The Kentucky General Assembly’s Republican supermajority passed a two-year, $32 billion state budget Wednesday night, just hours before the start of the governor’s veto period.
Because the bills were approved before the deadline, any veto issued by Gov. Andy Beshear can be overridden when lawmakers return later in April, effectively making the measures veto-proof.
Lawmakers also passed additional legislation directing more than $1.7 billion toward specific projects and approving tax changes that include incentives for major developments.
House Bill 500 Sets $32B Spending Plan
House Bill 500 outlines $32 billion in state spending over the next two fiscal years. A conference committee finalized the 225-page compromise before both chambers approved it.
One of the biggest points of debate was Medicaid funding. The final version allocates nearly $700 million less for Medicaid benefits than requested by the Beshear administration. However, it sets aside $290 million in reserve funds that could be used if needed.
Republicans also included a 2.5% reduction in payments to Medicaid managed care organizations, aiming to redirect those funds to healthcare providers.
The budget increases K-12 per-pupil funding by 2% but does not include funding for teacher pay raises or expanded pre-K programs requested by the governor.
During debate, Democratic Rep. Chad Aull criticized the budget, warning Kentucky would continue to fall behind in teacher salaries and arguing Medicaid funding was being reduced.
Rep. Jason Petrie pushed back, saying slowing spending growth should not be considered a cut and defended the budget’s overall increases.
The final plan also removes a proposed extra payment for state retirees and reduces base funding for most public universities, while keeping funding steady for Kentucky State University, Morehead State University and Murray State University.
Lawmakers said about $345 million will remain unspent and be added to the state’s budget reserve, which currently totals $3.7 billion.
House Bill 900 Allocates $1.7B for Projects
House Bill 900 directs more than $1.7 billion from the state’s rainy day fund to over 300 projects statewide.
About $450 million will support local projects, while roughly $1 billion will fund water systems, infrastructure and economic development efforts.
Louisville is set to receive significant funding, including $90 million for downtown revitalization, more than $3 million each for the city’s ballet and orchestra, $5 million for the zoo and over $21 million for the airport.
The bill passed with overwhelming support, receiving unanimous approval in the House and only one dissenting vote in the Senate.
House Bill 757 Includes Tax Changes and Incentives
Lawmakers also approved House Bill 757, a wide-ranging revenue bill with several late additions.
The measure restricts local school districts from creating new occupational or personal property taxes and limits increases to existing ones. It also bans the sale of kratom.
Additional provisions offer major tax incentives for development projects, including:
- Up to $40 million in tax credits for large-scale historic building renovations
- A full sales tax incentive for major multi-day sporting events with large attendance
State leaders said these incentives are intended for projects such as the redevelopment of Humana’s former headquarters in Louisville and improvements at the Red Mile racetrack in Lexington.
The bill also authorizes placing a statue of longtime U.S. Sen. Mitch McConnell in the Capitol Rotunda in Frankfort.
Fiscal impact estimates for the budget and revenue bills had not been posted as of Thursday morning.
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