KY Senate OKs massive one-time spending bill, but no raises for K-12 teachers

The Senate is looking to spend, but not any more for teachers than the House did.

The first version of House Bill 1, a large one-time appropriations bill already passed in the House, proposed $1.8 billion in spending from the state’s Budget Reserve Trust Fund. The version unveiled Wednesday by Senate Appropriations & Revenue Chair Chris McDaniel, R-Ryland Heights, would clear a whopping $3.5 billion.

House Bill 1 was passed in a unanimous bipartisan vote on the Senate floor Wednesday, 38-0. House Bill 6, the state’s operating budget, was also passed 37-1.

House Bill 6 remains about the same compared to the House’s version in terms of overall General Fund investment. Both the initial House version and the new Senate version appropriate roughly $15 billion each fiscal year. Both chambers are controlled by Republican supermajorities.

To the disappointment of Democrats and public education advocates, the total allocation to the state’s per-pupil funding formula increased by a small margin from $6.4 billion over the next two fiscal years to $6.5 billion. No funds were earmarked directly for teacher raises, which was a key plank on Democratic Gov. Andy Beshear’s re-election campaign platform.

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House Bill 1 retains all the provisions put in the initial House version, headlined by $950 million to pay down pension obligations, but doubles the overall investment from the Budget Reserve Trust Fund, also known as the Rainy Day Fund, through a litany of spending projects.

The overall emphasis from McDaniel when presenting the bill was its focus on spending one-time funds from the state’s Budget Reserve Trust Fund. As of the filing of Beshear’s budget recommendation at the end of last year, the latest balance on the state’s Budget Reserve Trust Fund was more than $3.7 billion.

“These investments — in our people, in our energy, in public safety, education, the economy, health, quality of life and infrastructure in our communities — are both necessary and worthy,” McDaniel said.

“We stand in an odd juncture in history, where we’ve taken in far more in receipts than we anticipated. We have one-time monies, and we have maintained our commitment to spend those monies in a way that is one-time spending.”

He also said some of the investments should trigger new economic activity.

The new projects, listed from most to least expensive, in House Bill 1 include:

• $890 million for transportation projects “identified for industrial development, economic and quality improvement, or located in counties that are projected to have the largest change in total population in both numeric and percentage gain.”

• $150 million for a joint project between the state, Northern Kentucky University and the University of Kentucky College of Medicine for Northern Kentucky University’s Salmon P. Chase College of Law and UK’s College of Medicine Northern Kentucky Campus to relocate to downtown Covington.

• $100 million to fund infrastructure projects in Warren and Hardin counties, where massive growth is anticipated due to the construction of two major electric vehicle battery production facilities.

• $100 million to the city of Louisville for various downtown revitalization projects.

• $75 million for a tiered one-time check for certain state retirees, mostly through the Kentucky Employees Retirement System. The tier system prioritizes those who retired before 2015 and who receive an annualized retirement allowance of less than $45,000.

• $75 million to UK’s Center for Applied Energy Resource research center “to support and facilitate the development of nuclear energy.”

• $60 million to Murray State to “construct a facility for the veterinary technician program.”

• $50 million to construct the “Western Kentucky Law Enforcement Training Academy” in Madisonville.

• $36 million to the Kentucky Horse Park for facilities upgrades.

• $35 million to create a “defense industry development fund” to attempt to attract defense contractors to the state.

• $35 million for capital improvements at major airports in Northern Kentucky, Louisville and Lexington.

• $30 million to the Home of the Innocents in Louisville for the expansion of the Kosair for Kids Complex Care Center.

• $25 million to the University of Louisville to build the Center for Rural Cancer Education and Research in Bullitt County.

• $25 million to the Department for Local Government to administer a “community-focused park grant program.”

• $10 million to Lexington-Fayette Urban County Government to support Lexington’s Transformational Housing Affordability Partnership.

• New economic development fund for the 60 poorest counties in Kentucky.

• Extra $90 million from the Budget Reserve Trust Fund to the road fund.

McDaniel told reporters the budget team has run analyses showing that under the Senate’s proposals, the state will hit mandated “triggers” to decrease the personal income tax from its current 4% to 3.5% to start 2026. They budgeted around that goal, he said.

“Our second-year spending plan took out about $390 million dollars, specifically for the idea that we would be able to hit the trigger to lower to 3.5% at the beginning of ‘26,” McDaniel said.

Juror pay, a source of consternation and legislation, was bumped up from the current $5 per day to $25 per day in the latest version of House Bill 6.

Neal said Democrats were only given a preview of the budget Tuesday night and a full copy Wednesday morning.

“It’s not the most transparent process. People need to know; we need to know,” he said. “I’m a great proponent of transparency, but it’s a difficult process.”

Though K-12 education funding was a source of worry for some, House Bill 6 proposes significantly increases the state’s investment in performance-based higher education funding. It ups the dollar commitment in that fund from just over $100 million each fiscal year to $200 million each fiscal year.

What’s not in it?

Senate Democratic Leader Gerald Neal, D-Louisville, expressed disappointment that more funding wasn’t put forward for education, specifically to pay teachers.

“We have mechanisms that we could use to address teacher raises now, in my opinion. We also have the funds to do that. But there’s an emphasis on one-time costs as opposed to recurring costs, so they (oppose) that idea of raising salaries because obviously that’s a recurring cost,” Neal said.

The Kentucky Center for Economic Policy sung a similar tune.

In its analysis of the Senate budget proposal, the group pointed out that while the state’s per-pupil funding formula, known as SEEK, increased somewhat, it still hasn’t caught up to the inflation adjusted amount provided pre-recession.

“By not including dedicated teacher and school employee raises as with the governor’s proposed 11% increase, and by increasing core K-12 school per-pupil funding (SEEK) by only modest amounts, SEEK again does not keep up with inflation in the Senate budget,” a group of analysts from the center wrote. “Real total SEEK funding falls from 26% below 2008 levels in 2024 to 28% below by 2026.”

The center did, however, support the overall spending commitment of the Senate. It has been consistently opposed to past legislative efforts to greatly increase the size of the Budget Reserve Trust Fund and not make big investments.

Some child care watchdogs in Kentucky didn’t love what they saw, either.

Terry Brooks, executive director of Kentucky Youth Advocates, said that he appreciated the new House Bill 6 upping the commitment to the Child Care Assistance Program — General Fund appropriations were increased from $12 million per fiscal year to about $25 million — but it should have done more.

Many in Brooks’ space are concerned that Kentucky will fall behind if it doesn’t continue investments in child care from the federal American Rescue Plan Act that are now drying up.

“How can a budget feature an unprecedented level of physical infrastructure and it not go all-in on the most pressing infrastructure element at play – child care? Kentucky must invest in the child care infrastructure so families can access affordable, quality centers in their communities while also maintaining allocations for the Child Care Assistance Program so families don’t lose eligibility for that vital support,” Brooks said.

Funding for a proposed expansion to Bluegrass Station, which was in Beshear’s budget proposal as well as the House version of the budget, was not included in the new Senate version of House Bill 6. Its inclusion in the earlier versions of the budget drew significant outcry from landowners before state officials announced it was “closed” in late February.

Sen. Steve West, R-Paris, criticized Beshear’s reversal on support for the project. Beshear put the money in the budget for land acquisition while the feasibility study for it called for potential use of eminent domain. West, who also supported the project at one time, said it was hypocritical for the governor to claim his support was contingent on local buy-in.