BESHEAR GETS GOP’S $32 BILLION BUDGET FROM LAWMAKERS TO SIGN OR VETO

The Kentucky General Assembly passed a two-year state budget bill Wednesday night outlining $32 billion of executive branch spending — their largest task of the 2025 session — with just hours to spare before the beginning of the governor’s veto period.Bills receiving final passage from the Republican supermajority by Wednesday are considered veto proof, as any veto issued by Democratic Gov. Andy Beshear can receive an override on the final two days of the session in mid-April, after which they would become law.Republicans also sped through late-amended bills that night to direct more than $1.7 billion of spending from the state’s budget reserve trust fund to more than 300 specific projects — most involving economic development and infrastructure — and a revenue bill adding tax breaks for large business ventures.Here are the highlights from each of the three consequential bills that will affect billions of dollars in state tax revenue and spending, and how each was changed as the day progressed on Wednesday.

House Bill 500 outlines two-year budget with $32B of spending

House Bill 500 directs the spending of $32 billion of state tax revenue by executive branch agencies over the next two fiscal years.The House and Senate each passed different versions of the budget bill earlier this session, but a conference committee of GOP leaders produced a 225-page compromise bill Wednesday afternoon that was cleared by both chambers that evening.One of the most contentious parts of the budget bill over the past two months has been how much it allocates to Medicaid, as previous versions allocated more overall dollars, but far less on benefits than what was estimated to be needed by the Beshear administration.The final version of HB 500 appropriates nearly $700 million less for Medicaid benefits than what Beshear requested, though it does set aside $290 million in the budget reserve trust fund that could be used to cover benefits next year if the state runs low on budgeted funds. Rep. Jason Petrie, the GOP House budget committee chairman from Elkton, has said he does not believe the administration’s estimates.Citing the huge increase in state spending on Medicaid in recent years, Republicans kept a provision in the bill that makes 2.5% cuts to payments for 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.The final version of HB 500 increased the K-12 per-pupil spending formula by two percent over the biennium, but ignored requests from the governor to set aside money for mandated raises for public K-12 school employees and an expanded pre-K program.On the House floor, Democratic Rep. Chad Aull from Lexington decried that the state would continue “sliding down the ranks” in teacher salaries, as Kentucky ranks 48th among states in starting teacher pay at roughly $40,000 annually, whereas those teachers make $50,000 in West Virginia and $55,000 in Tennessee. He added that the budget also “cut Medicaid drastically.”That last statement stirred the ire of Petrie, who defended GOP budgeting decisions as both tax revenue and spending have increased in recent years, yelling that “restraining the growth in spending is not a cut!”“We have stuck with Medicaid, we have stuck with pensions, we have stuck with K-12, we have stuck with higher education, you name it, we’ve done it!” Petrie yelled, slamming his fist on his desk. “And to make up stuff and say that we’re cutting… I would not allow my children to do that. I would hope another adult wouldn’t do it.”The final version of HB 500 scrapped a proposal to give state retirees a “13th check” to cover a cost of living increase, while also cutting the base funding for all public universities except for Kentucky State University, Morehead State University and Murray State University, whose funding was frozen at current levels.Petrie said HB 500 left roughly $345 million unspent in the next two years, which would be deposited into the budget reserve trust fund that is currently a robust $3.7 billion. However, the state would also be spending a significant chunk of that “rainy day fund,” as outlined in another bill that was both unveiled and passed quickly Wednesday night.

House Bill 900 directs $1.7B of rainy day fund on ‘one-time projects’

House Bill 900 had spent the last few weeks as legislation that would spend more than $800 million from the rainy day fund on what Republicans deem “one-time projects,” but did not actually identify what any of those specific projects are.That changed Wednesday evening, when a conference committee released a version that increased the overall spending total to more than $1.7 billion, as well as identifying more than 300 individual projects that would receive funding.Roughly $450 million of this spending is directed to a wide variety of local projects through the Department of Local Government. Another $1 billion is going to water and sewer projects, economic development infrastructure and road projects across the state.Louisville is a big winner of the funds doled out in HB 900, as $90 million was directed to downtown revitalization projects The city’s ballet and orchestra each received more than $3 million, the zoo received $5 million and the airport more than $21 million.The bill received widespread support, passing unanimously in the House and with only one vote of dissent in the Senate.GOP Rep. Josh Bray, the vice chairman of the House budget committee from Mount Vernon, said these rainy day funds were only available to spend on these projects because of the fiscal discipline of past budgets crafted and passed by the supermajority.“This is what happens when you budget responsibly,” Bray said. “We are able to return the taxpayer money to our communities so that we can make these investments.”

House Bill 757 gives tax breaks to renovate Humana building

Lawmakers also gave final passage to a nearly 400 page revenue bill that makes numerous changes to the state’s tax code, with some late amendments giving large tax incentives to two specific projects in Louisville and Lexington.House Bill 757 was amended in committee on Wednesday to prevent local school districts from levying any new occupational or personal property taxes (such as vehicles) starting next year, and prohibit them from raising any rates that exist by then. It does not affect home property taxes, which make up the bulk of local tax revenues used by schools.The bill also bans the sale of kratom, a psychoactive drug that is commonly sold as an herbal supplement.Late Wednesday evening, a conference committee added several provisions to the bill that provide generous tax breaks to a Louisville real estate developer and a horse racing company in Lexington.The bill gives a tax credit of up to $40 million to anyone spending at least $150 million to rehabilitate “a certified historic structure containing a minimum of 25 stories.” Another section gives a 100% sales tax incentive for a company hosting a three-day sporting event that attracts more than 100,000 attendees over its duration. The language of the bill did not name any specific company or project.

Republican House Speaker David Osborne of Prospect told Kentucky Public Radio after the passage of HB 757 that these tax breaks are to go to the renovation of Humana’s former headquarters in downtown Louisville — which is now owned by Louisville-based Poe Companies — and to the Red Mile race track in Lexington for its hosting of the Breeders Crown event next year.Another late edition to the bill would authorize the placement of a statue of GOP Sen. Mitch McConnell, Kentucky longtime U.S. senator, in the Capitol Rotunda in Frankfort.As for HB 500 and HB 757, a fiscal note — in which legislative staffers estimate how a bill would affect state tax revenue and spending — had not been posted online for either bill, as of Thursday morning.