Kentucky lawmakers approved a two-year, $32.4 billion budget on Wednesday, April 1. The bill, HB 500, focuses on key priorities like K-12 public education, public safety, veterans’ services, and maintaining university facilities.
The budget invests in the state’s priorities – education, infrastructure, and public safety – while being careful with taxpayer dollars and keeping long-term financial stability in mind. It is built by focusing on needs first and avoiding unnecessary spending, the same way that many Kentucky families manage their own finances. To accomplish this, the measure directs state agencies and programs – including the legislature itself – to identify and address outdated and pandemic-era programs; duplicate programs, grants, and services; reduce administrative costs and consulting contracts; and ended programs that do not produce clear benefits. The budget also encourages finding more efficient ways to deliver services, including through families, businesses, and community organizations. To accomplish this, HB 500 reduces spending in several areas, including a 4% base cut to executive branch spending in the first year and an additional 3% cut in the second year. However, to ensure priority programs are protected, agencies will have flexibility to decide where those reductions make the most sense.
At the same time, the budget protects core services. Per-pupil SEEK funding, Family Resource and Youth Service Centers, Medicaid, juvenile justice, corrections, and veterans’ programs are all exempt from the cuts. Certain education programs, including extended school services and Jobs for America’s Graduates, are also protected.
In education, HB 500 provides $369 million in new K-12 funding, includes a 2% annual SEEK increase (raising per-pupil funding from $4,586 to $4,626 in fiscal year 2027 and $4,792 in fiscal year 2028), keeps transportation funding steady at $398 million each year, and provides an additional $134.8 million to fully fund teacher retirement at the level actuaries believe is necessary to continue our efforts to stabilize the pension.
For public employees, the plan includes a 2% pay raise in each year of the budget, fully funds pensions and health insurance, and addresses pay compression in some agencies. The final version of HB 500 also fully funds the Kentucky Employee Health Plan at the recommended level. That includes a 14% cost increase in the first year and another 10% increase in the second year, both paid by taxpayers.
The budget also highlights major challenges facing our state. One particular area of concern is Medicaid, the taxpayer-paid health insurance program that covers medical costs for low-income individuals and families, including children, seniors, and people with disabilities. In this budget, Medicaid alone will cost about $6 billion over the next two years – the second-largest expense after K-12 education. The budget adds waiver slots to expand access for vulnerable populations and maintains key behavioral health services. We continue to focus on reforming the program to improve both the delivery of services and the cost, but it is a complicated issue that directly impacts all of us, with a third of the state receiving health care benefits through it and all taxpayers paying for it. This session we approved HB 2, which takes a huge step forward in tackling issues like oversight, ensuring recipients are eligible, and instituting federal community engagement and copay policies.
Overall, the budget includes targeted investments while maintaining a focus on financial responsibility. It increases funding for K-12 schools, including modest growth in SEEK funding, and fully supports teacher retirement and school employee health insurance. It also maintains steady funding for higher education, supports scholarships and dual credit programs, and invests in campus infrastructure.
In addition to HB 500, lawmakers approved several other budget bills, including nearly $1 billion for the judicial branch (HB 504), $182 million for the legislative branch (HB 503), a $7 billion transportation budget (HB 501), a $4.6 billion road plan (HB 502), and $70 million for local road projects (HJR 76). We also approved a $1.7 billion measure (HB 900) that makes one-time investments with excess funds in our budget reserve. While there was a desire to use these monies to create new programs and services, we chose to invest in communities to improve infrastructure (particularly with water and sewer lines), and improve the quality of life throughout the state.
Overall, this is a modest but strong budget that will serve the people of Kentucky well over the next two fiscal years. It continues to build a strong foundation on living within our means while planning for future needs. HB 500 now goes to the governor. Lawmakers will return to Frankfort on April 14 and 15 to consider any vetoes.
As always, I can be reached anytime through the toll-free message line in Frankfort at 1-800-372-7181. You can also contact me via email at Amy.Neighbors@kylegislature.gov and keep track through the Kentucky legislature’s website at legislature.ky.gov.
(HD21 – News from the Office of Rep. Neighbors)