RALEIGH, N.C. — Warning of tight spending, new Gov. Josh Stein on Wednesday asked for modest state employee raises but higher starting teacher pay, and called for freezing some tax cuts while adding new ones for workers and families.

Stein’s first budget proposal would spend $33.6 billion in the first year of the two-year plan and $34.3 billion in the second.

Here’s what the Democratic governor wants for raises, taxes and more.

Tax credits

Stein told reporters on Wednesday morning that he wants tax cuts to offset the cost of child care, along with a child tax credit, and a “working families tax cut available to all low-to-moderate income workers, which could mean up to $1,600 a year for certain families. These investments and these tax cuts are what it means to truly be pro-family.”

The proposal shows that he’s proposing $530 million a year in tax cuts, including several tax credits that would be refundable — meaning that people can get them in a refund even if they don’t owe income tax. He proposed:

▪ a new version of the refundable tax credit for workers that Republicans ended in 2013.

▪ a refundable credit for child care.

▪ converting the current child deduction to a refundable tax credit.

Stein said that the working families tax cuts can also go to individuals if they meet the income qualifications.

At the same time, he repeated what he said earlier this year about freezing other planned tax cuts, criticizing corporate tax cuts in particular.

Raises for state workers and teachers

The biggest budget requests, and sticking points, have in recent years been the amount of raises for state employees and teachers.

Stein wants to raise starting teachers’ base pay to $44,500 a year starting in July, and to $51,200 for the following fiscal year, 2026-27. The current base pay set by the state for a starting teacher is $41,000.

The state provides supplements to rural school districts, and metro counties have their own supplements. Including supplements, starting teacher pay for 2025 in North Carolina is $42,804, and Stein’s proposal would raise that to $53,000 in 2027.

He called for an average of 10.6% in raises for teachers over the next two years.

Stein is proposing a 2% raise for state employees as well as a $1,000 bonus, and a 2% cost-of-living increase for retired state employees. He also wants to add another day of vacation time and renovate state buildings to add child care facilities.

The 2% state employee raise is only for the first year.

Up to lawmakers

The governor’s budget proposal is a key benchmark in this year’s state budget process, as the General Assembly learns how much money he wants them to spend in the budget bill they’ll send to his desk.

With a Republican-controlled legislature, the results are likely to be lower than what Stein requests. During former Democratic Gov. Roy Cooper’s two terms in office, his proposal for teacher raises were the highest of the three positions on the budget, with the Senate’s proposal the lowest and the House somewhere in the middle. Republicans generally propose the same level of raises for both state employees and teachers, whose base pay is set by the legislature. Stein already announced he would be proposing raises — particularly for law enforcement and correctional officers — as well as hiring bonuses.

Where the state gets its money

Stein’s proposal comes after he has warned of a “fiscal cliff” as planned cuts for the individual and corporate income tax rates continue to lower overall tax collections.

Nearly half of the state’s general fund revenue comes from individual income taxes, which are paid at a rate of 4.25% this year and will drop to 3.99% in 2026. State law triggers more tax cuts after 2026 based on total general fund tax collections.

Sales tax accounts for more than 30% of revenue, followed by corporate income taxes, franchise taxes and alcohol and tobacco taxes.

More than half of the state’s general fund is spent on education. The next largest spending area is Medicaid, with 19%, followed by justice and public safety.

The state’s consensus revenue forecast in February, which comes from both the nonpartisan Legislative Fiscal Research Division and the Stein administration’s Office of State Budget and Management, reported that “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.”

Stein previously said the answer was to freeze the tax cuts. And in his State of the State address in early March, he called for a $4 billion public schools bond, as well as an Impact Center in his budget office to look at efficiency and a fentanyl control unit, which is also included in his new proposal.

For the Impact Center, Stein said he wants to maximize the return on state investments, like property the state owns and doesn’t use that it could sell, and finding more efficient ways to deliver services.

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