As voters make decisions in the final days of early voting, North Carolina faces a consequential choice about its fiscal future. Two proposed constitutional amendments would constrain future revenue options for state and local governments. For public schools, the stakes extend beyond today’s tax rates to the resources available to meet future needs.
Public School Disinvestment and the Great Recession
During major economic downturns, state revenues drop sharply while the demand for public services rises. To counter the severe fiscal effects of the Great Recession, North Carolina had to close a $4.6 billion budget gap in 2009-2010. State leaders relied on every available fiscal lever to keep schools open and basic services functioning, including temporary income tax surcharges, increased sales tax, reserve fund transfers, and major spending cuts.
For K-12 public education, these cuts initiated a sustained decline in state funding effort. While many states across the nation eventually rebuilt their education budgets following the recession, North Carolina’s trajectory diverged. The state’s funding effort fell from 3.5% in 2010, which was near the national average, to 2.89% the following year. That metric has continued to decline. Today, North Carolina ranks last in the nation for school funding effort. In a preview of the 2026 Making the Grade Report, the Education Law Center confirmed that North Carolina will again be at the bottom of the nation for funding effort (50 out of 50) and fell to last in funding level (51 of 51). The Great Recession is an important part of this history, though it is not the only factor behind the state’s current ranking.
Constitutional Amendments on the Ballot
Personal income taxes generate the single largest share of the state General Fund, which directly finances teacher salaries, classroom resources, and daily school operations. Embedding a 3.5% income tax cap in the state constitution removes a critical tool for navigating future economic downturns. Without the flexibility to adjust income tax rates when revenues plummet, future legislatures facing budget shortfalls would be forced to cut education spending further, increase regressive consumption taxes like sales tax that place a larger burden on low and middle income families, or both.
At the local level, the property tax amendment would require the General Assembly to enact limits on increases in local property tax levies. Property tax revenues serve as the primary source for local capital investments, including school construction and facility modernization. Constraining property tax growth forces counties toward alternative funding mechanisms, such as local sales tax referenda or debt-financed school bonds.
North Carolina’s school facility needs add urgency to this discussion. With the Department of Public Instruction preparing to release an updated facility needs survey–anticipated to exceed the $12.8 billion identified in the previous report–local school systems facing capital shortfalls will have fewer revenue options if local tax limits are enacted.
What Voters Must Weigh
While tax caps offer permanent revenue limits, policy analysis indicates that income tax caps primarily benefit high-earning households, yielding minimal savings for average families.
For public education, the central question is how permanent constitutional limits could affect the ability of state and local governments to respond to future needs. North Carolina’s constitution assigns the state responsibility for providing every child with a quality education. Meeting that responsibility requires policymakers–and now voters–to consider not only current tax rates, but also the resources and flexibility needed to fund schools over time.
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