The state budget proposal working its way through the General Assembly this week offers retired state employees a one-time bonus on their pension instead of a permanent cost of living adjustment.
Advocates for retired state employees and Democratic lawmakers have raised concerns over that provision, arguing that retirees haven't seen a permanent cost of living adjustment since 2017 and are now grappling with inflation on fixed incomes that haven't kept up.
The teacher's and state employees pension plan provides benefits to about 257,645 people, according to an October 2025 report, with average benefits around $21,627. That means the one-time bonus, set to be paid in September, will average about $540.
Tim O'Connell, the executive director of the Retired Government Employees Association, said one-time bonuses may offer relief for that month but don't help retirees' payments keep pace with rising costs.
"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," O'Connell said.
Sen. Joyce Waddell, D-Mecklenburg, focused her criticism during Wednesday's budget debate on the decision to provide a one-time benefit to retirees in this budget.
Waddell began her remarks by saying the bonus is too small but quickly moved to the choice to not make the adjustments permanent.
"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," Waddell said.
Rep. James Roberson, D-Wake, made similar remarks later Wednesday during the House's budget debate.
"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," Roberson said before offering an apology to those retirees.
History of pension increases in NC
The General Assembly began to shy away from what had been routine increases during the Great Recession. Since 2009, the legislature has offered three cost of living adjustments, with the last coming in 2017.
Instead, it has offered several one-time bonuses, giving retirees some financial relief while also avoiding recurring expenses.
A January N.C. Retirement Systems report said a 1% COLA increase would cost the state's general fund $52 million in each of the next 12 years, with an additional $28 million coming from other sources.
By comparison, a one-time supplement of 1% would cost $39 million from the state's general fund, with an additional $20 million coming from other sources.
The proposed 2.5% supplement requires $98 million from the state's general fund, with $50 million coming from other funding sources.
Rep. Donny Lambeth, R-Forsyth, a House budget writer, said that the House is typically sympathetic to COLAs for retirees but that he understands the hesitance Senate budget writers have towards them.
"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," Lambeth said in an interview.
It is likely, Lambeth said, that the House will continue to explore ways to achieve COLAs.
And there is increasing optimism about that, particularly with first-term State Treasurer Brad Briner, a Republican, shifting the investment strategy for the state's retirement funds to bring their performance in line with peers after years of lagging returns.
Last year, for instance, the state's pension fund earned 13.26% returns, putting it near the median for funds that manage more than $20 billion in assets.
O'Connell said that's a welcome change, in part due to a shift in how retirement assets are managed. That money had previously been managed at the sole decision of the state treasurer but is now managed by an investment authority that is overseen by a five-member board of directors.
"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," O'Connell said.
