Budget Remains a Focus for Kentucky Legislators During Interim

By:

Representative

Chris Fugate

While the interim provides an opportunity to prepare for an upcoming session, it also grants lawmakers a chance to dig into how legislation they have already passed is being put into practice. Nowhere is that more important than with the state budget. After all, the spending plan incorporates the state’s priorities and sets the stage to take advantage of opportunities and challenges.

Members of the Interim Joint Committee (IJC) on Appropriations and Revenue used their first meeting to review portions of the budget as well as spending and revenue trends. While I am including a brief overview of the committee’s work in this week’s update, more information can be found on the individual committee page at legislature.ky.gov. You can also watch meetings – both live and recorded – on the legislature’s YouTube page, @KYLRC Committee Meetings.

Overall Spending: For the most part, general fund appropriations follow state revenue because the state constitution wisely requires that the budgets passed by the legislature be balanced. There are exceptions, most recently in 2021 when the pandemic created economic uncertainty. The legislature responded by passing an austere one-year budget, meeting only the state’s most basic and immediate needs. Since then, lawmakers have continued to address needs first, but we have been able to make investments in other areas that will benefit Kentuckians. Some of these priorities include water, road, bridge, and high-speed internet infrastructure, as well as paying down public pension liabilities, providing support for economic development growth.

Budget Reserve Trust Fund (BRTF): Essentially the state’s savings account, the budget reserve trust fund exists to prepare our state for both the good times and the bad. Lawmakers can set money aside for the BRTF, and we can direct that any money left over at the end of the state fiscal year be placed in it. The Kentucky General Assembly has done both over the past few years, and the results are incredible. We are now better prepared than ever in our history. In fact, committee members received a graph that detailed the historic growth – dating back 13 years to 2011 when the BRTF was completely empty. We have been able to use those funds to benefit Kentuckians impacted by natural disasters, leverage it to attract thousands of jobs and billions in economic investment, and make about $3.1 billion in one-time investments in priority areas. Even after accessing the fund for those allocations, we have one of the healthiest reserve accounts in the nation.

Education Funding: While we know the budget we passed earlier this year includes a historic level of funding for kindergarten through 12th grade public schools, committee members were presented with detailed information about trends in funding since the passage of the Kentucky Education Reform Act in the early 1990s. Total funding for K-12 education will reach $5.7 billion in the fiscal year that begins next month, and $6.1 billion in fiscal year 2026. One of the most interesting takeaways from the committee presentation is that average daily attendance, which reflects overall enrollment, has decreased considerably over the past several years (the presentation only went back to 2017), and attendance is forecast to continue to go down during the 2025 school year.

Medicaid Funding: According to information presented at this month’s meeting, overall spending on Medicaid, the government program that provides health care for eligible, low-income populations, has grown from $4.23 billion in 2012 to an estimated $15.47 billion in 2026. While the federal government has carried most of the burden, state spending in the same period has more than doubled. Medicaid is a state and federal program authorized by the Social Security Act. More than a third of our state’s population is enrolled in the program and monthly Medicaid benefits added up to approximately $808 per eligible recipient in the last fiscal year. Despite this investment in health care, we lead the nation in chronic disease and early deaths and rank at the bottom for access to medical care. The Medicaid program will be the subject of many discussions throughout the next six months as we look at how we can make it more effective and efficient within federal requirements.

As always, I can be reached anytime through the toll-free message line in Frankfort at 1-800-372-7181. You can also contact me via e-mail at Chris.Fugate@lrc.ky.gov and keep track through the Kentucky legislature’s website at legislature.ky.gov.