Senate Unveils Their Plan for Biennium Budget Bills

On Wednesday, Senate Budget Chair Chris McDaniel and the Kentucky Senate Majority Caucus offered the proposed two-year spending plan (House Bill 6) and over two dozen one-time expenditures (House Bill 1) during the Senate Appropriations and Revenue Committee meeting.

One-time expenditures, including infrastructure improvements, urban and rural development, scientific innovation, economic investment, and expanded access to health care and housing—allow the use of new revenue for essential government services while applying one-time money to one-time expenses.

A high priority of McDaniel, Senate leaders, and the Republican supermajorities is the continued reduction of working Kentuckians’ income taxes.

HOUSE BILL 1

The Senate Committee Substitute 1 to House Bill 1 maintains significant one-time investments prioritized by the state House of Representatives, including infrastructure, economic development, public safety, and state employee and teacher pension liabilities. These one-time investments would not negatively impact the fiscal trigger provision of 2022’s HB and take into account operational realities. It accounts for income tax reductions. The remaining budget reserve trust fund balance would be $2.7 billion.

Senate additions to House Bill 1 include:

$890 million transfer to the state road fund: This will support road, bridge, and highway improvements in high-growth counties amid Kentucky’s continuing record years of business investment. It will focus on metropolitan districts. This investment will help with over-programming within the state road plan and allow other projects to move forward, according to a news release.

$150 million for the innovative and entrepreneurial Commonwealth Center for Biomedical Excellence: The funds support an innovative entrepreneurship and life sciences campus in Covington. The city possesses an emerging cluster of life sciences companies led by CTI Clinical Trial and Consulting Services, Gravity Diagnostics, and Bexion Pharmaceuticals. This investment is in addition to the $15 million secured by McDaniel in the 2022 biennial budget to build a life sciences laboratory within the OneNKY Center, which is currently under construction and is expected to open in 2025.

$75 million for nuclear development siting: Furthering the effort championed by Sen. Danny Carroll, R-Benton, this funding would help propel Kentucky into a more sustainable and cheaper energy future in its vision to embrace an all-of-the-above approach to lowering Kentucky family’s energy costs and supporting Kentucky businesses. This investment will help pull down federal dollars also.
$75 million to support a 13th check for Kentucky state employee retirees:  This initiative would provide retirees within the Kentucky Employee Retirement System a 13th check.

$60 million for Murray Vet Tech: The investment will support the current program.

$50 million for high unemployment counties’ economic development fund: This funding would prioritize areas most needing business investment and job opportunities.

$50 million for Madisonville Department of Criminal Justice Training: Funds will construct a new facility to accommodate trainees in the furthest western part of the Commonwealth.

$36 million for improvements at the Kentucky Horse Park: This will further support Kentucky’s signature industry and improve a landmark international attraction within the thoroughbred industry.

$35 million for the Grayson Department of Defense Park: This will fund a program to recruit prime defense contractors to Kentucky. This effort will require collaboration between state and federal delegates.

$35 million in airport economic development: This is financial support for our state’s largest airports and the $200,000 supporting smaller regional airports. 

  • $5 million for Louisville Muhammad Ali International Airport (SDF)
  • $5 million for Bluegrass International Airport (LEX)
  • $25 million for Cincinnati/Northern Kentucky International Airport (CVG)

$30 million for the Home of the Innocents-Kosair for Kids Expansion match: Established in 1880, Home of the Innocents enriches the lives of children and families with hope, health, and happiness. Programs include residential and community-based behavioral health services, therapeutic foster care and adoption services, supportive services for young adults experiencing homelessness, and long-term care for children with complex medical needs.

$25 million for The University of Louisville Cancer Center at Bullitt: UofL Health is asking for help to build a state-of-the-art cancer center in Bullitt County to expand treatment access for cancer patients across the state. Kentucky currently has the highest death rate from cancer in the U.S. and UofL Health Brown Cancer Center wants to reverse that trend by creating a Center for Rural Cancer Education and Research in Bullitt County to make it easier for out-of-towners to get the care they need.

