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Kentucky Senate speeds through budget bills with additional $1.7B for projects

Ryan Van Velzer
The Kentucky state Capitol in Frankfort.

The fast-moving budget bills were amended in the Senate to add $1.7 billion for one-time spending on projects and remove language defunding an alternative sentencing program and threatening K-12 school districts with takeover.

With little opportunity for the public to weigh in, two newly amended state budget bills appropriating more than $34 billion in Kentucky over the next two years cleared a state Senate committee Wednesday morning and then passed the full chamber later that afternoon.

The Senate’s version of the budget bills would chart a path toward state income tax reductions in 2026, increase spending on infrastructure and economic development projects and strip provisions threatening to take over underperforming K-12 schools.

The Republican chair of the budget committee from Ryland Heights, Sen. Chris McDaniel, was asked that morning if the bills were moving too quickly for the public to read and digest.

“We're confident in our members to be able to digest it,” McDaniel answered.

House Bill 1 and House Bill 6 were amended from what passed the House in early February, with copies of the new versions of the bill posted online shortly after clearing the Senate budget committee. The House passed the two bills less than 24 hours after a budget committee passed amended versions of them Jan. 31.

McDaniel briefly outlined the major changes in the budget bills before their passage Wednesday, with no committee members asking questions.

Just as it did in the House, the full Senate later passed HB 1 by a unanimous vote. Whereas the House passed HB 6 by a nearly party-line vote — most Republicans voting for it and most Democrats against it — it passed the Senate by a 37-1 vote, with only Republican Sen. Adrienne Southworth of Lawrenceburg voting no.

House Bill 1 previously appropriated $1.8 billion from the state’s budget reserve trust fund for one-time spending projects and public pension payments, but the amended bill added another $1.7 billion for specific projects.

Chief among these HB 1 additions is $890 million to go towards road construction projects in counties undergoing large population growth.

The bill also picks up on a proposal of Gov. Andy Beshear to fund a “13th” monthly check for retired state workers to account for inflation and the lack of a cost-of-living adjustment for retirees for more than a decade. The amended HB 1 adds $75 million for such payments, which would be tiered based on how long they’ve been retired and whether their annual benefits are more or less than $45,000.

Two of the largest specific appropriations are $150 million for a Commonwealth Center for Biomedical Excellence campus in Covington to support a cluster of life sciences companies there and $75 million to the University of Kentucky to “support and facilitate the development of nuclear energy.”

The amended HB 1 also directs $50 million for an economic development fund to the 60 counties with the highest unemployment rate and $100 million to Louisville Metro Government for the “revitalization” of its downtown, including projects such as the Butchertown Sports District, the Louisville Garden renovation and vacant lots revitalization.

As with the version of HB 1 passed by the House, the bill retains language that exempts all spending in it from counting towards the tax cut trigger mechanism of House Bill 8 passed in 2022 — helping to improve the odds of another income tax cut by 2026.

Speaking on the Senate floor, McDaniel called the investments of HB 1 “a once-in-a-lifetime opportunity” for the state that was made possible by the fiscal discipline of the legislature in recent years.

“It is my hope that the one-time investments we make with those accumulated one-time dollars will reward the discipline of the past with success in the future,” McDaniel said.

The version of HB 6 passing out of the Senate Wednesday is similar to what was passed by the House, in that it does not pick up on Beshear’s recommendation to mandate 11% raises for all staff of public K-12 schools and institute universal public pre-K for four year olds. Those two measures alone would have a price tag of $1.4 billion over the biennium.

While retaining the House’s increase of the per-pupil SEEK formula for funding K-12 schools by 4% and 2% in the next two fiscal years, the Senate version does not fully fund school transportation costs in the second year, lowering its funding to 90% of costs.

The amended and 244-page HB 6 would also double performance-based funding for public higher education, raising appropriations to $201 million over the biennium.

Another change in the Senate’s version of HB 6 is it removed langage from the House bill that defunded the Alternative Sentencing Worker Program within the Kentucky Department of Public Advocacy. A last-minute amendment in the House prohibited funds from going to the program, which employs more than 50 social workers who coordinate with attorneys, judges and prosecutors to create plans steering criminal defendants to substance abuse services for rehabilitation, instead of more costly incarceration.

The new version of HB 6 also removes language that threatens K-12 school districts with “takeover” if they don’t make progress on their employee recruitment and retention numbers.

After the committee meeting, McDaniel said HB 6 would increase the chances of meeting the tax cut triggers by removing about $390 million of spending, “specifically for the idea that we would be able to hit the trigger to lower to 3.5% at the beginning of 2026.”

Introducing HB 6 on the Senate floor, McDaniel said the process of making the budget bill has been diligent and fair, allowing people from around the state to give their input.

“I think those who have participated in the process and have seen the process will say that they've had the opportunity to do just that,” McDaniel said.

Casting his vote for HB 6, Sen. David Yates, a Louisville Democrat, thanked McDaniel for including members of the Democratic majority in the budget-making process, saying it is “greatly appreciated.”

With their passage out of the Senate, HB 1 and HB 6 will likely head to a conference committee of the House and Senate to work out a compromise between the two versions of the budget bills, with its members chosen by leadership in each chamber.

The Senate versions of the budget bill drew early criticism from right-leaning and left-leaning policy groups — for very different reasons.

Andrew McNeil, president of the conservative Kentucky Forum for Rights, Economics & Education, said the bills “spend way too much.”

“We’ve come too far getting our fiscal house in order to squander those gains now,” McNeil said. “This spending spree threatens the progress we’ve made in building up our budget reserves and will make it harder to reduce the income tax in future years.”

The left-leaning Kentucky Center for Economic Policy panned the bill for different reasons on its website, saying the “largely austere” budget contains “still-inadequate monies for education, child care, housing, state and school employee raises and other areas despite additional ongoing funds being available.”

This story has been updated following the vote on the Senate floor Wednesday afternoon.

State government and politics reporting is supported in part by the Corporation for Public Broadcasting.

Joe is the enterprise statehouse reporter for Kentucky Public Radio, a collaboration including Louisville Public Media, WEKU-Lexington, WKU Public Radio and WKMS-Murray. Email Joe at jsonka@lpm.org.
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