for startup needs at the North Wilkesboro Readiness Center.

More money for indigent defense

The law gives $10 million one time in 2025–2026 to the Private Assigned Counsel Fund. This supports legal defense for people who cannot afford a lawyer.

One-time funds for Johnston airport

The law transfers $8.3 million one time to the Highway Fund for Johnston Regional Airport. The money pays for capital upgrades and State Highway Patrol aviation relocation starting July 1, 2025.

Retroactive help for UNC Health Blue Ridge

UNC Health Blue Ridge can use $1.5 million per year from ARPA transfers for 2023–2025 to cover costs it paid before July 1, 2023. The money must support the same intended purposes. This eases earlier expenses and supports hospital services.

Cut to NC loan repayment program

The state reduces funding for the North Carolina Loan Repayment Program by $2,000,000 each year in 2025–2027. Fewer health professionals may receive help, or awards may be smaller.

One-time cuts to Special Assistance

State‑County Special Assistance loses $8,647,002 in 2025–26 and $2,250,000 in 2026–27 in state funds. Departmental receipts fall by $750,000 in 2025–26 and $2,250,000 in 2026–27. Seniors who rely on this program may see tighter support in those years.

Cut to county reimbursement system rollout

The state cuts $1,578,905 in one‑time funds in 2025–2026 for operating and maintaining the new County Administration Reimbursement System. The reduction follows a delay in the system’s rollout.

Caps on political appointee jobs

Departments headed by elected officials can designate up to 25 exempt policymaking jobs or 2% of full‑time positions, and up to 25 exempt managerial jobs or 2%, whichever is greater. The Superintendent of Public Instruction can designate up to 70 policymaking and 70 managerial positions or 2%. The State Controller is limited to 10 total exempt positions. The State Board of Elections director is limited to seven specified exempt positions.

IT rules for state agencies updated

DoIT rules do not apply to the General Assembly, courts, UNC, the State Board of Elections, or the State Highway Patrol; each can opt in by written choice. If House Bill 549 becomes law, the State Auditor is also exempt and may opt in. The Division of Emergency Management is excluded from required IT transfers. Two related statutes are repealed. DoIT may shift funds among listed programs after the original purpose is met as practicable.

New rules for exempt state jobs

Council of State agencies, the State Controller, and the State Board of Elections director can set pay for exempt policymaking and managerial jobs. Pay must meet HR minimums and can be up to 10% above the listed maximum. The Governor may designate up to 425 exempt positions across cabinet departments. A successor filling an unexpired term must send designation letters within 180 days after taking the oath.

New state watchdog for waste

The law creates the Division of Accountability, Value, and Efficiency (DAVE) in the State Auditor’s office. All agencies must report by October 1, 2025 how they spend money and list positions vacant six months or more. DAVE can hire staff, use AI tools, and must report findings and any elimination recommendations by December 31, 2025. It may reassess agencies each year. The state provides $6 million per year for up to 45 positions. Key subsections establishing the Division expire December 31, 2028.

Prior rules for R&R21 funds

For 2025–27, funds for project code R&R21 follow Section 40.1(c) of S.L. 2021‑180. This continues earlier handling rules for that money.

Sunset dates for programs set

Section 1.6(d) of S.L. 2023‑7 ends June 30, 2025. The Division created in this act terminates December 31, 2028.

Tighter control of employee benefit funds

Agencies may use available receipts to pay the costs of employee benefits during 2025–2027. OSBM must ensure benefits money is used only for that purpose and can reallocate extra funds to agencies that are short. Agencies cannot use these dollars to raise pay for vacant jobs or give raises beyond what the General Assembly requires. Excess funds go to the Pay Plan Reserve, and OSBM must report by May 1, 2026. The law also moves $394,259 from the Insurance Regulatory Fund to the General Fund for 2025–2026.

PATH homelessness funds shift source

The state reduces $460,000 a year in departmental receipts for the PATH grant’s non‑federal share and replaces it with $460,000 a year from the General Fund. Funding stays level; the source changes.

Public Health uses Talc settlement

Public Health General Fund money is cut by $7,000,905 in 2025–26 and $13,475,394 in 2026–27. The Division must use Talc Settlement funds to replace those amounts.

Benefit costs match salary funding

For 2025–27, employer contributions for benefits must come from the same source that pays the employee’s salary. If a salary is split between General or Highway Funds and receipts, the benefit contributions must match those proportions.

Project land limits and faster contracting

If you use state project funds to buy or improve land, you cannot sell, encumber, or lease it without Economic Investment Committee consent. Any approved lease must keep the land used for the agreed business purpose. For the funded improvements, the project authority and the business are exempt from specified state procurement laws to speed design and construction.

Sponsors & Cosponsors

Cosponsors

There are no cosponsors for this bill.