$25 million for Ashland Conference Center: Ashland is home to 21,000 residents and is a regional center for commerce, health care, activities, and much more. The Huntington-Ashland metropolitan area is home to 362,000 people within a three-state region. The city seeks to develop a conference center of up to 30,000 square feet. The conference center aims to open Ashland up as a host city for conferences and events, bringing positive economic impact and revenue to eastern Kentucky.

$25 million for community-focused park match: The project will improve quality of life by supporting improvements to Kentucky state parks and increasing tourism for surrounding communities. Projects must be a minimum of $2 million and would require a 50/50 local match. 

$21 million for Livestock Innovation Center: This space will be a central coordinating point and key resource for the livestock industry in Kentucky and across the eastern United States.

$20 million for the Murray/Louisville cybersecurity partnership: Funding will allow both universities to benefit from federal dollars.

$16 million for Appalachian Regional Healthcare Hazard Psychiatric Research: The project will serve to improve health and promote the well-being of all people in central Appalachia.

$12 million for Middlesboro Cancer Center: Operated by ARH, this investment will expand and improve services to eastern Kentucky residents.

$12 million for Pikeville Medical Center: The funds will support the center’s project ventures and improve health care for regional residents.

$10 million for Grayson Airport: A proposal is to build a runway at the local tri-model park.

$10 million for Lexington Transformational Housing Affordability Partnership: Plans aim to address the housing crisis.

$8 million for Morehead University Deep Space Array: This will provide the university with a full deep space array and further strengthen its partnership with NASA.

“One-time funding investments for these transformative 21st-century projects seeds planted today that will allow us to reap untold rewards in the future,” Senate President Robert Stivers, R-Manchester, said. “We are talking regional growth, improved health outcomes, scientific advancement, and critical infrastructure improvements. There’s no way to truly quantify the benefits these investments offer. I commend everyone in the Kentucky General Assembly who has supported the policies and budgeting that have put this opportunity at our fingertips.”

BIENNIAL STATE BUDGET – HOUSE BILL 6

The state House of Representatives and the Senate have been philosophically aligned on conservative policy and fiscal responsibility since the historic flip of the state House in 2016.

“We started by recognizing the great strides the House of Representatives made in House Bill 1. We added to that by making strategic decisions on how to invest our resources to help areas in need, create a modern economy, and make our state a great place to live,” McDaniel said. “The Senate’s proposal makes sure we are doing transformational things. We are laying the groundwork to ensure our competitiveness in the next century.”

There are five key differences between the Senate budget proposal compared to the House proposal:

  1. Increases SEEK funding by nearly $100 million.
  2. Doubles performance-based funding for postsecondary institutions to approximately $201 million from approximately $100 million.
  3. Corrects a funding source issue related to Medicaid funding, increasing funding by $120 million in FY 2025.
  4. Increases jail performance funding by $15 million to result in long-term savings.
  5. Pays off $200 million in bonds related to KYWired, resulting in $5 million in savings each of the next 20 years.

Key provisions and investments of the Senate’s budget proposal in comparison to the enacted budget include:

Education and Learning Attainment

K-12:

  • Increases the SEEK per-pupil base guarantee to $4,368 in fiscal year (FY) 2025 (4 percent increase) and $4,455 in FY 2026 (2 percent increase).
  • Increases transportation funding support by $44.6 million in FY 2025 and $65.9 million in FY 2026 to support increases to 80 percent and 90 percent.
  • Increases general fund by $8 million in each fiscal year to support the Center on School Safety.
  • Amends language for special offers of assistance to identify six schools that previously received awards for bond authorization in FY 2025 to help partially offset construction cost inflation.
    • Adds language requiring SFCC to investigate design and construction issues with Estill County Middle School.
  • Increases general fund by $175,000 in FY 2025 and $225,000 in FY 2026 for increased salaries at state area technology centers.
  • Increases general fund by $176,600 in FY 2025 and $191,300 in FY 2026 for step and rank increases at the Kentucky School for the Blind.
  • Increases general fund by $374,700 in FY 2025 and $406,000 in FY 2026 for step and rank increases at the Kentucky School for the Deaf.

