- Coming up, Governor Josh Stein signs the $34 billion budget into law, saying some of the races are good, but criticizes the power shifts.

And unaffiliated voter registrations are growing in the state.

What this could mean for the 2026 election.

This is State Lines.

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Welcome to State Lines.

I'm Melody Hunter-Pillion.

Kelly McCullen is out this week, but there is a lot happening in the state this week.

Joining me today is Travis Fain of Fain Communications, former North Carolina State Senator Mike Woodard, Donna King of Carolina Journal, and Lennie Friedman of the North Carolina Forward Party.

This week, Governor Josh Stein has signed the $34.3 billion state budget into law.

Governor Stein praised a few items in the budget, including having the largest teacher pay raise in 15 years, $700 million for Hurricane Helene relief, and $1 billion to fully fund the state's Medicaid rebates.

Mike, it was a mixed bag from the governor's standpoint.

Let's start with these items that received the thumbs up from Governor Stein.

- Well, you know what?

I think we're all relieved that the budget passed.

I heard one of the budget writers say on the floor it was the best budget he had ever been part of.

He's a veteran now, so he spoke from experience, but I think that was coming because it was finally done after well over a year of negotiating and a year past due.

The governor highlighted a few things that made him in favor of signing this bill, despite some of his reservations.

Obviously, he raises four state employees, teachers, law enforcement officers were big.

Relief for the Helene and Chantrelle victims.

Of course, the $700 million will trigger some of the federal money that we have been desperately waiting for in Western North Carolina.

The Medicaid rebates is important.

That was an ongoing fight between the governor and Department of Health and Human Services with budget writers and the legislature, but the fact that it's fully funded now at over a billion dollars, hopefully we'll avoid that fight in the coming year.

Money for the children's hospital, that had been a point of contention, but included in that is some important money for behavioral health at this new children's hospital, something I think most of us all get behind.

So there were a lot of good things in this budget.

I know we'll talk about some of the other concerns a little later.

- Asking some of you, looking at some of you and thinking about the things that Governor Stein says, "Hey, this is really great."

In particular in Western North Carolina, I was there just a few weeks ago doing some stories with Helene residents who are still recovering.

Now we are approaching the second anniversary and they told me that they thought that people had forgotten about them.

They said, "They think that we've already recovered."

So talk about how important this part of the bill is.

- I mean, North Carolina has a long history of problems with recovery from hurricanes, certainly Florence and Matthew and NCORP and some of those problems that they've had.

I know that the Helene victims felt like that they could fall victim to the same thing.

So I think that this budget is important and that it acknowledges their struggle, but there's other things in it that are great.

Double digit raises for law enforcement.

That's something we've talked a lot about this year, about public safety.

So that's a good thing.

Bonuses for local police.

But there's also small things like eliminating the exemption for data centers to not pay sales tax on the electricity they use.

There was an exemption that data centers would not be paying sales tax on the electricity that they're using.

That exemption has been removed.

So there's a lot, I mean, it's a 600 page budget.

There's a ton in it.

There's some really good things going on, but among them also, which was a point of contention as we went through this last year and a half or whatever it's been, that the pattern of tax cuts for North Carolina taxpayers is gonna continue.

And that's something that lawmakers and leadership there felt like that that has played such a huge part in North Carolina's prosperity over the last decade.

- One of the smaller things too, although it's not that small, the program called the Healthy Opportunities Pilot has been re-upped, has been kind of brought back from the dead.

And this allows us to take Medicaid money and spend it on things for people who are on Medicaid like healthy food, mold remediation in your house so that the asthma or the other breathing problems that you have that cost a lot of money can be addressed.

And there have been a couple of studies that show this really saves a lot of money.

So I'm glad to see that re-up decline of mine, Healthier United really lobbied for that.

There's a lot of these good little things in the budget, but I'm also, you know, we talk about the salary increases.

You know, correctional officers, for example, 15% increase, still one of the lowest 10 states for correctional officers.

And I think you can make that comparison kind of up and down the budget where, yeah, we're trying to go back and do better by these folks, but we delayed raises and we were already kind of on the low side.

So we're still trying to play catch up.

- Travis, I think this helps us segue into maybe the next part, like what did Governor Stein not like too much?

So during the signing ceremony, Governor Stein did voice concerns over parts of the state budget.

He criticized cuts to vacant job positions.

The elimination of both the Office of Health Equity and the Office for Historically Underutilized Businesses plus multiple power shifts away from the executive office.

Donna, what are the concerns for how these changes play out, in particular, those power shifts as we look at going from the cabinet to, you know, council of state?

