Two topics dominated legislative discussions this week: the announcement of an agreement on a framework for a comprehensive state budget between the House and Senate, and property tax reform legislation in the House.
State Budget
After a year of deadlock between the House and Senate, Senate Leader Phil Berger and House Speaker Destin Hall held a joint press conference announcing a framework agreement between the two chambers that they will use to build the rest of an official state budget around. Most of the framework revolves around the state’s income tax rate and government employee salaries, both of which have been points of discussion between the Senate and House over the past year. The Senate supported maintaining the previously approved reductions in income tax rates, while the House supported pausing those reductions.
Both chambers agreed to a new personal income tax schedule, with rates set at 3.49% in 2027, then dropping every three years to finally end at 2.49% in 2035. Both chambers also agreed to place a constitutional amendment on the November 2026 ballot that would cap the income tax rate at 3.5%. A similar constitutional amendment was passed in 2018 to cap the income tax rate at 7%. That provision was approved by 57% of voters.
The corporate income tax rate step-down plan remains untouched. It currently sits at 2% and is scheduled to reach 0% in 2030.
The House and Senate also agreed to varying salary increases for government employees, based on the perceived need to make wages more competitive to attract talent. Teachers will see an average 8% raise, while law enforcement officers will see higher raises, varying from 13% to 20%, depending on the agency. Other state employees will see a 3% increase, and all government employees, plus some local law enforcement officers, will receive bonuses ranging from $500 to $1,750, depending on tenure and existing salary levels.
Significantly, the budget deal between the chambers also included an agreement for the Senate to pass House Bill 1089, which would place a constitutional amendment on the ballot to create a levy limit for local government property taxes. More details on that legislation below.
Tax Reform
The House Finance Committee moved two bills forward this week that would impact county property tax rates.
First, House Bill 1042 – Affordable Housing Exemption Mods was approved and sent to the Rules Committee. The bill closes a property tax loophole created by a lawsuit in 2013 that allowed for-profit companies to use nonprofits with extremely small ownership shares in housing developments to receive a property tax break, despite not adhering to the intent of state law. NCACC supports the bill and appreciates legislators’ efforts on the bill.
Second, the House Finance Committee also approved House Bill 1089 – Const. Amend. Property Tax Levy Limit. The bill would place a constitutional amendment on the November ballot and, if approved by voters, would amend the State Constitution to require the General Assembly to adopt laws that would limit the amount that property tax levies can increase. This limit could include exceptions. Several lawmakers raised concerns about the impact on local government revenues and service delivery, pointing to cost-shifting and unfunded mandates from the legislature as the main driver behind property tax increases. Despite these concerns, the Finance Committee approved the bill and sent it to the Rules Committee. As part of the budget agreement, the Senate has agreed to take up the constitutional amendment once it passes in the House.
Timing
There is still a significant amount of work to be done before both chambers agree to a joint budget, but both leaders have stated that they expect to have the work completed and the conference report ready for a vote by mid-June.
Bills on the Move
House Bill 1042 – Affordable Housing Exemption Mods
Bill Summary: The bill closes a property tax loophole created by a lawsuit in 2013 that allowed for-profit companies to use nonprofits with extremely small ownership shares in housing developments to receive a property tax break, despite not adhering to the intent of state law. The bill closes that loophole and ensures that only charitable organizations designed to provide below-market-rate housing can receive the tax breaks as intended. This bill was a recommendation of the House Select Committee on Property Tax Reduction and Reform, and NCACC supports it.
Changes of Note: The bill was modified with technical changes, requirements for deed restrictions to be recorded with the register of deeds, and changes to the compliance process for properties that qualify under the bill.
Bill Next Steps: The post-committee substitute was approved and sent to the House Rules Committee for review.
House Bill 1089 – Const. Amend. Property Tax Levy Limit
Bill Summary: This bill proposes an amendment to the North Carolina Constitution, requiring the North Carolina General Assembly to pass a law that would limit the amount of property tax a local government could levy, with exceptions. If passed, the amendment would be included on the November ballot and would need to be approved by a majority of voters.
Levy limits in other states have been used to restrict year-over-year growth in local government spending, often tied to inflation plus population growth factors. This bill was a recommendation of the House Select Committee on Property Tax Reduction and Reform. The NCACC has stated opposition to this bill.
Changes of Note: None this week
Bill Next Steps: The bill was approved by the House Finance Committee and sent to the House Rules Committee for consideration. Note: Passage of this bill was announced as part of the agreed-upon framework for a comprehensive budget deal between the House and Senate.
