North Carolina’s budget basics

According to the National Association of State Budget Officers (NASBO), North Carolina’s total expenditures in fiscal year (FY) 2022 were $62.5 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2022 were $2.9 trillion, ranging from $5.6 billion in Wyoming to $510.0 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, North Carolina’s combined state and local direct general expenditures were $93.7 billion in FY 2020 (the most recent year census data were available), or $8,957 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $10,540.

(Note: We cite data from both NASBO and Census to provide a broader picture of each state’s fiscal situation. However, these sources detail spending from different levels of government in different years, and the COVID-19 pandemic and the federal government’s response to it significantly affected these totals in different ways in different years. Please only use one source if you are looking for historical comparisons.)

North Carolina’s largest spending areas per capita were health and hospitals ($1,688) and public welfare ($1,626). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

North Carolina’s combined state and local general revenues were $95.9 billion in FY 2020, or $9,171 per capita. National per capita general revenues were $10,933. North Carolina uses all major state and local taxes. After federal transfers, North Carolina’s largest sources of per capita revenue were charges ($2,063), such as state university tuition and highway tolls, and individual income taxes ($1,196).

North Carolina’s politics

Governor Roy Cooper, a Democrat, was elected in 2020 with 52 percent of the vote. The next gubernatorial election is in 2024.

North Carolina has a divided government. Republicans control both the House of Representatives (71 Republicans to 49 Democrats) and Senate (30 Republicans to 20 Democrats). The entire legislature is up for election in 2024 because both representatives and senators serve two-year terms.

North Carolina’s budget institutions, rules, and constraints

North Carolina uses a biennial budget. The legislature must pass a balanced budget and is prohibited from carrying a deficit over into the following year. State spending growth is limited by a budget rule based on personal income growth, but the legislature can override the rule with a simple majority vote. North Carolina limits authorized debt incurred by the state, but not debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

North Carolina’s current budget

Governor Cooper has not yet released his FY 2024-2025 biennial budget proposal or given his state of the state address.

North Carolina enacted its original FY 2022-2023 biennial budget in November 2021 and its revised FY 2022-2023 biennial budget in July 2022. The enacted budget adjustments included $26.99 billion in general fund spending for 2022 and $27.9 billion in general fund spending for 2023. North Carolina also enacted a series of tax cuts in calendar year 2021, including lowering its individual income tax rate from 5.25 percent to 3.99 percent and eliminating the state’s corporate income tax (the current rate is 2.5 percent). Both reductions will phase in over multiple years.

Under the American Rescue Plan, North Carolina will receive $5.4 billion in direct state fiscal aid and $2.7 billion in local government aid from the federal government. As of January 2022, North Carolina had spent part of its ARP funds on education spending, public health response, human services, and economic development.

According to NASBO, North Carolina’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2022: $25.8 billion/$62.5 billion
• FY 2021: $24.5 billion/$59.4 billion
• FY 2020: $24.6 billion/$61.2 billion
• FY 2019: $24.0 billion/$58.2 billion

For more on North Carolina’s budget, see

• the North Carolina General Assembly,
  
• the North Carolina Department of Revenue,
  
• the North Carolina General Assembly Fiscal Research Division, and
  
• the North Carolina Office of State Budget and Management.

North Carolina’s economic trends

North Carolina’s per capita income (per the Bureau of Economic Analysis) was $57,416 in 2022, ranking 36th among the states. It was below the national average of $65,423, but above the Southeast regional average of $56,118. The state’s median household income (five-year estimate) was $60,516 in 2021, ranking 40th among the states and below the national average of $69,021. North Carolina’s poverty rate was 13.7 percent in 2021 (five-year estimate), above the national rate of 12.6 percent.

Although North Carolina’s averages tell a story about the entire state, North Carolina is composed of diverse localities. For example, the city of Kinston’s median household income was $33,280, and its poverty rate was 27.9 percent; the city of Apex’s median household income was $121,313, and its poverty rate was 3.3 percent.

North Carolina’s unemployment rate historically tracks the national rate. The state’s rate was slightly above the national average following the Great Recession, but it has again paralleled the US rate for the past few years.

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In North Carolina, the average unemployment rate in 2022 was 2.9 percent for white residents, 6.5 percent for Black residents, and 3 percent for Hispanic or Latino residents.