- Sure, and I think you're referring to boards and commission appointments that we saw there in the state budget.

I think one of the things to note is that the boards and commissions that were addressed were all appointed by the governor's office and the budget does shift away that moves them those appointment powers, some to the legislature, some to other offices in the executive branch.

In the end, the executive branch still has more appointments than the legislature, but that's where we're seeing that.

When we talk about some of these offices, one, the Office of Health Equity, that function is being moved elsewhere in DHHS, not going away, but the Office of Underutilized Businesses.

I think what we're seeing is lawmakers perhaps didn't see the benefit compared to the cost for taxpayers, and it didn't stop a lot of the, you know, some Democrats and some, even leader Robert Reeves from voting for it, certainly didn't stop Governor Stein from signing it or letting it become law without him.

So he's criticizing it, but it looks like it made the cut enough to sign it and put his name on it.

- All right, well, Lennie and Mike and Travis, as we look at rural North Carolina, a lot of health deserts out there.

So when we think about the closing of this office, are we thinking there'd be some impacts with that and that folks will feel like it's maybe cutting away at something.

- The health equity?

I think it's moving outside, it's moving to another function in DHHS, so there will be some transitional challenges.

- Yeah, so I think the key is how does it actually play out, not just was something eliminated, but what actually changes.

So at the end of this, when it's implemented, are things better or are things worse?

And that's what we really need to see.

And with the potential 1,000 jobs that have been eliminated, that's neither good nor bad.

Were they needed?

If they were not needed, then it's great that they're eliminated, right?

Especially in an age of AI and technology, can we do more with less?

We need to understand that.

But right now, we don't have a great detail on it.

We don't know what exactly those 1,000 jobs are, so we need to dig into it.

If it's things like less nursing, that's a problem.

But if it's things like administrative work that we can do without, then that's a good thing.

So let's see what happens.

- I think it makes a good point that we need to look at these jobs, what's being cut.

It's easy as a budget writer, not that I ever held the big pin, but I did sit in the room with a lot of these negotiations, and what, are you just eliminating X number of jobs, or are you looking to see what those jobs are?

Because one of the challenges we've had in state government for a long time now, but particularly in the last 12 to 15 years, is hiring professional and paraprofessional jobs when the private sector's paying so much more.

And we just aren't able to fill these jobs, and we need to ask the question, why have they gone unfilled for a year or two?

And that just puts them in a spreadsheet, they're just an easy number to pull out.

But we need to talk more to these cabinet secretaries, council state members, and their directors about why these jobs are unfilled in state government.

- Yeah, and also I think it's important to talk a little about how the budget was done.

It was done as a conference report, which means leadership hammered it out behind closed doors.

It showed up whole cloth, and it's 600 pages of text, another 600 pages for the money report, so you're talking 1,200 pages overall.

It was voted on within a couple of days, and the thing about a conference report is no amendments.

You have to vote for it or against it.

You cannot change a single word in it while it's on the floor of the House or the Senate.

So basically a handful of people get to write it, and then the rest of us just see what's in it.

And we'll be finding out what's in this budget for months.

House Budget Chairman Donny Lambeth, who I have a ton of respect for, stood up on the House floor and said, hey, as you go through this over the next few weeks and you find stuff, call me, call the other budget chairs, we'll talk about it.

That's just backwards.

When plan A is, I know you haven't absorbed this, but we're voting for it today, and you must say yes or no to 1,200 pages.

You are ceding -- you're losing accountability, and you're ceding power to a handful of legislative leaders.

- Let's talk about another thing, just the timing, how long it took.

So for state employees who are already in jobs, for teachers, everybody, lots of compromising happened.

Seems like the signing of the budget was very celebratory, right, because finally we have it.

But for, you know, real folk out in North Carolina and for state employees, they waited a long time.

Inflation didn't wait, right, while the budget was so far behind.

Is this really something to celebrate when it takes the process so long?

- I obviously didn't love the process, and I don't love how long it takes.

And yeah, I mean, things are more expensive, they're continually getting more expensive.

You can only deal with so much of that.

These are good raises, is my sense.

But yeah, it's a shame that we had to wait so long.

- Well, some of these raises at 3% aren't matching inflation.

Then you look at what's happened, for instance, employees who are in the state health plan and look at the rising costs there.

So even a 3% raise might mean that that state employee actually falls behind because we've waited so long to get them a budget, to get them 3%.

And then of course, retirees, you know, we never, they always get a bonus.