Teachers’ Pensions:

  • Increases general fund support by $159.2 million in FY 2025 and $302.1 million in FY 2026 and directs the use of $29.3 million of FY 2023 lapses to continue paying the full actuarially determined contribution in each fiscal year.
  • Directs the use of $11 million in overfunding of retiree health insurance in FY 2025 and increases general fund by $6.5 million in FY 2026 to continue covering the cost of single coverage for members who have retired since July 1, 2010, but are not yet eligible for Medicare.

Postsecondary Education:

  • Doubles the performance-based funding for postsecondary institutions, not totaling approximately $201 million.
  • Permits Northern Kentucky University to receive SEEK funding from the Kentucky Department of Education for Young Scholars Program students.
  • Provides $75 million to Kentucky State University for asset preservation to bring dormitories up to code, improve solvency, and address core issues facing the university. The investments give the university an opportunity to succeed.
  • Supports each postsecondary institution’s top priority project through bond fund authorization, except for Kentucky State University, in light of its immediate needs.
  • Includes language for KHEAA to evaluate and examine the effectiveness of the distribution of Kentucky Educational Excellence Scholarship merit scholarships based on a recipient’s high school grade point average.

Essential Government Services

  • Increases restricted funds by $3.2 million and federal funds by $1.8 million in FY 2025 and increases restricted funds by $6.4 million and federal funds by $3.6 million in FY 2026 for 100 additional social workers over the fiscal biennium.
  • Fully funds the Kentucky Children’s Health Insurance Program, known as KCHIP.
  • Fully funding Michelle P. waivers, including a prequalification screening.
  • Increases general fund by $2 million in each fiscal year to support the operations of the domestic violence shelters.
  • Increases general fund by $775,000 each fiscal year as one-time funding to support facility improvements at Maryhurst.
  • Increases general fund by $3 million, restricted funds by $2 million, and federal funds by $3 million in FY 2025, and increases general fund by $6 million, restricted funds by $2 million, and federal funds by $3 million in FY 2026 for a relative caregiver reimbursement rate increase.
  • Increases general fund by $6.5 million in FY 2025 to support a one-time infrastructure modernization program for Holly Hill Child and Family Solutions.
  • Increases general fund by $500,000 annually to support the Volunteers of America – Family Recovery Court.
  • Increases general fund by $1.1 million and restricted funds by $394,300 in each fiscal year to support staffing and operations for the Office of Dementia Services and the State Long-Term Care Ombudsman.
  • Increases general fund by $4.2 million and federal funds by $10.5 million in FY 2026 to develop an HCBS 1915(c) waiver for children ages 0-21 with severe emotional disabilities, autism spectrum disorder, and intellectual disabilities.
  • Increase General Fund by $17.9 million in FY 25 to support Victims of Crime Act grants to offset reduced federal awards.
  • Adds language requiring a report from the Kentucky Department of Juvenile Justice (DJJ) on the design and cost parameters for a high-acuity juvenile mental health treatment facility.
  • Increases general fund by $20 million in FY 2026 to support a medical services contract for primary care and mental health care across all DJJ facilities.

