NC’s new governor: After state revenue forecast, Stein warns of ‘fiscal cliff’
North Carolina’s consensus revenue forecast came out Friday afternoon, which sets the stage for how much money the state is expected to be able to spend this year.
After years of sunny forecasts and healthy revenue surpluses, clouds have arrived.
Welcome to the Sunday Under the Dome newsletter, which focuses on new Gov. Josh Stein. I’m Dawn Vaughan, The News & Observer’s Capitol bureau chief.
This joint revenue forecast is the consensus between the Office of State Budget and Management, which is a Stein Cabinet agency, and the Legislative Fiscal Research Division, which is comprised of nonpartisan staff at the General Assembly. The forecast covers the next two fiscal years, 2025-2027. The biggest work of the General Assembly’s long session this year will be to pass a state budget and send it to Stein’s desk to sign, veto or let become law without his signature.
Stein already warned of “less revenue, greater demands” looming, mainly because of how much money the state will likely need to spend on Hurricane Helene relief in Western North Carolina.
The forecast does include a current surplus, with about half a billion dollars more expected before the new fiscal year starts July 1. The forecast anticipates an extra $544 million, which is 1.6% more than anticipated. That’s because of “more robust economic growth and financial conditions” than foreseen in the last forecast in May 2024, along with investment income, the corporate income tax and continued growth in wages and consumer spending.
Now come the rain clouds, however:
For 2025-2026, the forecast shows a year-over-year growth rate of just 0.5%, followed by a 2.4% drop in 2026-2027.
“Economic factors exerting upward pressure on the forecast are outweighed by downward pressure from reductions in the individual and corporate income tax rates, resulting in negligible growth in FY 2025-26 and a decline in FY 2026-27,” OSBM and Fiscal Research wrote.
Here’s what Stein said about it in a statement:
“While today’s consensus revenue forecast for this year is positive, North Carolina is approaching a fiscal cliff that threatens our ability to invest in rebuilding western North Carolina, strong public schools, people’s health, infrastructure, and other services we need to make North Carolina safer and stronger.
“With a growing economy and population, it doesn’t have to be this way. I am committed to working with the legislature to develop solutions that allow us to continue to invest in our state’s future.”
The first round of Appropriations Committee meetings start Tuesday at the General Assembly, including a discussion of the revenue forecast on Wednesday. Budget season has begun. Lawmakers’ goal, though they often don’t reach it, is to send a budget bill to the governor’s desk by the end of June.
New Stein staffers
Stein has added more staff, including those who he worked with previously at the N.C. Department of Justice and those who worked for former Democratic Gov. Roy Cooper. Here are the latest staff additions:
▪ Adam Chandler, policy director, previously worked at the U.S. Department of Justice as associate deputy attorney general and chief of staff to the deputy attorney general.
▪ Kindl Detar, senior policy adviser, who previously worked at N.C. DOJ.
▪ Sadie Weiner, senior adviser, who led communications for Cooper.
▪ Awo Eni, digital director, who worked on Cheri Beasley’s 2022 Senate campaign.
▪ Liz Doherty, policy adviser, who was also policy adviser for Cooper when he was governor and communications director for Cooper’s 2020 campaign.
▪ Rania Hassan, policy analyst, who had the same job for Cooper.
▪ Madhu Vulimiri, senior adviser for health and families policy, who previously worked at the N.C. Department of Health and Human Services.
▪ Elena Ashburn, senior adviser for education policy, who was an area superintendent for the Wake County Public School System.
▪ Jonathan Moch, senior adviser for climate and energy policy, who previously worked at the U.S. Department of State.
▪ P.J. Connelly, director of the Governor’s Eastern North Carolina Office, who had the same job for Cooper.
Stay informed about #ncpol
Coming up Monday on our Under the Dome podcast, I interview new Labor Commissioner Luke Farley, a Republican. We talk about elevators, raises he wants for elevator and safety inspectors, changes in diversity, equity and inclusion metrics, how he got Cherie Berry’s endorsement and more.
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