They never get a cost of living adjustment, which raises their ongoing, recurring, what their dollars, their payment is gonna be.

So they're stuck at that same level.

- Yeah, so certainly the timing took a long time, right?

And nobody wants that.

Nobody thinks that's a way to run government.

That said, you do give credit where credit's due.

It passed, and it passed even though it was Republican-led, it was passed with a significant Democrat support, right?

In today's day, when we were talking about social media earlier, everyone's at each other's throats, especially the political parties.

Seeing a budget that passed with significant Democratic support, that's a good thing, and it should be praised.

- And I think that the uncertainty unquestionably was a problem for particularly state employees.

But I think one thing that we have to look at is the relationship between the state legislature and Governor Stein, I think is a dramatic improvement over what it was with Governor Cooper.

Governor Cooper did not sign, refused to sign budget after budget after budget.

I think he signed one in the entire time he was there.

So for Governor Stein to be able to sign the first one that comes his way, I think is a good sign that they worked together and they had a year and a half.

Each chamber passed their own, we had a year and a half to look at it, and I think that this does show that there is a working relationship there.

- Yes, and both the executive mansion and the legislature did give a nod to the compromises that were had.

So, moving on to our next topic, one provision in the state budget makes North Carolina the first state, the first to formally recognize the federal government's authority over prediction markets.

We know this is becoming quite a trend.

It would put a 6% tax on the net trading revenue of some prediction market operators.

Senate President Phil Berger and House Speaker Dustin Hall both said prediction markets are here, and it's time to address them.

This past May, Governor Stein had signed an executive order banning state employees from betting on prediction markets.

So Lennie, two different approaches here.

Other states have taken various routes about this.

What does this all mean?

- Yeah, so from the North Carolina forward party perspective, we believe in open markets and we believe in personal responsibility, right?

So you're not gonna stop the betting markets.

They're here to stay.

We were talking about our kids.

I had one child just graduate college, one in college, one about to go to college.

The sports betting is all over the place.

You're not gonna get the genie back in the bottle.

I don't think the genie ever was in the bottle.

So it's here.

So what does that mean?

That means we need to regulate it, we need to communicate the risks, right?

We need to not hide it in the shadows.

It's not going anywhere.

But then the important part is there needs to be accountability and there needs to be consequences for people that abuse it.

And what I mean by that, whether you're an athlete, a referee, a politician, a business person who's using your stature to manipulate betting markets, the penalties should be severe, right?

So if you're a politician and you do something that manipulates a betting market on purpose, you should lose the right to be a politician.

If you're an athlete, if you're my Duke team, my alma mater, if you're on the football team or basketball team and you do something to influence a betting market, you should lose your right to play college sports.

So that has the consequences for abusing it needs to be severe.

And then we need to communicate with the public the risks, right?

You're no guaranteed here.

The house is always going to win.

More people will lose in the bets than will win the bets.

So be cautious when you're going to do that.

You're really putting real risk out there.

Yeah, but we're taxing sports betting at 23 percent.

We're going to tax these prediction markets at 6 percent.

And I don't understand why there's a delta there.

Also, my understanding is we're the first state to pass any regulation on these prediction markets, which essentially means we're legitimizing them.

We're the first state in the union to legitimize them in this way.

And we did that again through a conference report budget where you had to vote up or down, yes or no, you couldn't change anything.

You had to vote against teacher raises to vote against this.

Who other than legislative leadership says, yes, those two issues should be jammed together.

And in order to get teacher raises, you should have to legitimize a relatively new, relatively young industry that allows people to bet on literally anything from their phone.

So that's fair on having to make those choices between supporting the betting markets and supporting teacher raises.

But this is legitimate.

I mean, there is no -- you can't not legitimize at this point.

It's all over the world.

We're not going to stop it.

So we might as well get ahead of it.

We can have a discussion between the 6 percent and 23 percent, but keeping it in the shadows, not saying that it's out there and it's real, and therefore not putting a spotlight on it, I don't think that's a solution.

- I think this was also acknowledged by the governor's office, who said that public employees can't engage in it because they could be controlling things about public policy.

So it's already part of our statutory framework.

But I also think that this makes North Carolina, to your point, a test market.

And that is -- I'd like to see somebody else figure this out first.

I don't want to be the one that we make all the mistakes.

But I do think we're going to come back and we're going to find some sort of balance between the 23 and the 6 percent.

- I think Travis is right.

I think we left money -- or the legislators left money on the table where they could be taxing at a higher percent.

I know Illinois and I think Kentucky are in about the same time frame we are, and they were coming in at 6 percent as well.