House Bill 1090 – RURAL Care Act
Bill Summary: This bill creates a new Rural Health Care Infrastructure Fund and Program to be managed by the Rural Health Care Infrastructure Council, replacing the previous Rural Health Care Stabilization Program and Fund. The fund’s goal is to provide a dedicated funding source for the capital and infrastructure needs of rural health care facilities, supporting both new construction and improvements to existing facilities.
Changes of Note: Modifications to the bill include changing the makeup and terms of the council in charge of distributing funding for rural health care infrastructure, details more responsibilities of the newly created council, and provides more clarity on its reporting requirements.
Bill Next Steps: The bill’s proposed committee substitute was approved by the House Committee on Health and sent to the House Appropriations Committee for consideration.
Senate Bill 394 – Prohibit Foreign Ownership of NC Land
Bill Summary: This bill would generally prevent a prohibited foreign party from owning agricultural land or property within a 50-mile radius of a military installation. In this context, a foreign party is defined as an adversarial foreign government or an affiliated entity. The bill would require buyers to submit an affidavit attesting that they are not a prohibited foreign party. The register of deeds would then be required to attach the buyer’s affidavit to the property deed.
Changes of Note: None this week
Bill Next Steps: The bill’s proposed-committee substitute was adopted by the House Committee on Judiciary 2 and referred to the House Committee on Homeland Security and Military and Veterans Affairs.
Senate Bill 990 – Students First Act
Bill Summary: This multipronged bill would do three things: First, it would strengthen the confidentiality of student disciplinary records, barring public colleges and universities from accessing them. Student disciplinary records would be considered privileged and not public records, even if federal law would allow their release. Second, it would direct the North Carolina Collaboratory’s Office of Learning Research to convene a panel of education finance experts to develop a strategy for transitioning North Carolina’s K-12 funding to a weighted student funding model. The work group would examine consolidating various funds into per-pupil allotments, increasing funding flexibility and transparency, reporting on spending, and ensuring accountability. The group would also consider whether the State Education Assistance Authority, rather than the Department of Public Instruction, should handle disbursing funds to local districts. The results of the examination would be summarized in a three-year strategic plan; supported by a $300,000 appropriation.
And lastly, the bill would create a Student-Based Educational Wallet Pilot Program in which eligible high school students at a selected public school would receive up to $395 each for qualifying educational expenses, managed through online accounts. The pilot involves strict application and eligibility requirements, preapproval for expenses, and parent participation agreements. The program emphasizes data privacy, requires a comprehensive report on outcomes, and is funded with a $445,000 appropriation for administration.
Changes of Note: None this week
Bill Next Steps: The bill passed the Senate Education/Higher Education Committee Wednesday, May 13 and will now head to the Senate Appropriations/Base Budget Committee.
Senate Bill 991 – Community College Workforce Readiness Act
Bill Summary: This bill expands North Carolina’s community college workforce training programs for individuals with intellectual and developmental disabilities (IDD) by growing participation from 15 to 25 colleges and providing ongoing funding for staff, training, marketing, and student support. The bill also directs ApprenticeshipNC to develop a plan for faster teacher apprenticeship pathways, allowing high school students to earn college credit, gain classroom experience, and move more quickly toward a teaching license.
In addition, the bill invests nearly $5 million in a statewide digital credential system for community colleges, giving students secure digital records of their certifications and workforce credentials that can be easily shared with employers.
Changes of Note: None this week
Bill Next Steps: The bill passed the Senate Education/Higher Education Committee and is now headed to the Senate Appropriations/Base Budget Committee.
Senate Bill 1044 – Foundational Mathematics Act
Bill Summary: In efforts to improve mathematical proficiency in public schools, this bill sets expectations for schools to use high-quality, research-based math materials and provide at least 60 minutes of math instruction each day for K-8 students.
Students would be tested in math several times a year so schools can identify learning gaps early and provide extra support when needed. Parents would also receive regular updates on their child’s performance. Students who are struggling would receive a personalized support plan outlining interventions and progress monitoring.
The bill also creates a new Office of Learning Research to review and approve math instructional materials and to study what is working in other states.
Changes of Note: None this week
Bill Next Steps: The bill passed the Senate Education/Higher Education Committee on Wednesday, May 13 and will now head to the Senate Appropriations/Base Budget Committee.
Legislation Filed This Week
Senate Bill 1080 – Lower Taxes for All NC
Bill Summary: The bill creates a constitutional amendment to reduce the maximum income tax rate from 7% to 3.5%, effective for taxable years after January 1, 2027.
Changes of Note: None this week
Bill Next Steps: The bill was filed on May 13 and is waiting for committee assignment.