First Responders and Public Safety

  • Increases Kentucky State Police general fund by $8.3 million in FY 2025 and $14.2 million in FY 2026 to support the statutory consumer price index adjustment in both years in the trooper salary schedule for 1,013 troopers and commercial vehicle enforcement officers.
  • Increases general fund by $6 million in FY 2025 and $16.6 million in FY 2026 to support classes of 75 Kentucky State Police trooper cadets in each fiscal year.
  • Includes sufficient restricted funding to provide for a 2.6 percent increase to the incentive payment in FY 2025 and a 2.6 percent increase in FY 2026, expanding eligibility to part-time law enforcement officers.
  • Increases the Kentucky Law Enforcement Foundation Program Fund, also known as KLEFPF, training incentive stipend for each full-time eligible participant to $4,412 in FY 2025 and $4,527 in FY 2026 and includes part-time at half that amount in each year, respectively.
  • Increases restricted funds by $230,000 every fiscal year (including FY 24) to expand the Law Enforcement Protection Program within the Kentucky Office of Homeland Security.
  • Increases restricted funds by $3.7 million in FY 2025 and $4.3 million in FY 2026 within the Kentucky Community and Technical College System to support an increase to incentive payments of 2.6 percent in FY 2025 and 2.6 percent in FY 2026 for each qualified professional firefighter under the Firefighters Foundation Program Fund and to increase aid payments for each volunteer fire department to $15,000 each fiscal year.
  • Increases general fund by $325,000 in FY 2025 to update the Kentucky Offender Management System, which tracks inmate, probationer, and parolee sentences, program credits, and services received for proper sentence completion dates.
  • Increases general fund by $307,400 in FY 2025 and $2 million in FY 2026 and restricted funds by $2 million each fiscal year to support an additional 20 probation and parole officer positions and operating costs within the Kentucky Department of Corrections.
  • Increases general fund by $1.1 million each fiscal year to support upgrades in technology, communications, and operations at 11 multi-jurisdictional drug task forces.

“Reigning in Spending, Increasing Transparency and Reducing Government”

  • Amends language relating to COVID-19 federal funds to require joint approval by the governor and state treasurer for reallocation of unexpended funds in the interim.
  • Amends language relating to budget implementation to require quarterly reports on line-item appropriations and language provisions.
  • Amends language to return to the statutory process for the expenditure of excess restricted funds receipts.
  • Increases restricted funds by $126,200 in FY 24, $132,500 in FY 2025, and $139,100 in FY 2026 to support an online filing system for submissions of annual financial disclosures and lobbyist registrations.
  • Amends language to stipulate the conditions under which a report is required by the governor for executive orders.
  • Adds language to prohibit any agency from adopting or enforcing standards relating to the control of emissions from new vehicles that are identical to those established by California.

State employees and Pensions

  • Provides a 2.6 percent pay increase for all state employees in FY 2025 and FY 2026.
  • Includes general fund in the amounts of $250 million in each fiscal year to pay down the unfunded pension liability of the Kentucky Employees Retirement System Nonhazardous plan.
  • Adds language requiring the secretary of the Personnel Cabinet to contract with an independent consultant to review all personnel and payroll records of all current employees from Jan. 1, 2018, through June 30, 2024, to determine the exact salary compression issues that exist in the executive branch.

Workforce and Economic Development

  • Increases general fund by $21 million and Federal funds by $7 million in FY 2025 and general fund by $28 million in FY 2026 to maintain reimbursements to child care providers for Child Care Assistance Program (CCAP) families at the 80th percentile of the market rate survey and adds language to include a directive that the American Rescue Plan Act Child Care Development Fund remaining balance shall be utilized to the fullest extent possible and to expend any additional federal funds that become available before spending General fund money.
  • Increases general fund by $14.8 million and federal funds by $5.1 million in FY 2025 and general fund by $18.5 million and federal funds by $1.3 million in FY 2026 to support CCAP initiatives including an income exclusion for eligibility determinations for child care providers; a six-month transition for families no longer eligible for CCAP benefits; background check fees covered for child care providers; and establishes an Innovations in Early Childhood Education Delivery Fund and adds language to include a directive that the American Rescue Plan Act Child Care Development Fund remaining balance shall be utilized to the fullest extent possible and to expend any additional federal funds that become available before spending general fund money.
  • Increases general fund by $1 million each fiscal year for the Kentucky Healthcare Workforce Investment Fund.
  • Increases general fund by $4.9 million each fiscal year for the Work Ready Kentucky Scholarship Program.
  • Increases general fund by $24.8 million in FY 2025 and $49.6 million in FY 2026 for the College Access Program.
  • Increases general fund by $250,000 in FY 2025 and $7.5 million in FY 2026 to support the Kentucky Talent Attraction Initiative.
  • Increases general fund by $3.5 million in each fiscal year for the Kentucky Dataseam Initiative, a workforce development and education nonprofit in Kentucky.
  • Increases general fund by $241,300 in each fiscal year for the Governor’s Scholars Program.
  • Increases general fund by $105,000 annually for the Governor’s School for Entrepreneurs.

