Senate leader Phil Berger said Tuesday he鈥檚 not concerned by a projected $823 million drop in state revenue in 2026.
鈥� developed by nonpartisan economists at the legislature in partnership with the governor鈥檚 budget office 鈥� shows a $544 million surplus this fiscal year.
But as additional tax cuts take effect, the forecast calls for a revenue decrease of 2.4% in fiscal year 2026-2027. That prompted Gov. Josh Stein to warn of an impending 鈥渇iscal cliff.鈥�
Berger, however, told reporters he thinks the alarm is unwarranted. He said previous Democratic governors have issued similar warnings as Republicans cut taxes.
鈥淚 think North Carolina is in good shape,鈥� he said. 鈥淥ur revenue situation is good. We still have some challenges, obviously, not the least of which is how we're going to do what needs to be done in western North Carolina. But we'll figure all that out, and we'll move forward.鈥�
He added that the long-term revenue projections are based on a 鈥渟tatic model,鈥� and 鈥渋t's our expectation that we will continue to see an expanding economy, and that expanded economy will generate the revenue that we need in order to fund the functions of government.鈥�
The state鈥檚 individual income tax rate is scheduled to drop from 4.5% to 3.99% by 2026, and the state鈥檚 corporate income tax is being slowly phased out. It鈥檚 set to drop from 2.5% to 2.25% this year, with more decreases in the following years until it鈥檚 eliminated entirely in 2030.
Senate Democrats don鈥檛 share Berger鈥檚 optimism for the state鈥檚 future revenue picture.
鈥淚 think continued tax cuts are going to continue to starve the state from investing in our people and in the future of the state,鈥� said Sen. Jay Chaudhuri, D-Wake.
They say the revenue projections could lead to tough choices about state spending starting with the budget that lawmakers will develop this spring.
鈥淓ven for this year's budget, how are you supposed to know what you can put into recurring expenses, like a state employee salary increase, if you're worried that you're going off a cliff two years later?鈥� said Sen. Graig Meyer, D-Orange.
The bulk of this year鈥檚 projected surplus, the revenue forecast says, came from higher-than-expected corporate and individual income tax collections, 鈥渄ue largely to continued growth in wages, profits, and consumer spending and persistently higher short-term interest rates.鈥�
