Gov. Josh Stein warned Monday that North Carolina could face a $3.5 billion budget shortfall within two years, with public education likely to take the largest hit.
Speaking at an education conference hosted by BEST NC, Stein said the projected gap is tied to tax cuts approved in prior years that are set to continue.
He urged lawmakers to halt those cuts, saying they are reducing state revenue as the population grows and demand for services increases.
“Three and a half billion is real money,” Stein said. “It’s the equivalent of firing 35,000 teachers.”
The $3.5 billion estimate is based on the state’s most recent 2025 state budget update released by the Office of State Budget and Management. It projects a revenue gap of $2.5 billion to $4 billion starting in the 2027-28 fiscal year. The shortfall is driven in part by automatic income tax cuts set to lower the personal rate to 3.49% in 2027. Under current law, income tax rates are set to drop automatically if revenue targets are met.
“This gap exists not because of any new programs,” Stein said. “It exists because of the difference between shrinking revenues and maintaining services for a growing population.”
The governor said he was not calling for a tax hike, but a pause on the current policy. “I am not talking about raising anyone’s taxes,” he said. “I’m just saying that I urge our legislative leaders to reexamine the current fiscal policy in light of the growth and population.”
North Carolina already ranks near the bottom in per-pupil spending, Stein noted, and 43rd in average teacher pay. Starting salaries are lower than in neighboring states, he said, making it harder for districts to recruit and keep teachers.
In one example, Stein described a district near Virginia where higher pay across the border draws teachers away from North Carolina schools.
“We are bearing the fruit of an orchard that was planted a long time ago,” Stein said. “But today, we risk hollowing out the institutions that have helped to create our success.”
Stein tied the warning to his proposed “critical needs” budget, which he said would raise teacher pay by an average of nearly 6 percent. The plan would also restore extra pay for teachers with master’s degrees and provide larger raises for veteran teachers and school leaders.
He said the goal is to make starting teachers pay the highest in the Southeast.
He also called for more funding for school support staff, including counselors, nurses and social workers, saying schools have been underfunded in those areas for years.
North Carolina is one of the fastest-growing states in the country, Stein said, increasing pressure on schools, infrastructure and other services.
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