Legislature OKs massive one-time $2.7B spending bill focused on projects & tax cuts

Austin Horn
·6 min read

The Kentucky legislature is spending. Nearly $3 billion, in fact.

The $2.7 billion figure is down from a previous $3.5 billion in the Senate’s proposal for House Bill 1, a massive one-time appropriations bill using state reserves to fund various projects. It also helps the state inch forward in its goal to cut personal income taxes to zero.

The House’s version of the bill had proposed $1.8 billion in such spending over the next two fiscal years, but Sen. Chris McDaniel framed the final product coming out of a joint Free Conference Committee as a healthy compromise between the chambers.

The bill is separate from House Bill 6, the state’s Executive Branch budget, which spends roughly $15 billion from the state General Fund each year over the next two fiscal years. Kentucky’s fiscal year starts July 1 and ends June 30.

Like all previous budget documents, the final drafts of House Bills 1 and 6 do not contain direct raises for K-12 teachers, one of the primary asks of Democratic Gov. Andy Beshear and legislative Democrats.

Republicans have insisted on exclusively funding education through the state’s per-pupil SEEK funding formula.

“We just firmly believe that that kind of thing throws the SEEK funding formula out of balance, and that is rooted in the state’s constitution,” McDaniel said. “We just don’t see that.”

The bill features a hefty investment in downtown Covington, as $125 million is appropriated to the Kenton County Fiscal Court to “plan, design, and construct a Commonwealth Center for Biomedical Excellence in the City of Covington.”

The bill also previously mentioned moving Northern Kentucky University’s Chase College of Law to a site downtown. Though that language is removed, McDaniel said that’s still the plan.

The bill also puts forth $200 million for a grant program meant to help cover local funding matches for communities and nonprofits seeking federal grants, which has the potential to draw in more than $1 billion dollars.

In Lexington, the bill keeps in $10 million to the Lexington-Fayette Urban County Government to support Lexington’s Transformational Housing Affordability Partnership.

A $100 million plan was granted to the Cabinet for Economic Development to support “approved mega-development projects” of at least $10 million. Another $50 million will go to Warren and Hardin Counties to support such “critical infrastructure improvements” as water and sewer.

Both communities have massive electric vehicle battery production facility projects in the works.

The bill puts $230 million to help fund three different state pension obligations — state police, Kentucky Teachers’ Retirement System and state employees.

Big appropriations are also coming to communities in Shelby County and Central Kentucky for economic development projects.

The Rockcastle, Garrard , Lincoln County Regional Industrial Development Authority gets $62 million “for the purchase of real property” and the Shelby County Fiscal Court gets $25 million to “support economic development for an energy development project.”

It’s important to note spending in the bill is completely exempt from consideration in hitting the “triggers” set by statute to bring the state’s personal income tax down. That makes it more likely the state can cut the tax.

Having already lowered the rate down from 5% to 4% in two half-percent increments in the past two years, McDaniel said that House Bill 1 and the Executive Branch budget in House Bill 6 put the state on a path to reduce the income tax to 3.5% by January 2026.

“The early projections look like it will happen, but we we will have to await final receipts,” McDaniel said.

Democrats didn’t love everything about both House Bills 1 and 6 — a contingent of House Democrats was particularly upset about a perceived lack of funding for Kentucky State University — but both bills gained near-unanimous passage in both chambers.

Here’s a rundown of other big-ticket and notable items funded in House Bill 1. It’s important to note legislative leaders didn’t provide in-depth details of some of these spending commitments, as in what could be built or what is envisioned:

  • $450 million to the Kentucky Transportation Cabinet to support the State Supported Construction Program and select construction projects within the 2024-2026 Biennial Highway Construction Program.

  • $344 million for Kentucky Infrastructure Authority water and sewer projects.

  • $200 million to the Department of Agriculture budget unit to support matching funds for federal grants under the Government Resources Accelerating Needed Transformation Program.

  • $125,000,000 in fiscal year 2025-2026 to the Kenton County Fiscal Court to plan, design and construct a “Commonwealth Center for Biomedical Excellence” in Covington in partnership with Northern Kentucky University and the University of Kentucky.

  • $100 million to Louisville Metro Government for downtown revitalization projects.

  • $100 million to the Kentucky Public Pensions Authority budget unit to be applied to the unfunded pension liability of the Kentucky Employees Retirement System Nonhazardous pension fund.

  • $70 million to the Economic Development budget unit to support development projects in accordance with the Kentucky Product Development Initiative.

  • $62 million to the Medicaid Benefits budget unit to support ongoing needs of the Medicaid benefits program.

  • $60 million to Murray State University to construct a facility for its veterinary technician program.

  • $40 million for the University of Kentucky’s Center for Applied Energy Research’s administration and support of the Kentucky Nuclear Energy Development Authority and the Energy Planning and Inventory Commission.

  • $35 million to support capital improvements at Lexington’s Bluegrass Airport, Louisville Muhammad Ali International Airport, Cincinnati/Northern Kentucky International Airport, Barkley Regional Airport and Owensboro-Daviess County Regional Airport.

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

  • $25 million to be distributed to the Shelby County Fiscal Court to support economic development for an energy development project.

  • $20 million to to be distributed to Kentuckiana Works to support workforce development programming.

  • $20 million to to the Barren River Area Development District to develop and implement a regional substance use disorder services pilot program.

  • $18 million to the Kentucky Horse Park Commission budget for facility upgrades and renovations.

  • $15 million to improve public riverports within Kentucky.

  • $12 million to the Pikeville Medical Center for upgrades of its facilities.

  • $11.25 million to Frankfort to support construction of the Frankfort Convention Center subject to the full funding of the estimated $22.5 million project.

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

  • $10 million to the Leitchfield-Grayson County Airport to purchase land for the expansion of runways.