By Sam Walker, SamWalkerOBXNews.com
North Carolina lawmakers appear poised to make one of the most sweeping changes in the history of the state ferry system, with a draft state budget requiring tolls to be collected on all state-operated ferry routes beginning next year, while also providing millions in short-term funding to keep the system running.
According to a draft version of the 2026 Appropriations Act released Monday night, the N.C. Ferry Division would be required to begin collecting tolls on every route in the system, ending free passage on routes including Hatteras-Ocracoke and Currituck-Knotts Island.
The final budget bill had not been published as of Tuesday morning ahead of committee meetings scheduled later in the day.
The proposal marks a major escalation in a debate that has simmered for years.
Sen. Bobby Hanig (R-Currituck) said he will again fight against the toll provisions, after unsuccessful attempts to remove them from the Senate’s version of the budget last year.
“Here we go again,” Hanig said in a text Tuesday morning.
The Senate budget proposal originally called for new tolls on the currently free Hatteras-Ocracoke and Currituck-Knotts Island routes, along with higher tolls on the existing Ocracoke-mainland routes, with Senate leaders estimating the changes would generate about $6.4 million annually.
The House had previously rejected those toll increases, but the latest draft budget appears to embrace a broader tolling model affecting all eight ferry routes operated by the state.
The move is expected to draw strong opposition in coastal communities where ferries serve as essential transportation links rather than optional services.
That is especially true on the Outer Banks, where the Hatteras-Ocracoke ferry serves as Ocracoke Island’s primary connection to the northern Outer Banks, and the Currituck-Knotts Island ferry provides the only direct connection between Knotts Island and the rest of North Carolina.
Residents on Knotts Island rely heavily on the route for daily commuting, school transportation, medical care and emergency access.
The budget proposal does not list rates that will be charged on each of the division’s seven vehicle and one passenger route.
Provisions included in the draft budget would grant free passage to school buses and also allow coastal county residents to purchase a commuter pass that would charge no additional fees.
At the same time, the draft budget provides short-term relief for the Ferry Division, including approximately $15 million in nonrecurring funding — $12 million for operations and fuel costs and $3 million for maintenance and capital needs.
The funding comes as Ferry Division officials warn the system faces mounting financial pressure from rising fuel costs, aging vessels and increasing maintenance demands.
Ferry Division Director Jed Dixon has told lawmakers that roughly 70% of the fleet is more than 20 years old, while the division faces more than $92 million in additional operational, maintenance and capital needs, including upgrades at the Manns Harbor shipyard.
“We’re at the place where the fleet is aging faster than we can service it,” Dixon told lawmakers earlier this year.
Fuel costs have further strained the system.
NCDOT officials recently told legislative budget writers that ferry fuel costs have risen nearly 75% since geopolitical tensions in the Middle East intensified earlier this year.
Without additional funding, Dixon warned the Ferry Division could be forced to reduce service by as much as 43%.
The draft budget also preserves funding for a performance audit of the Ferry Division by State Auditor Dave Boliek’s office.
That review, included in House Bill 1094 which is slated for a final vote on Tuesday in the legislature, will examine the ferry system’s finances, maintenance practices, route structure, vessel replacement needs and potential revenue sources. The audit report is due Jan. 15, 2027.
Lawmakers have said the audit is intended to help guide future decisions on tolling, route changes and long-term ferry investments.
The draft budget allocates approximately $101.1 million to ferry operations within the Highway Fund for fiscal year 2026-27, part of a total Highway Fund budget of roughly $3.38 billion.
Because the budget remains in draft form, provisions could still change before debate begins in the House and Senate.
