North Carolina Budget Puts $337 Million Into Development

On July 7, 2026, North Carolina Governor Josh Stein (D) signed Senate Bill 257, now Session Law 2026-41, the 2026 Appropriations Act and the state's first comprehensive budget since October 2023. The $34.4 billion fiscal year 2026-27 plan, which Republican leaders call the largest in state history, cleared its final votes on July 2, passing the House 88-21 and the Senate 35-10 after more than a year of negotiations between House Speaker Destin Hall (R-Caldwell) and Senate Leader Phil Berger (R-Rockingham). For site selectors and manufacturers, the signing restores funding certainty after nearly three years without a budget, and it brings $337.1 million in economic development appropriations and a fixed personal income tax schedule stepping down toward 2.99%.

Aside from stopgap "mini budget" measures such as S.L. 2025-89, state agencies had operated at spending levels approved in 2023, no new state construction dollars flowed, and in late May 2026 JetZero, the state's largest-ever economic development project, pushed its hiring timeline back a full year, citing the budget holdup.

Data center operators also face a pending bill. The Ratepayer Protection Act (Senate Bill 730), which would impose new requirements on large data centers, passed the House on June 3, 69-44 on second reading, and still awaits Senate concurrence. For those operators, the electricity tax change enacted in the budget may be the first of two cost shifts this summer.

Where the Economic Development Money Goes

The $337.1 million figure combines local project earmarks with one megaproject. According to EdNC's tally of the conference committee report, the budget contains 727 special appropriations totaling more than $350 million, of which $203.2 million flows through the Regional Economic Development Reserve (line items 112 through 775) and $150.8 million through the Stabilization and Inflation Reserve. Layered on top is the $133.9 million fiscal year 2026-27 (FY27) installment for JetZero, drawn from the Economic Development Project Reserve (Exhibit 1).

The budget also adds to the state's reserves. It lifts the Savings Reserve by $450 million to about $4.2 billion and funds a $1.325 billion Stabilization and Inflation Reserve. Reserves matter for multi-year incentive commitments, because Job Development Investment Grants (JDIG) and other discretionary grants are paid out over a decade or more and depend on the state honoring them through a downturn. The budget does not include the Senate-backed framework for a $1.7 billion Major League Baseball stadium in Raleigh, which House leaders declined to fund.

The JetZero Package, Line by Line

The FY27 funds complete a two-year, $252 million site commitment. The $133.9 million in nonrecurring FY27 funds, drawn from the Economic Development Project Reserve and layered on top of the $118.1 million appropriated in the 2025 mini budget, is earmarked "for acquisition and improvements at the project site." S.L. 2025-89 had already stated the General Assembly's intent to appropriate this $133.9 million in FY27 and $198 million more in future years, so the budget funds a commitment made in 2025. Exhibit 2 shows how the FY27 money is divided.

The state has funded its share, and JetZero has pushed back its hiring. The project is supported by a JDIG, and the budget requires reports on the use of funds to both chambers. JetZero, a blended-wing-body aircraft manufacturer, now plans no hiring in 2027, with accelerated ramp-ups in 2028 and 2029 to reach the 14,000-job target by the end of 2037, a year later than the original 2036 deadline. Suppliers and service firms planning around the Greensboro campus face the same one-year shift.

Tax Changes That Matter for Site Selection

The income tax rate now steps down on fixed dates. North Carolina's 3.99% personal income tax rate falls to 3.49% for tax year 2027, then steps down on a set schedule: 3.24% for tax years 2030 through 2032 and 2.99% beginning in tax year 2033. Revenue triggers return after tax year 2034 and could bring up to two further cuts between 2035 and 2040, to as low as 2.49%. The prior law tied every reduction to revenue targets, which left recruiters unable to promise a rate more than a year out. For a manufacturer with a 500-employee payroll averaging $85,000, employees' aggregate state income tax bill (before deductions) falls from roughly $1.70 million at 3.99% to about $1.27 million at 2.99%, approximately $425,000 a year more in employees' take-home pay once the 2.99% rate applies.

