Kentucky lawmakers have finalized a more than $31 billion, two-year state budget now heading to the desk of Governor Andy Beshear.
The plan, according to state GOP leaders, emphasizes fiscal discipline while continuing investments in education, healthcare and public safety, as lawmakers brace for rising Medicaid costs and economic uncertainty.
Senate budget chair Chris McDaniel said the plan “avoids long-term spending commitments” and reflects what he calls “a more sustainable approach to state finances.”
FISCAL DISCIPLINE AND RESERVES
Lawmakers say the budget maintains strong reserves while directing $1.77 billion toward one-time statewide and regional projects. The plan continues full pension funding and adds roughly $500 million more than the previous two-year budget, while avoiding ongoing commitments that could strain future finances.
K-12 EDUCATION
K-12 education funding continues at record levels, with SEEK funding topping $7 billion and increasing 2% each year.
The budget includes:
- $2.23 billion for teacher pensions
- $213 million for retired teacher health insurance
- $46 million for school resource officers
- $30 million for school safety
Additional investments target preschool ($170 million), family resource centers, literacy programs, gifted education, and math achievement. Career and technical education receives more than $254 million, while smaller allocations support programs like Teach for America, Save the Children and statewide reading initiatives.
The Dolly Parton Imagination Library is funded at $5 million, with a focus on expanding access for low-income and foster children.
POSTSECONDARY EDUCATION
Funding for colleges and universities remains mostly flat, with some adjustments tied to capital projects.
The budget provides:
- More than $187 million for KEES scholarships, with a higher GPA requirement
- Nearly $12 million for cancer research at the University of Kentucky and University of Louisville
- Funding for veterinary and optometry scholarships tied to in-state workforce commitments
Lawmakers say the changes aim to better align higher education funding with workforce needs.
MEDICAID AND HEALTH
Medicaid remains the largest and fastest-growing part of the budget, with more than $6 billion in state funding and $36 billion in federal support.
Key provisions include:
- A $290 million Medicaid “lockbox” requiring legislative approval
- Expanded waiver slots and behavioral health support
- Funding for hospitals, dental services, and specialized care
- A future 2.5% reduction in managed care payments, with savings redirected to patient care
The plan also includes significant support for rural healthcare providers, including Appalachian Regional Healthcare.
FAMILY SERVICES AND CHILD WELFARE
The budget directs $44 million toward foster care and out-of-home placement services and $6 million annually to implement recent child welfare reforms.
It also requires parents to continue supporting children in state custody and mandates new quarterly reporting on spending. Child care funding is maintained, with resources shifted to areas of greatest demand.
PUBLIC SAFETY AND JUSTICE
Public safety funding includes nearly $500 million for Kentucky State Police and $26 million for jail programs and reentry services.
The budget also provides:
- Raises for public defenders
- Funding adjustments for prosecutors
- New law enforcement training facilities in Middletown and Louisville
In juvenile justice, the state moves forward with planning a female detention facility and studying expanded mental health treatment options for youth.
ENERGY
Lawmakers set aside $75 million for a nuclear site readiness pilot program, with individual projects capped at $25 million pending approval.
Another $15 million will support statewide energy planning efforts through a program tied to the University of Kentucky.
GENERAL GOVERNMENT
The budget includes funding for veterans services, emergency response, and local government support, while restoring traditional funding structures for some agencies.
It also strengthens oversight through required school financial audits and expanded use of the state’s KyFromAbove aerial mapping system for property valuation.
LONG-TERM OUTLOOK
Lawmakers say the budget reflects caution about the future, pointing to Medicaid growth and economic uncertainty as major concerns.
With the plan now delivered to Andy Beshear, the governor can issue line-item vetoes, which lawmakers could override in the final step of the budget process.
WHAT DIDN’T MAKE THE CUT
While the budget includes major investments, it does not fully align with priorities proposed by Beshear—especially on early childhood education.
The governor’s push for universal pre-K did not make it into the final plan. Instead, lawmakers maintained about $170 million in targeted preschool funding and approved a smaller, pilot program tied to kindergarten readiness, without expanding eligibility statewide.
A proposed statewide teacher pay raise structure also fell short. While SEEK funding increases could allow local districts to boost salaries, the budget does not establish a dedicated, long-term funding mechanism for raises.
Child care expansion was similarly limited. Funding levels are maintained, but largely reallocated rather than significantly increased.
Overall, lawmakers opted against large new ongoing commitments, instead focusing on targeted programs and cost control as Medicaid spending continues to rise.
