Bill
HB 1146
HB 1146 increases base funding for state operations, reforms education funding/governance (textbooks/instructional materials), and shifts community college funding toward labor-mar
HB 1146 Summary — 2026 Governor's Budget (North Carolina)
Overview
- Full title: Current Operations Appropriations Act of 2026.
- Purpose: Provide base budget appropriations for current operations of state departments, institutions, and agencies for the 2025-2027 fiscal biennium, plus related financing, reserve, and program provisions.
- Sponsor: Rep. Arp.
Key Provisions and Changes
1) General Fund current operations (2025-2027)
- Establishes annual General Fund appropriations for each agency/department for FY 2025-2026 and FY 2026-2027.
- Major spending areas:
- Education
- Community College System: from about 1.73B to 1.88B (FY2026-27)
- Public Instruction: from about 12.39B to 13.60B
- UNC System and constituent universities: various adjustments; UNC total shows shifts, e.g., University of North Carolina line items with movements in some accounts.
- Health and Human Services: total increases from about 8.70B to 9.71B
- Includes Health Benefits, Mental Health/Developmental Disabilities/Substance Abuse Services, Public Health, Social Services, etc.
- Justice and Public Safety; General Government; Agriculture/Natural Resources; and other agencies shown with specific line-item totals and some reclassifications.
- Net appropriation totals:
- FY2025-2026: Total Net Appropriation around 33.274B
- FY2026-2027: Total Net Appropriation around 35.436B
- Note: Section 2.1(a) allows the General Assembly to set annual budgets within these amounts for each year, with savings reverted to the fund if not needed.
2) General Fund availability and revenue adjustments
- Provides a detailed reconciliation of General Fund availability for FY2025-2027, including:
- Beginning unreserved balances, over collections, estimated reversions
- Statutory reservations (e.g., State Capital and Infrastructure Fund, Savings Reserve)
- Adjustments to revenues (e.g., income tax rate, standard deduction, Earned Income Tax Credit adjustments, Back-to-School Tax Holiday)
- Net revised total General Fund availability for FY2025-26 and FY2026-27
- Deductions for base budget and recommended adjustments
- IT and Federal Infrastructure match reserves: transfers and allocations for IT projects, federal match activities, and other targeted uses.
3) Reserves, debt, and other budgets
- Establishes and/or dedicates funds to several reserves (e.g., Medicaid Contingency Reserve, Emergency Response/Disaster Relief, Contingency and Emergency Reserve).
- Directs transfers to reserves to support expenditures, and allows response to federal spending freezes or shutdowns.
- Requires reporting on use of funds from these sections.
4) Highway Fund and Highway Trust Fund
- Sets Highway Fund current operations for the Department of Transportation for FY2026-2027 (approx. 3.40B).
- Provides availability figures for Highway Fund sources (Motor Fuels Tax, Sales Tax transfers, etc.) totaling about 3.40B.
- Highway Trust Fund appropriations (construction, bonds, Turnpike Authority, etc.) totaling about 2.57B.
- Availability for Highway Trust Fund sources mirrors the same revenue streams totaling about 2.57B.
5) Other appropriations and programmatic provisions
- Education Lottery Funds and other special funds: updates to allocation tables for 2025-2027 and related programs (e.g., Needs-Based Capital Fund, Public School Building Capital Fund).
- Indian Gaming Education Revenue Fund, Civil Penalty and Forfeiture Fund allocations updated for various educational programs and technologies.
- Public Instruction policy reforms (Part VII):
- Repeals the Textbook Commission and certain text/source governance sections; consolidates text/materials funding under the State Public School Fund as of July 1, 2026.
- Transfers literature, textbooks, digital resources responsibilities, and related funding to new Instructional Materials funding allotment.
- Implements parental review processes for instructional materials and adds guidelines for local boards of education to manage challenges to materials.
- Updates duties for the State Board of Education and local boards regarding cost, procurement, and distribution of instructional materials.
- Expands parental review rights and establishes Community Media Advisory committees for challenges to materials.
- Prohibits charging rental fees for basic textbooks; authorizes damage fees for loss/damage.
- Reforms school performance metrics via a pilot program (School Performance Grade Redesign) to improve transparency; intention to weight growth more heavily and align with federal requirements (ESRS).
- Expands charter school funding considerations to virtual charter schools with statewide average per-pupil funding and transportation funding changes.
- Improves targeted funding for English Learners (Limited English Proficiency allotment) with a new formula.
- Establishes School Resource Officer (SRO) Allotment to fund SROs in middle schools, with consolidated administration of these funds via DPI starting 7/1/2026.
- Expands literacy interventions, including literacy camps, early literacy program enhancements, and data-driven approaches (EVAAS integration).
6) Propel NC and Community College reforms
- Reforms Propel NC funding to shift from a tier-based enrollment model to a labor-market driven model aligned with high-demand, high-salary sectors.
- Requires the State Board of Community Colleges, with the Dept. of Commerce, to identify targeted sectors and allocate funding accordingly.
- Adds a workforce-sector designation review/update cadence (every three years).
- Establishes Enrollment Growth/Reserve mechanisms to reward colleges with enrollment increases.
7) 2026 Disaster Recovery and related safeguarding
- Directs funding for disaster response and recovery to households/communities; adds requirements for subrogation of insurance proceeds and floodplain considerations.
Effective dates and timelines
- Many provisions reference July 1, 2026 (e.g., transfer of textbook funding responsibilities and SRO funding).
- The Public Instruction text/materials funding reform is effective July 1, 2026, with a multi-year transition for the new Instructional Materials funding allotment.
- School Performance Grade Redesign pilot operates in 2026-2027 and 2027-2028, with statewide expansion planned for 2028-29.
Impact and Who is Affected
- State agencies and departments receive specified General Fund appropriations for operations.
- Public schools and the Department of Public Instruction experience major reforms in textbooks funding, instructional materials governance, parental input, and the allocation framework.
- Community colleges face a major shift to labor-market demand alignment, new reserves for enrollment growth, and expanded literacy initiatives.
- Local boards of education, charter schools, and regional/laboratory schools are affected by funding formulas, resource allocation, and accountability provisions.
- Disaster, emergency, and infrastructure funding are adjusted through reserves and targeted appropriations.
Procedural/Timeline Notes
- Several sections set fiscal year 2026-27 as the operative period for new allocations and reforms.
- The act includes reporting requirements to legislative oversight and specific deadlines (e.g., November 1, 2027 interim reports; final reports by June 30, 2029 for certain pilots).
- Effective dates generally July 1, 2026 or during the 2026-27 fiscal year for specific programs.
Overall, HB 1146 consolidates and increases base funding for core state operations, retools education funding and governance (notably textbooks/instructional materials), accelerates workforce-aligned community college funding, and establishes new reserves and disaster-related funding mechanisms. It also introduces a School Performance Grade redesign pilot and several reforms intended to align state funding with labor market demand and federal compliance requirements.
Compiled from official sources — confirm details with the bill’s official record.
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