The Following is from a press release from the Commonwealth of Kentucky Senate Majority Caucus.
FRANKFORT, Ky.) — The Kentucky General Assembly has finalized the state’s two-year operating budget, advancing a fiscally responsible plan that maintains strong investments in education, protects essential services, and prepares for long-term financial challenges driven by rising Medicaid costs and economic uncertainty, according to a news release from the Senate Majority Caucus.
The final version of House Bill 500 reflects agreement between the House and Senate through the free conference committee process, resolving differences while maintaining a disciplined approach to spending.
“This budget continues the progress we’ve made over the past decade, restoring fiscal stability, strengthening pensions and making responsible investments without overcommitting taxpayer dollars,” said Sen. Chris McDaniel, R-Ryland Heights, chair of the Senate Appropriations and Revenue Committee. “It avoids the budgeting gimmicks proposed by the governor, who attempted to shift the use of funding items around in a manner that indicated he was filling funding gaps when he truly was not, and on one of the more egregious cases, offered a supposed pay raise for teachers that he had no plan to continue paying for in the future.
“The agreed-upon spending plan between the House and Senate stops the political gamesmanship. It acknowledges and appreciates the value of every taxpayer dollar while stating that unsustainable government spending cannot be tolerated. As our commonwealth proceeds into the next fiscal year, I am going to challenge the governor to, in the final months of his administration, be a willing partner in identifying true costs and ways to best promote essential government programs while respecting precious taxpayer dollars.”
FISCAL DISCIPLINE AND RESERVES
Maintains strong reserves while still allocating $1.77 billion from the fund to invest in another round of transformative on-time statewide and regional investments.
This continued commitment builds on years of disciplined budgeting that have replenished the budget reserve trust fund, stabilized state finances, improved Kentucky’s credit rating and attracted record levels of outside business investment over multiple years.
Avoids ongoing spending commitments that could strain future budgets amid economic uncertainty and the lapsing of COVID-19-era spending in Washington, D.C.
Continues full funding of pension obligations, which has allowed for one of the most significant public pension turnarounds in the country.
Includes additional funding over the biennium of nearly $500 million more compared to the previous two-year budget.
Note: Unless otherwise stated, funding amounts reflect the total over the biennium and any items listed include only decisions on budget areas where the House and Senate budget proposals did not align. The details below do not reflect the areas of agreement between the two versions of the bill.
EDUCATION (K-12)
The Dolly Parton Imagination Library maintains a total allocation of $5 million over the biennium.
Includes language directing the Kentucky Cabinet for Health and Family Services (CHFS) to research ways to increase enrollment in the program by children from low-income households and those living in foster care.
Increases per-pupil funding by two percent in both fiscal years, making the seventh consecutive biennium under Republican supermajority leadership with increased funding for the state’s SEEK formula.
Total SEEK funding equates to over $7 billion from the state’s general fund revenues. This does not include funding within the budget’s learning and results services program (LARS).
Continues record-level education funding compared to prior budgets.
Teachers’ retirement system receives more than $2.23 billion over the biennium to provide over and above the actuarial determined employer contribution
More than $213 million over the biennium is allocated to support the state’s share of health insurance coverage for retired teachers who are not yet eligible for Medicare.
Includes more than $46 million total to support school resource officers statewide, with up to $20,000 in reimbursement per officer.
A total of $30 million is maintained to support the Center for School Safety.
LARS:
Almost $170 million for the Preschool Program
Nearly $98 million for the Family Resource and Youth Services Centers Program
Almost $48 million for the Extended School Services Program
$25 million for the Kentucky Educational Collaborative for State Agency Children
Over $24 million for the Read to Achieve Program
$22 million for the Read to Succeed Program, established by legislation sponsored by Senate Education Chair Steve West in a past legislative session
$20 million for the Gifted and Talented Program
Over 10 million for the Mathematics Achievement Fund
$6 million for Dataseam
$3.8 million for Advance Kentucky
$3.7 million for the Community Education Program
Almost $2.8 million for Local School District Life Insurance
$3 million for We Lead CS
$2 million to support Math Nation
$4 million for Save the Children
$2.4 million for Statewide Reading Research Center
$1 million for the Visually Impaired Preschool Services Program
$1 million for the Kentucky Alliance of Boys & Girls Clubs
$1.4 million for Teach for America
$200,000 for the Hearing and Speech Center
$200,000 for the Heuser Hearing and Language Academy
Supports career and technical education with more than $254 million total, including over $140 million to strengthen locally operated and state-run technical centers.
