The budget bill appropriating roughly $31 billion of state tax revenue over the next two fiscal years cleared another key hurdle Wednesday, as the Kentucky Senate quickly passed an amended version of House Bill 500.
The new 228-page version of HB 500 was presented to members of the Senate budget committee just before their meeting that morning. The bill cleared the committee, then was posted online for the public to read, and then passed by the full Senate chamber four hours later.
The next step for the bill that outlines spending for dozens of executive branch agencies is likely a conference committee, where leaders of the GOP supermajority in both chambers will hammer out differences for a final version of the bill. They are expected to send that bill to Democratic Gov. Andy Beshear by April 1 — the last before the governor’s veto period — so they could override any potential veto on the final two days of the 2026 session in mid-April.
In the budget committee, Sen. Chris McDaniel, the Republican chairman from Ryland Heights, spent 24 minutes quickly highlighting areas where the amended bill differed from the version that passed the House. The committee then voted to advance the bill without any questions.
Among the major changes to the Senate version of HB 500 was that it spends approximately $400 million more and leaves less in the budget reserve trust fund, also called the state’s “rainy day fund.” The Senate’s budget would grow the fund from $3.7 billion to $3.9 billion, roughly $800 million less than the House budget.
House Bill 900, which the Senate budget committee also advanced Wednesday, would spend more than $800 million from the rainy day fund over the next two years for what Republicans deem “one-time projects,” though what those specific projects are have not yet been identified in the legislation.
Another large change in the Senate budget involves Medicaid benefits. The House budget appropriated $220 million less than what the Beshear administration projects will be needed to pay out those benefits — with the GOP chairman of the House budget committee saying he didn’t believe their estimates — but McDaniel said the Senate bill is closer to what was requested.
McDaniel also noted the Senate’s budget makes a 2.5% annual reduction in payments to Medicaid managed care organizations — the private insurance companies that administer Medicaid benefits — saying those savings would be used to increase reimbursement rates for fee-for-service health care providers. He said this measure was needed to control Medicaid spending, which has become “the most explosive cost to the commonwealth” in recent years.
“We need to send a message to those involved that they either need to help us with cost containment in this process, or we need to be pursuing potentially a different path,” McDaniel said after the committee meeting.
The Senate budget also takes a new approach when it comes to what to do with $350 million of funds from the Department of Insurance, directing them to retirees and pensions. Beshear proposed to put the $350 million back into the General Fund, whereas the House budget put it in the budget reserve trust fund, with $250 million of that tapped for Medicaid benefits, if needed.
The Senate budget splits the $350 million into two funnels: $81 million goes to a so-called “13th check” for public retirees to deal with cost of living increases, while $269 million is directed to the insurance fund of the most financially troubled pension plan for state employees.
The Senate version of HB 500 also reverses some of the major cuts to public postsecondary institutions. The House budget cut funding for public colleges and universities by 7% from current levels, but the Senate’s bill increases their base funding by 1% and increases their performance-based funding by $20 million.
The Senate voted unanimously for HB 500 after McDaniel listed the highlights of the bill again, with no other senators asking questions. Sen. Gerald Neal, the Democratic floor leader from Louisville, thanked McDaniel for briefing his caucus on the bill shortly before the budget committee meeting that morning.
Asked about the speed of the process for unveiling and passing their version of HB 500 on Wednesday, McDaniel said that budget negotiations are “very contentious,” and with the short amount of time that's left in the session, “we've got to move this thing along quickly.”
Like the House budget, the Senate ignored several of the top priorities of Beshear, who wanted funding to significantly expand pre-K programs and provide mandatory K-12 employee raises. Democrats and progressive groups have criticized both budgets for keeping spending artificially low and not spending enough of the budget reserve trust fund, saying Republicans are doing so in order to meet the budget triggers needed to implement income tax cuts in future years.
On the Senate floor, McDaniel said Kentucky is in improved financial shape because of restrained budgeting decisions by Republican leadership of the General Assembly over the past decade.
“We did things with discipline,” McDaniel said. “We made tough decisions when we had to. We crafted our budgets for the future, not just for today.”
