North Carolina entered the new year as the only state in the country without a new budget, leaving questions unanswered for public schools, Medicaid and the UNC System as lawmakers remain locked in an internal standoff over taxes and spending.
Republicans split over taxes and spending
Although Republicans hold supermajorities in both chambers, Senate Democratic Whip Sen. Jay Chaudhuri, who represents Senate District 15, encompassing NC State, said the legislature’s failure to pass a budget reflects divisions inside the majority party more than a lack of votes to move a plan forward.
“Common sense might dictate that when you have a working Republican super majority in both chambers, we might see a budget passed,” Chaudhuri said. “Passing a budget is really the number one responsibility of the General Assembly to carry out. Surprisingly, even when you have Republicans who have a super majority in the General Assembly, you’re unable to pass a budget. I think at the end of the day it’s an abdication on the General Assembly’s part to pass a budget, but it is also an indictment of the real disagreement between the Republican House leadership and the Republican Senate leadership as to whether about what the priorities in this budget ought to be.”
Republican leaders missed the July 1 deadline to pass a new state budget and have now been in a standoff between House and Senate Republicans for more than six months. The Republican-led House sent budget proposals to the Senate in the fall that would pause or adjust automatic tax cuts from 2023 legislation and shift funding away from projects like a new children’s hospital, but Senate Republicans refused to take them up, insisting on keeping the full tax cut schedule and additional spending for the hospital project.
Chaudhuri said Senate leader Phil Berger has treated the tax cut schedule “as a hallmark and a legacy of his leadership,” while House Speaker Destin Hall and House Republicans have grown more wary of giving up revenue they argue will be needed to fund basic services during a possible economic downturn.
Chaudhuri and Rep. Cynthia Ball, a Democrat whose 49th district also includes NC State’s campus, tied the stalled budget to looming 2026 elections and Senate leader Phil Berger’s first serious primary challenge in years. Ball said she has been told that serious budget talks are unlikely until after the March 3 primary, when Berger no longer has to worry that compromising on taxes or spending “is going to lose him votes.”
“That makes no sense to people if you talk to them. Why should a primary in Rockingham County for a Senate district hold up a budget? What’s going to change other than the fact that if Senator Berger wins the primary, he does not have to worry about whether or not he agrees to negotiate on a budget that is going to lose him votes? That’s a whole lot of power held by one person.”
Education funding
Those tax choices are closely tied to public schools, where Democratic lawmakers say the lack of a budget is deepening a severe teacher shortage. Chaudhuri said roughly 60% of the state’s 32 billion dollar spending plan typically goes to education from early childhood through the University system.
“I mean, look, I think the lack of a budget now translates into a lack of investments for our teachers, our students, and the public schools. And it’s all the more worse, and I think exacerbated when we are in the middle of a teacher crisis. I don’t think it’s any secret that the state of North Carolina continues to lag behind the national average when it comes to teacher pay. We continue to be ranked 43rd in the country, last in the Southeast.”
UNC System, NC State and stalled projects
For NC State and other UNC System institutions, operating under an outdated spending plan means growing enrollment without matching growth dollars, limited raises for faculty and little clarity on delayed building projects. In November, the NC State Board of Trustees approved a 3% tuition increase for incoming 2026 students, the first in-state undergrad hike since 2017, citing inflation, operational costs and the lack of state funding to cover record enrollment.
Chaudhuri said that tension is playing out across campuses that are being asked to do more with less, especially when already facing federal funding cuts.
“We’ve certainly seen a record enrollment in the UNC system, but again, I mean, the universities have not received enrollment growth funds that reflect the growth,” Chaudhuri said. “ … I think that the lack of not passing a state budget for higher education becomes more significant and exacerbated when we know that universities such as North Carolina State University confront real federal funding cuts and grant reductions that have happened at the federal level.”
NC State Vice Chancellor Julie Smith told the Board of Trustees in November that without a new state budget, critical priorities remain stalled, including funding the College of Engineering expansion and projects like Poe Hall and the College of Veterinary Medicine’s Large Animal Hospital.
Medicaid, state jobs and core services
Beyond education, both lawmakers said the continuing impasse threatens key state services that many students and their families rely on, particularly Medicaid.
Chaudhuri said federal cuts combined with the absence of a new state budget make it “close to impossible” for the state to make up for the current cuts being made to Medicaid at the federal level, of which the Trump Administration’s “One Big Beautiful Bill” Act’s nearly $1 trillion reduction over 10 years that eliminates enhanced matching funds for expansion states starting December 2026 while imposing stricter six month eligibility checks and new cost sharing up to $35 per service for enrollees.
“And unless we figure out a way to address that issue, I think there is a real danger for hundreds of thousands of North Carolinians, including college students, to lose any kind of health care coverage that they have now,” Chaudhuri said.
Chaudhuri, regarding jobs, said stagnant salaries and subsequent high vacancy rates due to the lack of a budget are making it harder for state agencies to compete with the private sector, particularly in regions like the Triangle that produce a large number of college graduates.
“I think, No.1, when you don’t provide competitive pay in the marketplace for state agencies and you know, particularly when you think about the correctional system and the healthcare system, it is very difficult for state government to compete with the private marketplace, particularly in a region such as the Research Triangle Park, where median wages can be quite high,” Chaudhuri said.
Under North Carolina law, the state continues operating under the previous budget until a new one is passed, avoiding shutdowns but leaving departments to absorb inflation and new demands without additional support. Ball said that stopgap reality has stretched far beyond what residents should accept.
“The people of North Carolina deserve to know when we’re going to be working on legislation so they can make sure they’re following it,” Ball said. “And they also deserve a budget.”
Looking for a path forward
Both lawmakers see the only real way out of the budget impasse coming through the 2026 elections rather than any sudden compromise among current leaders. Chaudhuri called this year’s elections “critical” for breaking the Republican supermajority and forcing both parties to negotiate a budget that reflects North Carolina’s diverse priorities.
“In many instances when you’ve got a Republican super majority, the governor’s recommendations for a budget, really, it just doesn’t have an impact,” Chaudhuri said. “And that’s why the 2026 elections are critical. It’s critical that Democrats break the super majority in one or both chambers because not only is it a reflection of the real bipartisan makeup that we have in the state, but it also forces both parties to come to the table to fashion some kind of compromise that results in a budget. I think that reflects the inputs of both Republicans and Democrats. And as I mentioned, under my time when Gov. Cooper was governor, when we broke the supermajority, we were able to do that.”
