General Assembly Passes Two-Year State Budget

The Kentucky General Assembly has passed a two-year, $32.4 billion state budget, sending House Bill 500 to the governor for consideration. Lawmakers are scheduled to return to Frankfort in mid-April to consider any vetoes.

The spending plan prioritizes funding for K-12 education, public safety, health care, and core government services while including reductions in executive branch spending. The budget includes a 4%-base reduction in executive branch spending in the first fiscal year and an additional 3% reduction in the second year.

Areas that are exempt from the reductions include SEEK funding, certain educational services, Family Resource and Youth Service Centers, Medicaid, juvenile justice, corrections, and programs and services for veterans.

Key components and updates in the two-year budget include:

Education (K-12)

The budget provides $369 million more in funding over the current biennium for K-12 public education and includes a 2% increase in SEEK funding in each year, raising per-pupil funding from $4,586 to $4,626 in FY27 and $4,792 in FY28.

Transportation funding remains flat at $398 million annually.

The budget includes several funding increases to support education, including:

• $61.51 million in FY27 and $73.36 million in FY28 to support Teachers’ Retirement System obligations for school districts
• $128.3 million in FY27 and $211.9 million in FY28 to meet required long-term pension funding obligations
• $201 million in FY28 to fully fund health insurance costs for local school district employees

Additional investments include funding to support career and technical education, maintain student support services through Learning and Results Services programs, and continued support for Family Resource and Youth Services Centers and extended school programs.

Postsecondary Education

The budget maintains performance-based funding at $115 million annually and provides funding for campus infrastructure and student access.

It includes $10 million per university in FY27 and $100 million in FY28 for asset preservation projects.

Additional investments include:

• $8.09 million annually for the College Access Program
• $8 million annually for the Dual Credit Scholarship Program, along with $6.29 million annually in additional support from lottery funds
• Additional funding to expand veterinary contract spaces

Public Employees and Health Plan

The budget includes a 2% salary increase each year for state employees and fully funds pension obligations at required levels, including $78.5 million in FY27 toward the unfunded Kentucky Employees Retirement System liability.

The budget also fully funds the Kentucky Employee Health Plan at the actuarially determined amount, including a 14% increase in the first year and a 10% increase in the second year in state funding.

Medicaid and Health

The budget includes nearly $6 billion in General Fund support for Medicaid over the biennium, making it one of the largest areas of state spending.

Targeted increases include:

• Increased funding to support additional waiver slots across programs, including 110 new Michelle P. Waiver slots, 135 Community Living Waiver slots, and 160 Home and Community-Based Waiver slots over the biennium
• $55.9 million in restricted funds to support the Medicaid Benefits Program
• Additional funding for Certified Community Behavioral Health Clinics, including $2.4 million in FY28, with $1 million designated as a one-time allocation
• Additional funding supports Medicaid fraud and abuse oversight through the Office of the Attorney General.

Public Health

The budget provides $212.9 million annually in federal funding for the Rural Health Transformation Program to support health care access in rural communities.

Additional funding increases support for public health operations, including for vital statistics, medical marijuana testing, and the Ryan White Program.

Family Services and Child Welfare

The budget includes $43.5 million in FY27 and $58 million in FY28 to address increased state costs for SNAP administration, along with continued support for foster care and kinship care programs.

It also increases funding to support child welfare services, including $22 million annually in restricted funds for foster care and kinship care services for children with complex needs, and $6 million annually for relative and fictive kin caregivers.

Public Safety and Justice

The budget includes funding to support law enforcement, corrections, and juvenile justice operations, along with investments in facilities, technology, and workforce needs.

Key investments include:

• $3.8 million in FY27 and $7.4 million in FY28 to support salary adjustments for state police personnel
• $5.5 million annually to convert compensatory time to paid overtime for sworn officers
• $3.6 million in FY27 and $5.4 million in FY28 to support salary increases for public defenders

The budget also includes funding to support juvenile justice facilities, including $6.5 million in FY27 and $12 million in FY28 for detention centers in Jefferson County.

General Government and Operations

The budget also includes various targeted investments across state government to support core operations, technology upgrades, and infrastructure needs.

Additional Budget Bills Passed

In addition to House Bill 500, lawmakers approved funding for other areas of state government, including:

• Nearly $1 billion for the judicial branch (HB 504)
• $182 million for the legislative branch budget (HB 503)
• A $7 billion operating budget for the Transportation Cabinet (HB 501)
• A $4.6 billion road construction and maintenance plan (HB 502)
• $70 million in funding for local road projects (HJR 76)