North Carolina’s overall financial health looks to be in good shape, according to an audit of the State of North Carolina’s Annual Comprehensive Financial Report (ACFR), which is published by the Office of the State Controller.
A report released by the North Carolina Office of the State Auditor (NCOSA) was created from financial statements audited by NCOSA from the ACFR.
“The State Auditor’s Office audits the financial information used to determine whether North Carolina’s financial statements are reliable,” State Auditor Dave Boliek said in a press release. “Our team made six adjustments this year and had one material finding related to the Department of Commerce. Because of our team’s work, these issues were corrected, resulting in true and accurate financial figures being presented to the public. With the State Auditor Office’s opinion, state executives, policymakers, and industry leaders can confidently rely on these important financial statements for future decision-making.”
The six adjustments were corrected, and adjustments related to the Department of Commerce were significant enough to result in a financial reporting finding, which will be included in the state’s upcoming Single Audit Report, according to auditors. The total overstatements for the Department were $872.8 million, and the total understatements were $262.5 million.
The report’s highlights include:
Revenue Increases
The state’s net position increased by $6 billion or 6.51%. At year-end, the net position of governmental activities and business-type activities totaled $88.67 billion and $9.48 billion, respectively.
Operating grants and contributions increased by $6.10 billion, or 18.94%, primarily driven by Medicaid expansion. Charges for services increased by $1.97 billion, or 19.27%. This growth is primarily attributed to increased lottery ticket sales and higher medical billing resulting from the expansion of Medicaid.
Individual income tax revenue increased by $637.82 million, reflecting a 3.87% growth, which is attributed to higher wages and extended low unemployment rates.
Corporate income tax revenue saw an increase of $38.47 million, reflecting a growth of 2.56%.
Insurance tax revenue increased by $233.16 million, reflecting a 18.83% growth, primarily attributed to the Medicaid expansion. This growth was driven by a rise in gross premium tax revenue from Medicaid prepaid health plans, which resulted from hospital reimbursements and an increase in Medicaid enrollment.
Sales and use tax revenue saw an increase of $397.01 million, reflecting a growth of 3.28%, attributed to sustained strength in consumer spending.
Franchise tax revenue decreased by 5.45%.
Spending Increases
Health and Human Services spending increased by $5.67 billion or 16.37%, primarily driven by Medicaid expansion.
Public safety, corrections, and regulation spending increased by $1.92 billion, or 40.21%, which was attributed to enhanced services provided, such as those related to Homeland Security and ongoing hurricane recovery efforts.
Higher education spending increased by $884.48 million, or 13.51%, primarily due to increased state aid and funding from sports wagering.
Capital Assets
The state’s investment in capital assets was $76.57 billion, an increase of 4.85% from the previous fiscal year-end. The largest component of capital assets is the state highway system. North Carolina has an 80,593-mile highway system, making it the second-largest state-maintained highway system in the nation.
Capital Projects in Progress include:
- State highway projects -$3.14 billion.
- Complete 540 project – $297.55 million.
- DHHS’s new system for managing and administering social service benefits -$820.85 million.
- Relocation project for the DHHS campus – $246.99 million.
- New education campus to house several educational system offices -$107.41 million.
Long-term Debt
The state had total long-term debt outstanding of $7.2 billion, an increase of 0.08% from the previous fiscal year-end.
Credit Ratings
In 2025, the top three rating agencies – Standard & Poor’s, Moody’s Investors Service, and Fitch Ratings – all affirmed the state’s AAA bond rating, which signifies the absolute lowest risk of default and the strongest financial health, allowing it to borrow money at the best rates.
North Carolina remains one of only 14 states with AAA ratings from all three major rating agencies.
State Treasurer Brad Briner had told Carolina Journal in an October interview that the bond ratings, including those from Moody’s and S&P, indicated that the state was in very good financial shape.
“North Carolina continues to be an incredibly well-run state financially, and that’s been true for a long, long time, and it will be true for a long, long time,” he told CJ.