But if we're going to provide that accountability and the knowledge for bettors that we need to do and the support folks have with gambling problems, then we've got to tax a little higher than 6 percent, I think.

But also in that budget was the ability to write off your gambling losses if you play the sports market.

And you got to wonder about that one.

So anyway, how you get to say, I lose money on it and I get to write it off my taxes.

- And when all is said and done, still some guardrails much needed, as you said, Lennie.

Carolina Journal reported this week that unaffiliated voters in North Carolina grew more in the past week than combined since January 10.

According to reporting data from the State Board of Elections, 3,867 unaffiliated voters registered the week of June 30th, while 363 registered with the Republican Party and 158 with the Democratic Party.

That's thousands for unaffiliated and just a few hundred for the major two parties.

But in the state's party affiliation, the total now that we have is 39.8 percent unaffiliated, 29.8 percent Republican and 29.7 percent Democratic.

So that looks like a majority now for the unaffiliated.

Travis, first, how do we, if we can really focus in, zoom in, how do we account for this one week surge in July?

And then if we can zoom out to the big picture, what is this trend in unaffiliated voters being the majority?

What does that mean, especially for the upcoming elections in November with big races like the U.S.

Senate race between Cooper and Watley?

- I don't know that I have insight on why that week and why those numbers, but this has been a trend for a while where people are choosing to go unaffiliated as opposed to Republican or Democrat.

I can only assume it's a couple of things.

One, they're not too impressed with either party.

And I think that's particularly true at the national level.

I doubt most folks follow it closely enough to be making that choice based on local or state politics; it's national politics.

Second, we're an open primary state, which means if you register unaffiliated, on primary day you go and you just pick one party or the other.

That's what I do.

Sometimes I vote in the Republican primary.

Sometimes I vote in the Democratic primary.

I've been Democratic for the last few years.

So I don't really see why.

You know, why would you, if you're not a hardcore, why would you register for the Democratic party or the Republican party when you can make that choice?

Now, I do know some folks, some political scientists are concerned that this will have impact on candidates coming down the pipeline.

Like for example, if you don't come up in the Republican party or the Democratic party and it's really unrealistic to run as an unaffiliated candidate, where are we going to get candidates from as some numbers shrink and others go up?

I think that sounds like a problem that will fix itself.

But I do know that people, some people are concerned about it.

And we do have to look for other commonalities to work together to improve society if a political party is not going to be what unites people.

- You know, Travis is right, if you look at the trend in the 90s when both parties went to the open primary system, I think the Republicans were four or six years ahead of the Democrats on this, but you saw that trend.

So now that we're a 40-30-30 state, if you go unaffiliated Republican Democrat, that's where we are, it's 40-30-30.

But we've been that way for a long time because you might be a Democrat in a, let's say a rural county that tends to vote Republican, but you want to be sure you vote in that Republican primary for your sheriff's race or for your board of county commissioners.

So you tend to make sure you go unaffiliated while you keep that Democratic registration.

But more and more people are moving to North Carolina, they don't have those ties to the traditional Democratic Republican Party apparatus.

But I always point this out to folks, I teach a class at Duke and I always remind my students, I say, you know, unaffiliated doesn't mean you're undecided.

And you'll often talk about while they may be unaffiliated voters, they are party-adjacent voters.

So that percentage of voter we're ultimately fighting for to win the majority in an election, it shrinks and gets smaller and smaller.

So what does it mean for a race like Cooper-Watley or our Court of Appeals and Supreme Court races this year is that you're going to spend more and more dollars chasing fewer and fewer voters.

And that's what I think the implication for these fall elections look like.

- I mean, I think that some of, there are good things in this.

I think one of the things that's good is that it has fundamentally changed how the parties look for voters and find it.

And it also means that some of the issues, it becomes a race on issues and not necessarily R's and D's.

You know, you have to have a marketplace of ideas when you hit the campaign trail.

But I also think that, you know, we're seeing the trend to your point, they're not necessarily undecided voters.

I think traditionally more unaffiliated have picked that Republican ballot as they go in to go vote in the primary.

It doesn't necessarily mean that they are Republicans, but it means that they're picking the Republican ballot.

So that's what we start to watch when we go into elections.

Where are those unaffiliated voters landing when they hit the voting booth?

- Yeah, and I think it's bigger than that.

I don't think it's people deciding they want to be undecided so that they can vote in a particular election.

So I agree we are a semi-closed primary and you can do that.

But I think people are saying, I don't want to be, I'm not represented by either of these parties.

I'm frustrated by the Republican Party.

