New Kentucky House GOP budget fixes insurance issue, ups education spending

In their latest version of the state executive branch budget bill, House Republicans put more money into education and fixed an issue that could have hurt state employees’ health insurance, according to a copy reviewed by the Herald-Leader.

House Appropriations and Revenue Chair Jason Petrie, R-Elkton, unveiled a committee substitute on House Bill 500, the state’s biennial budget bill, on Wednesday that allocates about $1.17 billion more from the General Fund.

The lawmaker went over the bill during a meeting of the House Appropriations and Revenue Committee; the bill was not publicly posted online during the discussion.

HB 500, the first draft of the House GOP proposed budget, was filed in January, with Republican lawmakers emphasizing it was a preliminary document and subject to change throughout session. Before Petrie released the committee substitute, many raised concerns, including some Republican lawmakers, over education funding and impacts for state employees’ health care.

Some of those have been addressed in the new version of the proposed budget.

The budget, which is passed every two years, controls spending for all facets of the executive branch for the next two fiscal years, which begin July 1, 2026. Like in the 2024 budget cycle, there will be a separate bill with one-time spending is expected at a later date. Like the budget, it must originate in the House.

House Speaker David Osborne, R-Prospect, told reporters Tuesday afternoon that one-time spending bill is still being worked on, but “it’s coming.” He expects HB 500 to pass the House by the end of this week.

As the General Assembly continues to craft HB 500, Republican lawmakers are clashing with Democratic Gov. Andy Beshear and his administration to obtain information they deem as necessary to create the document.

On Tuesday, the House Majority Caucus announced subpoenas were issued by the co-chairs of the Legislative Oversight and Investigations Committee to the Kentucky state budget director, secretary of the Personnel Cabinet and deputy secretary of the Personnel Cabinet for that information.

While a spokesperson for Beshear called the subpoenas “a stunt with no merit,” Osborne said to reporters Tuesday lawmakers have been told the requested information exists, but the administration has yet to give it to them.

Meanwhile, Senate President Robert Stivers told reporters Wednesday morning he was unaware lawmakers were subpoenaing the Beshear administration until he read in the press.

Still, Stivers said there is plenty of time for the Senate to work on their version of the biennial executive branch budget, and lawmakers are monitoring what the House has been doing.

The new iteration of the House budget still ignores Beshear’s primary budget push: a $100 million-plus pre-kindergarten program. There is no mention of such a program, or any funding for pre-K education, in the latest version of the budget.

The first draft of the budget allocated $29.81 billion from the General Fund over the next two fiscal years, while the committee substitute allocated $30.98 billion from the General Fund.

In addition to the committee substitute, a committee amendment was also adopted during Wednesday’s meeting. The amendment was much more limited in scope, allocating a total of more than $16 million combined to the Kentucky Infrastructure Authority and postsecondary education; that total appears to come out of the Budget Reserve Trust Fund.

The bill as amended by the substitute and committee amendment was passed with unanimous Republican support. Three Democrats passed on voting and House Minority Caucus Chair Lindsey Burke, D-Lexington, was the lone no vote, though she thanked Petrie for addressing issues like education and insurance in the latest version.

Funding for SEEK per pupil spending and transportation are both increased in the new version of HB 500. The Support Education Excellence in Kentucky formula, or SEEK, is a state-provided funding approach for schools based on per-student calculations.

In the committee substitute, over allocations for SEEK funding increased by $273.5 million. The first draft of HB 500 proposed $3.46 billion and $3.37 billion in the next two fiscal years, which froze the per-student spending at $4,586 per fiscal year.

Now, HB 500 in its current state allocated $3.53 billion for fiscal year 2026-27 and $3.57 billion for fiscal year 2027-2028. That increases the per-student spending to $4,626 for fiscal year 2026-2027 and $4,792 for fiscal year 2027-2028.

Ahead of the House Committee’s meeting Wednesday, lawmakers and members the public sounded the alarm bells over freezing SEEK’s guaranteed base funding level.

Before HB 500 was scheduled for a committee hearing, House Democrats announced they filed multiple floor amendments to address concerns in the proposed plan, including freezing education spending.

House Floor Amendment 7, which was filed by Rep. Tina Bojanowski, D-Louisville, would increase per student funding to $4,701 for fiscal year 2026-27 and $4,818 for fiscal year 2027-28.

Jessica Hiler, Kentucky Education Association vice president, said at a Wednesday press conference the number that froze per-student spending $4,586 did not keep pace with the cost of living.

“After adjusting for inflation, it will fall 29% below 2008 levels,” Hiler said. “Let that sink in: We are funding Kentucky’s children at a lower rate in real dollars than we did nearly 20 years ago, and it gets worse.”

Other concerns surrounding education funding is transportation, where the state allocated $359 million toward school transportation in first draft of HB 500 — a $40 million decrease from current level spending at $399 million per fiscal year.

The committee substitute addressed that concern and raised transportation funding back to $399 million per fiscal year.

Language that raised concern over a potential decrease in benefits for members of the Kentucky Employee Health Insurance plan was nixed in the committee substitute.

The first draft of the proposed state budget placed a 5% increase cap on employer health plan contributions per year. In a letter from Personnel Cabinet Secretary Mary Elizabeth Bailey, she wrote to lawmakers the cap would cause a shortfall and lead to increased premiums or a decrease in benefits.

“If the General Assembly passes this proposed change, it will have a devastating impact on all Kentucky Employee Health Plan (KEHP) members and their dependents, resulting in a possible 78% increase in employee premiums over the two years,” Mary Elizabeth Bailey wrote.

The cap though wasn’t included in the new proposed budget that passed committee. Currently, 310,000 — or 6.8% — of Kentuckians are members of the KEHP program.

Jason Bailey, executive director of the Kentucky Center for Economic Policy, said at a press conference Wednesday he hopes not having that 5% cap doesn’t get added back as HB 500 goes through the legislative process.

Tucked into the bill is highly consequential language on the Cabinet for Health and Family Services, which runs the state’s Medicaid and Medicare programs as well as the Supplemental Nutritional Assistance Program.

“The Cabinet for Health and Family Services shall implement all program and eligibility requirements of (the Big Beautiful Bill),” the new language reads.

That would force the state to comply with work requirements and more frequent eligibility checks imposed under the new bill.

The budget language would add to a bill passed last year that attempted to force the cabinet to impose similar work requirements on able-bodied individuals without dependents.

Another big change for the state’s Medicaid program is a transfer from the Insurance Regulatory Trust Fund, which is a self-funded regulatory pool meant to support Department of Insurance operations and regulatory oversight, of $350 million.

The budget language directs that tranche of funds to the Budget Reserve Trust Fund, also known as the “Rainy Day Fund.” The budget language explicitly states the intention for $250 million of that total is to support Medicaid.

“It is the intent of the 2026 General Assembly to reserve $250,000,000 for potential appropriation for Medicaid Benefits in the 2027 Regular Session if deemed necessary for claims payments in fiscal year 2026-2027 or fiscal year 2027-2028,” the language reads.

Another utility to the move for Republicans could be the prospect of a new cut to the state tax on personal income.

The GOP-led legislature has put the state on a path to erase the tax completely, and the size of the Budget Reserve Trust Fund is one of the “triggers” that would allow them to cut it again.

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