A new budget proposal in the state’s General Assembly has sparked significant debate, centering around a temporary bonus for retired state employees that replaces a more permanent cost of living adjustment (COLA). This decision comes as retirees face financial pressures from inflation without an increase in their fixed incomes since 2017.
Covering around 257,645 retirees, the teacher’s and state employees pension plan will see a one-time bonus averaging $540, based on average benefits of approximately $21,627, according to a report from October 2025. This bonus is set for distribution in September, but many argue it falls short of addressing long-term needs.
Tim O’Connell, representing retirees, highlighted the insufficiency of the bonus: “We’re all living it. It’s brutal, especially if you’re on a fixed income and your food costs are up, your medicine costs are up, fuel costs are up, everything is up. And these are people all over North Carolina that built North Carolina, made it what it is,” he said.
Senator Joyce Waddell, D-Mecklenburg, criticized the proposal in a budget debate, emphasizing the necessity for ongoing adjustments: “The following month, that retirees’ pension is exactly what it was before, and next year it will be the same. A true cost-of-living adjustment would raise monthly checks permanently and keep pace year after year with the rising cost of groceries, medicine and rent,” she noted.
Echoing these sentiments, Representative James Roberson, D-Wake, expressed regret during the House’s budget deliberations, stating, “This is a difficult day for me. It should be a difficult day for all of us, to see that we have not done the right thing or to recognize that we have not done the right thing, especially when it comes to our state retirees,” before extending an apology.
History of Pension Adjustments in North Carolina
Since the economic downturn in 2009, the General Assembly has limited permanent COLA increases, offering only three since then, with the last in 2017. Instead, retirees have received one-time bonuses to avoid ongoing financial commitments from the state.
A January report from N.C. Retirement Systems indicates that a 1% COLA would necessitate $52 million annually from the state’s general fund over 12 years, with an additional $28 million from other sources. In contrast, a one-time 1% bonus would require $39 million, supplemented by $20 million from other funds. The proposed 2.5% bonus would cost $98 million from the general fund and $50 million from other sources.
Rep. Donny Lambeth, R-Forsyth, a key budget writer in the House, acknowledged the complexity: “We already have a deficit in the pension plan that we’ve been trying to sort of whittle away at that gap, and I think most people felt like increasing the deficit is not good. And every time they looked at the cost of it, it was more than they could tolerate,” he explained.
Despite current challenges, optimism remains, particularly with State Treasurer Brad Briner’s revamped investment strategy for retirement funds. Last year, these funds achieved a 13.26% return, aligning them near the median for large funds. This performance improvement is credited in part to a new investment authority managed by a five-member board.
“We give a lot of credit to the work that Treasurer Briner has done in his short time, but there’s a generation of retirees that have really received no cost-of-living adjustments during their retirement and that’s just unfortunate and, I dare say, unacceptable,” said O’Connell.