Local Government

  • Increases federal funds by $226.6 million in FY 2025 and $180.5 million in FY 2026 within the Kentucky Department for Local Government to utilize increased federal funding for various grant programs benefiting city and county governments across the commonwealth.
  • Adds language to require the Department of Corrections to conduct a study, in conjunction with county jails, to determine the cost of housing certain pretrial defendants in a state prison after an initial 60 days of being housed in a county jail.

Energy

  • Increases general fund by $835,500 in FY 24 and $832,400 each fiscal year to support the matching requirement for the federal Grid Resilience Grant Program. Increases federal funds by $5.5 million annually to support the federal Grid Resilience Grant Program.
  • Increases federal funds by $5.8 million in FY 2025 and $50.8 million in FY 2026 to support consumer home energy rebate programs.

Veterans

  • Increases general fund by $12.4 million in FY 2025 and $5.6 million in FY 2026 and increases restricted funds by $10 million in FY 2026 for personnel and operating costs associated with opening the Bowling Green Veterans Center.
  • Increases general fund by $320,000 within the Veterans Affairs office in each fiscal year to provide additional burial costs for National Guard and Reserve veterans ineligible for federal benefits.
  • Increases one-time general funds by $1 million in each fiscal year to USA Cares for programs to help prevent veteran suicide.
  • Increases one-time general funds by $140,000 each fiscal year to Unite Us to help ensure veterans are identified and connected to needed resources.

Collaboration with Statewide Constitutional Officers

Attorney General Russell Coleman:

  • Increases general fund by $450,000 in each fiscal year to support the Child Exploitation Specialized Investigation and Prosecution Unit to combat child exploitation and human trafficking.
  • Increases general fund by $691,701 in FY 24 and $1.01 million each year of the fiscal biennium for general fund Replacement for Medicaid Match for the Office of Medicaid Fraud and Abuse Control.
  • Increases restricted funds by $5 million in FY 2025 and $10 million in FY 2026 to support the Body Armor Grant Program, which supports law enforcement.
  • Increases general fund by $200,000 in FY 24, $600,000 in FY 2025, and $300,000 in FY 2026 for criminal investigation enhancements.
  • Increases general fund by $129,700 in FY 24 and $440,300 each fiscal year to support the Kentucky Office of Regulatory Relief combating burdensome federal bureaucracy. 

Agricultural Commissioner Jonathan Shell:

  • Increases general fund (tobacco) support for the Farms to Food Banks program by $300,000 in FY 2025 and $400,000 in FY 2026.
  • Increases general fund (tobacco) support for the Rural Mental Health, Suicide Prevention, and Farm Safety Program by $500,000 each fiscal year and places the program solely under the Department of Agriculture.
  • Appropriates general fund (tobacco) monies in the amount of $100,000 in FY 2025 to create a comprehensive agricultural plan.
  • Adds language that prohibits the Cabinet for Economic Development from approving agricultural economic development projects without first obtaining permission from the commissioner of agriculture.

Auditor Allison Ball:

  • Increases general fund by $2.25 million and restricted funds by $16 million in each fiscal year to support the transition of the CHFS Office of the Ombudsman and Administrative Review to the Auditor of Public Accounts on July 1, 2024, as enacted in 2023 SB 48.
  • Increases General fund by $750,000 in FY 2025 to support the Jefferson County Public Schools audit and allows the Auditor of Public Accounts to request as a necessary government expense (NGE) up to $750,000 in FY 2025.

Treasurer Mark Metcalf:

  • Amends language relating to COVID-19 Federal funds to require joint approval by the governor and state treasurer to reallocate unexpended funds in the interim.

Secretary of State Michael Adams:

  • Increases general fund by $145,600 each fiscal year for an additional senior software engineer contract.
  • Increases general fund by $5,600 in FY 2025 for presidential elector per diem.

House Bill 263 is the legislative branch budget, which appropriates funding for the operations, maintenance, and support of the Legislative Branch of the Commonwealth of Kentucky.