The Kentucky House on Thursday passed an executive branch budget bill outlining $31 billion of state spending over the next two fiscal years.
The bill backed by the dominant Republican supermajority cleared the chamber by a nearly party-line vote of 81-18, as only two Democratic members crossed lines to vote in its favor.
House Bill 500 is still several steps away from passing into law and is likely to take on different forms. The bill must now clear the Senate and then is likely to go to a conference committee, where legislative leaders will hammer out differences for a final version of the bill to clear both chambers and send to Democratic Gov. Andy Beshear by the end of March.
When HB 500 was first filed in January by House GOP budget committee chairman Rep. Jason Petrie of Elkton, he described the 152-page bill as a “bare bones” budget that would add more spending details after additional testimony in budget subcommittee hearings. Democratic lawmakers and many advocacy groups warned that the original version of the bill included large cuts that would be devastating to public K-12 schools, Medicaid benefits and the health insurance premiums of public employees.
A late amendment to the bill as it cleared the House budget committee Wednesday evening added more overall funding and changes to address some of those concerns.
On the House floor Thursday, Petrie said his bill “did not feed the appetite” of the extra billions of dollars requested by Beshear administration agencies, but instead “focused on needs, not wants.”
The bill grows Kentucky’s $3.7 billion budget reserve trust fund — often called a “rainy day fund” — even larger, as it leaves unspent $612 million in projected tax revenue. HB 500 also directs $350 million from the Department of Insurance to the budget reserve trust fund, with $250 million of that set aside to potentially cover Medicaid benefit payments if the state runs out of those funds.
Petrie said Republicans have another spending bill coming soon that will direct “one-time payments” to specific projects from the budget reserve trust fund, but has not yet revealed how much will be spent and what will be funded. Republicans took the same approach in the 2024 session, when they passed a bill with $2.7 billion of spending from the rainy day fund.
Whereas the original version of HB 500 kept the state’s K-12 education funding formula frozen at the current level of $4,586 per pupil, the updated bill clearing the House would increase that allotment by 2.7% on average over the next two years. That is still less than the 3.8% average increase under Beshear’s proposed budget, and does not include the governor’s call for funding mandatory K-12 employee raises and a significantly expanded pre-K program.
The current version of HB 500 appropriates $6 billion for Medicaid payments over the next two years. That’s much more than what was originally proposed, but still $220 million less than what the Beshear administration projects will be needed, even after including the $250 million set aside in the rainy day fund.
Asked about that shortfall on the House floor, Petrie said he does not believe the administration’s Medicaid projections, citing recent incorrect assumptions they have made in other areas.
“In recent years, we've had many projections missed, and I wonder whether this is yet another one,” Petrie said.
One major change to HB 500 that addressed concerns of critics is that it removed language capping health insurance costs for public and school employees, which could have spurred skyrocketing premiums.
However, several requests pushed by Democrats did not make their way into the new version of HB 500. Democratic members attempted to force a vote on six different floor amendments to add funding for affordable housing, school employees raises, pre-K, retiree benefits, rural hospitals and Medicaid waivers for those with special needs, but each failed due to a GOP procedural maneuver.
After Democrats attempted their amendments, GOP Rep. Josh Bray of Mount Vernon, the vice chair of the budget committee, said there may have been funding for some of those requests if Beshear had not spent so much traveling to meetings in Europe and other states to promote Kentucky and lure potential economic investment to the state.
Bray also blasted the administration for not giving them enough specific information about their budget requests and said Democratic lawmakers rarely asked to be involved in the budget-making process — receiving a lengthy standing ovation from Republican lawmakers.
“When we write a budget, there's a lot of stuff we'd love to have in there, but we can only fund so much, and we have to make sure we fund our needs and not our wants,” Bray said.
In his Thursday press conference hours before HB 500 passed into law, Beshear said the bill “is going to cause a lot of harm, unless changed.” The governor said the budget underfunded not just education and Medicaid, but the Kentucky State Police and youth detention facilities.
Beshear said his administration is “ready to get to work” when it comes to adding that funding into the bill in the Senate.