Provides $2 million over the biennium to support principal leadership development and strengthen school-level outcomes as part of the implementation of Sen. Steve West’s Senate Bill 4, which creates a structured, statewide leadership development system for school principals.
Provides $2 million over the biennium to support Sen. Danny Carroll’s Senate Bill 191, which establishes the Kindergarten Readiness Performance-based Childcare Incentive Pilot Program at the University of Kentucky’s College of Education.
Language included under the Department of Insurance (DOI) section of the Public Protection Cabinet (PPC) in the state budget seeks to determine the adequacy of insurance coverage for each local school district. The language requires DOI to submit a report using information from the Kentucky Department of Education to the Interim Joint Committee on Appropriations and Revenue no later than November 1.
POSTSECONDARY EDUCATION
Holds Kentucky State University (KSU) and Morehead State University (MSU) at base-level funding.
Applies a debt service offset for institutions receiving capital projects:
Base funding is reduced by the amount of debt service tied to those projects.
Exception: MSU and KSU receive capital projects without base reductions.
Maintains base-level funding for performance-based funding.
Allocates nearly $12 million over the biennium for cancer research and screening, shared equally between the University of Kentucky and the University of Louisville.
Allocates lottery funds to increase the Kentucky Education Excellence Scholarship (KEES) to more than $187 million over the biennium.
A total of $49.2 million is authorized in restricted fund use to support KEES.
Raises Kentucky Education Excellence Scholarship (KEES) eligibility minimum GPA to 2.75 and increases funding support to over $187.3 million over the biennium.
Provides $11.6 million total for veterinary medicine contract spaces, and $1.6 million to support optometry scholarships
Budget language is included to strengthen Kentucky’s veterinary and optometry scholarship programs and to add a clear workforce requirement tied to the investment. The budget provides ongoing funding for contract spaces and scholarships, but beginning with new recipients in the 2027-2028 academic year, it requires students who receive this support to practice in Kentucky for at least one year for each year of assistance provided. If recipients do not meet that commitment, the support is converted into a loan, with interest that must be repaid to the commonwealth.
MEDICAID AND HEALTH
Establishes a Medicaid “lockbox” of approximately $290 million, requiring legislative approval before funds can be accessed.
Ensures transparency and legislative oversight if projected shortfalls materialize.
Recognizes Medicaid as the fastest-growing area of state spending at an unsustainable level and as a key long-term budget pressure.
Medicaid benefits receive over $6 billion in general fund revenues and over $36 billion in federal dollars.
Includes additional Medicaid funding while promoting cost control and sustainability for those who rely on the program most.
Effectuates a 2.5 percent annual reduction in managed care organization payments in plan year 2028 and protects providers from reimbursement rate reductions.
Requires savings to be redirected to patient care through increased fee-for-service reimbursement rates.
Expands Medicaid waiver slots compared to the previous budget.
Supports behavioral health and hospital systems through targeted investments, including more than $14.6 million in general fund support annually for Appalachian Regional Hospital, $6.8 million in restricted funds, and approximately $85 million in federal funds each year to expand access to care in eastern Kentucky.
Provides additional funding for Medicaid disproportionate share hospital payments and cost settlements, including $6 million in restricted funds and $14 million in federal funds in the first year, along with $28.7 million in restricted funds and $86 million in federal funds to address prior cost obligations.
Rebases Medicaid dental services to better align with actual costs, supported by approximately $16 million in state funding and $63.2 million in federal funds over the biennium to improve provider reimbursement.
Increases support for specialized care facilities, including $5.4 million total in general fund and $12.6 million in federal funds to raise reimbursement rates for ventilator-dependent care.
Provides more than $14.1 million in general fund support for the Youth Villages Intercept Program, in addition to the $15.3 million allocated from federal funding.
Requires the cabinet to reimburse organizations for delayed reimbursement for providing therapeutic services to youth in state custody.
FAMILY SERVICES AND CHILD WELFARE
Provides $6 million each fiscal year alongside guiding language to pull down sufficient federal funds for the full implementation of 2024’s Senate Bill 151.
Language added to the CHFS section of the state budget requires that a child’s biological or legal parents must continue to provide support for a child in the state’s custody. Any support collected by the state must be applied only for the benefit of the child.
