Senate Passes Two-Year Budget Plan, Sends Proposal Back to House

The Kentucky Senate has unanimously approved its version of the state’s two-year executive branch budget, and returned it to the House for further consideration.

The Senate proposal continues funding for major state responsibilities, including education, health care, pensions, and public safety. It also maintains substantial reserve levels, including approximately $3.9 billion in the Budget Reserve Trust Fund prior to any one-time allocations. The proposal also includes a 2% pay increase for state employees in each fiscal year.

Education

The Senate plan maintains the state’s SEEK funding formula, including per-pupil increases, and continues support for student services such as family resource and youth service centers.

It includes $5 million in each fiscal year for school safety and allocates $100 million annually in federal funding for school and community nutrition programs. The proposal also continues support for dual credit and workforce development programs.

For higher education, the Senate maintains base funding while directing $5 million in fiscal year 2027 and $15 million in fiscal year 2028 to performance-based funding.

Additional investments include $7.5 million for School of Innovation pilot programs, $2.25 million each fiscal year for a Principal Leadership Development Program, $40 million for school construction assistance, and $5 million each fiscal year to support school resource officers, including expanded eligibility.

Health and Social Services

The proposal maintains funding for Medicaid and core health services while expanding access to home- and community-based care programs.

It includes more than $100 million to meet increased state requirements for administering SNAP benefits.

Additional funding includes $44 million over the biennium for out-of-home care, $10 million to support relatives caring for children, and approximately $20 million per year for staffing and operations at state psychiatric facilities.

Pensions and Long-Term Obligations

The budget continues full funding of required contributions to the Kentucky Teachers’ Retirement System, totaling more than $1 billion annually, and maintains funding for the Kentucky Employee Health Plan and other pension systems.

It also includes approximately $269.7 million to reduce retiree health insurance liabilities and $145 million to address unfunded pension liabilities.

The Senate plan provides approximately $80 million for a one-time retiree payment and includes $2 million for an independent actuarial review of the Teachers’ Retirement System.

Public Safety, Workforce, and Corrections

The budget provides additional support for Kentucky State Police operations and compensation.

It maintains $10 million each fiscal year for the Body Armor Grant Program and includes $11 million to convert accumulated compensatory time for state police into direct pay.

The budget also provides $32 million to increase reimbursement rates for county sheriff’s deputies, $5 million each fiscal year for next-generation 9-1-1 services, and $4.7 million for driver licensing offices. Juror compensation would increase from $12.50 to $25 per day.

For local governments and corrections, the Senate plan includes a $4 supplemental per diem for counties housing state inmates and provides approximately $3 million annually to support inmate medical costs.

Economic Development and Infrastructure

The proposal includes $42 million in bond funding to support a prison education program through the Kentucky Community and Technical College System and continues funding for capital and maintenance needs across state facilities.

It also allows up to $25 million per project to support nuclear energy development.  

The proposal provides access to an additional $25 million each fiscal year from the Budget Reserve Trust Fund to serve as state matching funds during federally declared disasters or emergencies.

Additional investments include funding for technology, cybersecurity, and modernization, and approximately $151 million to replace the state’s personnel and human resources system.

Additional Budget Measures

Along with House Bill 500, the Senate also approved:

• House Bill 503, the legislative branch budget
• House Bill 504, the judicial branch budget
• House Bill 900, which identifies approximately $810 million from the Budget Reserve Trust Fund for one-time investments and projects across the state

Because the Senate made changes to these bills, they will also return to the House for further consideration. Lawmakers from both chambers are expected to form a conference committee to negotiate a final version of the budget in the coming days.