As North Carolina legislative leaders begin to negotiate a spending plan for the next two years, they’ll have a little less money to work with than expected.

Economic forecasters who work in state government have revised their budget projections downward for the next two years.

Forecasters at the legislature and the Office of State Budget and Management come to what’s known as a consensus revenue forecast every year. Then they revise it after the April 15 tax deadline.

The forecasters tend to take a conservative approach, so revised budget projections often provide good news for the state in the form of more revenue coming in than initially anticipated.

But that wasn’t the case this year.

The budget forecast released in February projected the state would collect $544 million more in taxes than expected this fiscal year, but after tax season. Now they expect collections total to be about $364 million. The state’s budget is about $32.6 billion. Forecasters say business tax collections are down slightly because rising costs are cutting into taxable revenues.

The forecast for surplus tax collection in the 2025-26 fiscal year has also been revised downward slightly by $217.6 million or 0.6%. And the forecast for 2026-27 is down a bit more, by $222.4 million or 0.7%

The Office of State Budget and Management ascribed the revision in part to “a weakening outlook for wage and profit growth.”

“Recent business surveys show fewer businesses expect to raise workers’ wages, with many expressing renewed focus on cutting costs to support profitability amid higher prices for imports,” OSBM said in a statement.

Forecasters also predicted slower growth in sales taxes due to lagging wage growth, tariffs and heightened economic uncertainty.

Larger-than-expected tax collections in years past have helped North Carolina build a rainy-day fund — which in turn has helped the state quickly react to unexpected events such as Hurricane Helene, the September storm that caused about $60 billion in damage and left more than 100 North Carolinians dead.

Democratic Gov. Josh Stein seized the news of the budget revision to call on Republican state lawmakers to drop their plans for future tax cuts. His budget proposal called for freezing taxes at their current levels.

“This news comes in the midst of an uncertain economy and federal budget pressures that may put funding for critical resources including Medicaid and SNAP in jeopardy,” Stein said. “It also comes as we find ourselves on the hook for even more Hurricane Helene recovery expenses.”

“We need to balance our books, not bury our heads in the sand,” he concluded.

Demi Dowdy, a spokeswoman for Republican North Carolina House Speaker Destin Hall, provided WRAL News with a statement on Thursday.

“Joe Biden’s legacy of sky high inflation continues, but we’re confident President Trump’s policies will bring economic growth just as they did in his first term,” Dowdy wrote. “Meanwhile, the North Carolina House will continue to pursue fiscally conservative state budgets.”

Republican Senate leaders didn’t immediately respond to requests for comment.

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Despite Trump’s promises to help victims of Hurricane Helene, the North Carolina governor received a letter from FEMA denying the state’s request for full funding to aid the ongoing recovery efforts. May 29, 2025

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Technically, Democratic Gov. Josh Stein’s lawsuit against Republican leaders over the transfer of his election appointment power to the state auditor could go on for a number of months. But practically, it’s over. 

Friday evening, the North Carolina Supreme Court ruled that the North Carolina Court of Appeals did not break any rules by allowing the power shift to go into effect on May 1, when a new State Board of Elections was appointed by Republican State Auditor Dave Boliek. 

While the court did not technically rule on the state constitutional questions at play — does the power shift violate separation of powers or the governor’s duty to faithfully execute the law? — it clearly signaled its approval of the power shift in a 5-2 decision. 

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Now, the majority Republican Court of Appeals will decide on those questions. 

Ultimately, its decision may be appealed to the North Carolina Supreme Court to review again. Since the case deals only with the state constitution, there are no federal court appeal options, said Martin Warf, attorney for Senate President Pro Tempore Phil Berger. 

North Carolina Democratic Party Chair Anderson Clayton confirmed. 

“State court is where this is going to begin and die,” she said. “That’s what Republicans knew going into it.”

How we got here

For nearly a decade, Republican lawmakers have pushed for an elections appointment power shift. 

Their various attempts have included a failed constitutional amendment creating an eight-member board with equal party representation, a law shifting appointment power to the legislature and an elimination of the board altogether to form a new Bipartisan State Board of Elections and Ethics Enforcement. 

All have fallen short. Until now.

Last December, the legislature passed Senate Bill 382, a Hurricane Helene relief bill that also shifted elections appointment power from the governor to the state auditor, a newly Republican-held office. 

In April, the Wake County Superior Court ruled 2-1 that taking away the governor’s election appointment power would hinder his constitutional duty to “take care that the laws be faithfully executed.” 

A week later, an anonymous three-judge panel of the North Carolina Court of Appeals handed down a ruling allowing the power shift to go into effect while they considered the issue. The ruling did not include an explanation.

While Stein asked for the state Supreme Court to step in and postpone the changes until a full decision was made, the court did not do so. If that wasn’t enough to make the court’s stance clear, its Friday opinion certainly did the job. 

According to the court’s reading of the state Constitution, the governor may head the executive branch, but he doesn’t “unilaterally exercise the executive power.” That’s for all 10 Council of State members, including the auditor, to share. Furthermore, the General Assembly is granted power under the state Constitution to assign many of those executive powers as they please, the opinion stated. 

Separation of powers issues brought up by Stein are irrelevant, the opinion stated. While the legislature is the one making the decisions, the transfer of power is contained within the executive branch. 

Democratic Justices Anita Earls and Allison Riggs dissented. 

Earls accused her colleagues of “gaslighting” by claiming to not decide the constitutional issue while laying out their logic for supporting the power shift anyways. The majority opinion ignores precedent on executive power, and gives the legislature free rein to “reshuffle the powers and responsibilities of constitutional officers who are elected by the entire state,” she added. 

“If the voters of North Carolina wanted a Republican official to control the State Board of Elections, they could have elected a Republican Governor,” Earls wrote. “If they wanted David Boliek (the Auditor) in particular to run our elections, they could have elected him Governor. The voters did not.” 

After power shift, what’s next? 

Democracy North Carolina policy director Katelin Kaiser worries that the state Supreme Court ruling will create a culture of fear. 

What if Democratic Superintendent of Public Instruction Mo Green pushes back on the legislature’s stance on DEI? Are they going to modify his powers, Kaiser asked. 

“It creates a requirement of loyalty to the North Carolina General Assembly,” she said. “Rather than the separation and balance of powers, it’s the General Assembly’s say, and if you don’t fall in line, you could be next.” 

The courts won’t offer any relief, Clayton said, so instead she’s looking to another source of power: people’s voices. 

It’s as important now as ever for educated voters to show up to election board meetings, Clayton said. 

“It means making sure that we are present and vocal, and that we’re not also appointing folks that are going to just agree with what the Republican majority on the board says,” she said. 

Further down the line, re-electing Justice Earls and flipping Republican state Supreme Court seats in 2028 is the Democratic plan, she said. 

“We know that Republicans do not believe in fair and impartial judgments anymore,” Clayton said. “They believe in partisan acts and empowering their own party to ignore the Constitution.” 

Kaiser said Democracy NC will bolster its county election board monitoring program and continue advocating for elections officials. For example, they’d like the legislature to change a 1999 law that allows county elections directors to be paid as little as $12 an hour. 

“We’ve seen time and time again that their workload increases, and yet, many times the state does nothing to support,” she said. 

There’s no question that Republican legislators will win the case, Common Cause policy director Ann Webb said. The only question is how long it will take until the litigation officially ends. 

“I think the question is really up to the Governor at this point, whether to continue to pursue this case, recognizing that it’s been signaled from both of these courts where they stand,” Webb said. 

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