I'm frustrated by the Democratic Party.

You know what?

I don't want that flag in my yard.

I want to be independent because I don't see someone really speaking to me.

And something you said earlier, which is I think a problem for North Carolina, why is it so hard to run as an unaffiliated?

Why can we not have more parties on the ballot?

So North Carolina Forward Party, we're working to get on the ballot.

You know what we need to do?

15,000 wet signatures.

That means in a world of technology, it can't be done DocuSign or any type of thing like that.

It's got to be in person, physically signed.

We can do things with technology and require your driver's license, those type of things, to prove it, but 15,000 signatures, that's not easy to do.

And then once you get on the ballot, you've got to run a governor that achieves 2 percent vote.

That's really difficult.

Why is that being done?

It's being done to prevent choice for voters.

It's being done because the parties in power don't want competition.

You know who loves the Green Party?

The Republican Party.

You know who loves the Libertarian Party?

The Democratic Party.

Why?

Because they feel that it helps them by drawing voters away from their arch rival.

We should make things easier in North Carolina to get more voices, get more debate.

Why are we afraid of competition?

- Well, we'll see how the competition plays out in November.

Governor Stein signed 12 bills into law this week and vetoed one bill.

Stein said that House Bill 437, which addresses homeless camps across the state, fails to address the cause of homelessness.

The bill would largely ban homeless camps and public sleeping.

It would allow local municipalities to create dedicated sleeping areas, but away from businesses and residential areas.

It does not provide any additional funding for homelessness.

The bill originally passed the House 73 to 40, with five Democrats voting for the bill.

Donna, what are the pros and cons for homeless people and for municipalities now that it's falling on them?

- [Donna] Sure.

- [Melody] And is it likely that lawmakers will override the governor's veto?

- I think we will see an effort to override it.

I don't know for sure that they have the votes or where it stands, because those five Democrats would make a big difference.

They're coming back at the end of the month to address some of these and perhaps technical corrections in the budget, to Travis's earlier point.

I think one of the things that has been overlooked in this process is municipalities are having to deal with it one way or another.

And there is grant money, federal grant money, available to help them do it.

And this bill language was drafted.

The requirements on the federal grant money is that it has to be drug-free, it has to be safe, it has to be certified to be a safe place to put folks.

And so when these municipalities, particularly small towns, you know, look at Forest City in Rutherford County, they've got an area called -- that locals call, you know, the homeless highway along a trail.

They don't have the resources.

And so they can draw down some federal grant money if they meet the requirements of the process laid out in this bill.

Well, it's not available to them now without this bill on the books.

So there are a lot of challenges in finding those resources to address it, create a safe, drug-free place.

That's what each municipality is dealing with.

- Yeah, this is a really hard issue.

I know a woman from Cary, North Carolina, where I live, and she lives sometimes and works all the time for a sanctuary at Skid Row, probably the most famous homeless encampment in the United States.

And you know, God blessed her for it.

That's what God calls us to do, is to work with people who have less.

At the same time, I think about, and I think that this is totally unsustainable.

You know, how can this be safe?

How can this be something that you move forward on when you're living on a sidewalk?

How can people run businesses in the area?

The governor not signing this particular bill, my understanding is this also has some consequences for people who run homeless shelters as opposed to homeless camps.

It's a two-part bill.

And one of those consequences is you, if you're working in a homeless shelter and someone else sells drugs there over a certain amount, you, the person providing the shelter, can be charged with a crime, which would seem to me, to make it less likely, that organizations would run those shelters.

So I think that was at least some of the reason the governor didn't sign the bill.

But again, I don't know how you thread a needle on something like this, one of these deep, deep societal problems that has mental health aspects to it all over it.

- Yeah, in a campaign year, it's easy to write bills like this and say, "Well, we're gonna clean up that camp."

But most of these camps grow organically in communities.

It's hard for cities and counties to go in and to clean them out, if that's the intent here.

You know, I'll give the authors of the bill credit for at least beginning the conversation, but this bill, and I understand the governor's veto, feels a little half-baked to me.

We still have many, many more policy conversations.

We've gotta have about how we address homelessness and the funding.

That's one of the biggest things.

However, the federal money's coming down, however local governments qualify for that, and the state, I think, can have a role in helping fund that and provide these homeless services.

- Well, we know whether the governor vetoes the bill or not, homelessness will continue to be an issue for some time in North Carolina and across the nation.

So we wanna thank our panelists.

Thank you all for joining us.

I'm Melody Hunter-Pillion.

Thanks for watching, and we'll see you next time.

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