Allocates $44 million in total general fund support for foster care and out-of-home placement services, offsetting federal funding changes.
Language included alongside funding requires the Department for Community Based Services to submit quarterly reports detailing expenditures and fund sources for all services provided beginning Nov. 1.
Maintains overall child care funding levels while reallocating funds to areas of highest demand.
Provides targeted support for community mental health providers, including one-time funding increases to stabilize services.
Kentucky’s largest executive branch cabinet, CHFS, will see a grand total of nearly $55 billion flow through it over the next two years when factoring in all funding sources.
PUBLIC SAFETY AND JUSTICE
Provides funding to support law enforcement, including additional support for Kentucky State Police (KSP) overtime in place of compensatory time.
KSP is supported with nearly $500 million over the biennium from the state’s general fund revenues, and a total of over $435 million when factoring in federal, restricted and road funding support.
Directs approximately $26 million in total for county jails’ programming and reentry services.
Includes over $3.6 million in the first fiscal year and over $5.4 million in the second fiscal year to support annual salary increases for attorneys with a caseload in the Department of Public Advocacy who are classified pursuant to the provisions of House Bill 762 of the 2026 Legislative Session.
Includes funding adjustments for prosecutors tied to pension calculation corrections.
Authorizes the Justice and Public Safety Cabinet to utilize $15 million in the first fiscal year and $10 million in the second fiscal year to support the city of Middletown in constructing a firing range for statewide law enforcement use.
Provides $5 million in the first fiscal year to the city of Louisville to support the construction of a driving track for statewide law enforcement training use.
Juvenile Justice:
Authorizing bond funding in year two to support the design of a female youth detention facility
Language supporting the advancement of a high-acuity mental health facility directs the Justice and Public Safety Cabinet, working with the Department of Juvenile Justice, to gather information by July 1 on how Kentucky can better provide intensive mental health treatment for youth, including whether a new facility may be needed. The cabinet will seek input from qualified health care providers that meet certain Medicaid standards and review options for delivering these services. It must then report back with a summary of what it learned, how it evaluated the options and any recommendations for funding.
ENERGY
Identifies $75 million in total funding to support Carroll’s Nuclear Reactor Site Readiness Pilot Program, which is established through Senate Bill 57. Three projects under the program are deemed necessary government expenses. Each expenditure requires prior written approval from the state budget director and is limited to $25 million. Projects remain subject to final authorization by the legislature.
Provides $15 million of previously authorized 2024 funding to the Energy Planning and Inventory Commission, also known as EPIC, which is administratively attached to the University of Kentucky.
GENERAL GOVERNMENT AND OPERATIONS
Allows the use of various restricted funds requested by state agencies and other executive branch offices.
Identifies legislative intent and funding included in agencies’ base funding.
Provides additional funding to ensure full operation of the Bowling Green Veterans Center, correcting earlier funding assumptions.
Restores traditional funding distribution language for the Department for Local Government, addressing concerns from local officials.
Includes continued support for veterans’ programs, emergency response, and disaster preparedness funding structures.
Strengthens government accountability through required financial audits of school districts and improved statewide property valuation systems to increase transparency and efficiency.
Language in the budget requires property valuation administrators (PVA), by June 30, 2028, to utilize the commonwealth’s statewide aerial imagery and mapping program called KyFromAbove, as the source of aerial mapping and imagery services used in PVA functions.
IN SUM
Total general fund dollars expended in HB 500 exceed $31 billion.
BUDGET RESERVE TRUST FUND
The final state budget maintains healthy levels of reserves to allow for another round of transformative one-time statewide and regional investments conducive to return on investment, continued economic growth and supporting public services and infrastructure.
LONG-TERM OUTLOOK
Lawmakers emphasized that while the state is in a stronger financial position than in previous decades, significant challenges remain.
“This budget reflects a clear understanding that we cannot spend as if the current conditions will last forever,” McDaniel said. “Medicaid growth is rising at an unsustainable pace and economic uncertainty requires us to stay disciplined and focused on core priorities, but our fiscal discipline and wise investments in transformative areas and supporting critical government services, accompanied by sound pro-business policies, will keep Kentucky on the right track toward an even brighter future.”
The free conference committee report on HB 500 has been approved by both chambers and the budget has officially been delivered to the governor for consideration. The governor may issue line-item vetoes on portions of the budget bill, but each will be subject to legislative override.
Comments