Data centers lose their sales tax exemption on electricity. The budget repeals the sales-and-use tax exemption for electricity used by data centers, a partial step toward Governor Stein's proposal to phase out the industry's exemptions. Earlier Department of Commerce estimates, as reported by Carolina Journal, put the exemptions for data center electricity and replacement equipment at roughly $50 million a year. A data center purchasing $20 million of electricity annually would owe roughly $1.4 million a year at a 7.0% combined general rate (the 4.75% state rate plus a typical 2.25% local rate). The legislature's fiscal analysis, as reported by Carolina Journal, projects $21.4 million in new General Fund revenue in FY 2026-27, rising to $28.6 million by FY 2030-31.

A broader repeal did not pass, and local pressure continues. The more sweeping rollback proposed in House Bill 1213, filed April 30, 2026, was not adopted and remains in the House Energy and Public Utilities Committee. Dozens of local governments have separately imposed temporary data center moratoriums, citing electricity demand, water use, and noise. The budget also raises the sports wagering operator tax from 18% to 23% of gross wagering revenue, part of a broader set of changes that close tax loopholes and exemptions.

What the Budget Means for Projects in the Pipeline

Projects that stalled on state participation can restart. For nearly three years, companies negotiating site infrastructure, roadway, or utility scopes with the Department of Commerce and NCDOT faced a state that could commit only through one-off mini budgets. Both economic development reserves are funded again. The $200 million Regional Economic Development Reserve replenishment goes to special appropriations, and $133.9 million of the $170.9 million Economic Development Project Reserve is for JetZero. The JetZero structure (land, access road and taxiway, NCDOT roadwork, and construction administration, each as its own line) is the template the General Assembly has now used twice.

Data centers face higher costs, and labor-intensive employers gain a lower income tax path. A hyperscale campus in North Carolina loses its electricity exemption and will pay sales tax at the combined general rate, and the Ratepayer Protection Act could add new requirements. A manufacturer or headquarters project gains a personal income tax schedule now written into statute, an edge in offer negotiations against South Carolina and Georgia. Exhibit 3 sets out the dates.

What to Do Now

This budget matters most for companies with North Carolina projects in negotiation, data center operators, and manufacturers weighing labor costs. The reserves that back state site packages are funded again, and the income tax schedule is now set in statute through 2034. The Ratepayer Protection Act still awaits Senate action. If you want a read on what the budget means for your project, reach out to our team.

References

1. North Carolina General Assembly, Senate Bill 257 / S.L. 2026-41 (2025-2026 Session), 2026 Appropriations Act, ratified July 2, 2026, and signed July 7, 2026.
2. North Carolina General Assembly, Session Law 2026-41 text (ratified S257).
3. Office of Governor Josh Stein, Governor Stein Signs State Budget, July 7, 2026.
4. NC Newsline, Stein signs $34B North Carolina budget with pay raises, lower taxes, July 7, 2026.
5. Carolina Journal, Stein signs $34B NC budget ahead of deadline, July 7, 2026.
6. Carolina Journal, State budget allocates $133.9M for delayed JetZero project, July 1, 2026.
7. Carolina Journal, NC budget scales back data center tax break, July 8, 2026.
8. Carolina Journal, NC House, Senate announce budget framework, May 12, 2026.
9. WRAL, NC lawmakers unveil long-awaited state budget with tax cuts, raises for state employees, June 30, 2026.
10. EdNC, The state budget contains 727 special appropriations, July 1, 2026.
11. North Carolina General Assembly, S.L. 2025-89 (2025 mini budget).
12. North Carolina General Assembly, House Bill 1213 (2025-2026 Session).
13. Carolina Public Press, NC budget agreement finally reached, July 1, 2026.
14. North Carolina General Assembly, Senate Bill 730, Ratepayer Protection Act (2025-2026 Session); Carolina Journal, NC House passes Ratepayer Protection Act, June 4, 2026.

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