What to know about the final state budget

Published 3:10 pm Tuesday, April 2, 2024

FRANKFORT — On the final day before the veto period, the Kentucky legislature finalized the budget for the next two years.

The main budget was divided into two bills —one for all operating costs of state departments and agencies and another dedicated to one-time spending. The latter does not count toward the state spending figure used to determine whether Kentucky’s income tax rate can drop another half percent.

There are hundreds of specific items in the $2.7 billion one-time spending budget, House Bill 1. The funds come from Kentucky’s so-called rainy day fund, the Budget Reserve Trust Fund.

Several items were included in Gov. Andy Beshear’s budget proposals.

The Kentucky Rural Housing Trust Fund will receive $10 million across the biennium. The Kentucky Infrastructure Authority is getting $150 million for drinking water and wastewater infrastructure grants. An $100 million pool for mega-development projects is included.

State police, state employee and teacher retirement pension funds were funded. However, the state police and state employee pension funds were funded at a third of the Senate’s original budget level, while the teachers retirement pension went from the Senate’s proposed $500 million to $80 million in the final budget.

Legislators approved $100 million for various Louisville downtown projects, $10 million for a Lexington affordable housing program, $16 million for an Eastern Kentucky psychiatric residency program and $20 million for a regional substance use disorder services pilot program in Bowling Green.

House Bill 6, the primary budget, appropriated $131.6 billion across the biennium for the state government’s various departments, cabinets and agencies.

With the inclusion of Medicaid services, the Cabinet for Health and Human Services makes up the largest portion of the executive budget spending.

The budget includes $15.3 million to staff and operate the Office of Medical Cannabis ahead of its 2025 launch. However, no funds will be available until the Board of Physicians and Advisors finds that a “propensity of peer-reviewed, published research” provides enough evidence that medical cannabis is effective in “the persistent reduction of symptoms of diseases and conditions.”

It extends a pilot program — Tim’s Law — that helps provide access to mental health services for individuals with severe mental illness to more areas of the Commonwealth.

Legislators appropriated about $15 million across the biennium for 100 additional social workers, as well as $19 million to increase pay for relative caregivers of foster children.

The budget appropriates $41.2 billion for Medicaid services, $31 billion of which comes from federal sources. This includes nearly 2,000 additional Medicaid waiver slots and $25 million for a full Medicaid reimbursement rebasing effort.

It directs the Department for Medicaid Services to analyze wait lists for its waiver programs to “achieve a more efficient and effective management.”

The Support Education Excellence in Kentucky fund, public schools’ primary funding source, increased in several areas.

Base per-pupil pay rose from $4,200 to $4,326 in FY25 and $4,586 in FY26, including an adjustment for students with limited English proficiency. This cost about $3.95 billion from the state’s General Fund.

Also, the legislature altered Tier 1, a local contribution component of SEEK, to allow more of that local contribution to be matched by the state.

Growth districts got money to match facilities funding. And transportation was funded at 90% of last year’s costs for FY25 and 100% for FY26.

The additional funding comes with extra requirements. School districts must report the percentage of their students scoring proficient and distinguished on state math and reading assessments on their websites. The Kentucky Department of Education must then post a ranked order of schools’ overall academic performance on its website.

While there are no mandated teacher or school employee raises, the budget directs local boards of education to “consider the actions of other states and the local economy and the related effect on recruitment and retention when establishing the salary schedules for classroom teachers and classified employees.”

Legislators included one of Beshear’s proposals— Star Academy, a school-within-a-school STEM-based program for students who have fallen behind. They likened it to charter schools during debate. Over the next two years, Star Academy pilot programs will appear in five public schools.

Several pools of money were appropriated for school safety. The Center for School Safety got $30 million, $14.8 million was appropriated for full-time school-based mental health services providers and $34.4 million was granted to support school resource officers.

Other budget recipients include career and technical education centers, family resource centers and the Statewide Reading Research Center.

The legislature appropriated over a billion dollars in federal funds for the Broadband Equity Access and Deployment program, which aims to bring high-speed internet to all Kentuckians.

An additional $19 million was granted to the Rural Infrastructure Improvement Fund for pole replacements.

In light of recent natural disasters, approximately $600,000 worth of additional positions at the Division of Emergency Preparedness were funded. However, there are caps on emergency aid. If there is a disaster that exceeds the cap, the Governor will have to call a special session to appropriate more money.

Up to $100,000 associated with additional precincts and registered voters was appropriated for the cost of elections.

In response to a teacher shortage, the legislature appropriated a few pools of money to improve recruitment and retention.

The Teacher Scholarship Program got $4.6 million, the student teacher stipend program got $14.6 million and the Teacher Recruitment Student Loan Forgiveness Pilot Program got $14.8M to assist teachers with student debt; $230 million will go toward the Kentucky Educational Excellence Scholarship, which will be subject to an evaluation on the effectiveness of merit scholarships in the next two years.

The Kentucky Law Enforcement Foundation Program Fund will receive $197 million across the biennium.

In the juvenile justice space, there are additional funds for transportation of juveniles, alternative programming and contracting for mental health and primary care services for youth.

The budget does not include dedicated funds for two female detention centers in Fayette County and Western Kentucky, as the Senate version did. It does include required DJJ reporting on the projected costs, services and capacity of a high-acuity juvenile mental health treatment facility.

Under the final budget, Beshear’s office has to report the factual basis for nearly all of his executive orders, as well as how it achieves its stated goal with the least burden on Kentuckians’ constitutional rights and the most efficient use of taxpayer money. The report must be updated monthly.

Remaining pandemic funds could not be used for recurring expenses, and no state agency or department could mandate the purchase of electric vehicles.