Kentucky Politics

After weeks of negotiating behind closed doors, Republican leaders of the Kentucky legislature have agreed to a two-year state budget plan that includes raises for state employees, full funding for all-day kindergarten, money to rehab state parks and assistance for the state’s pension systems.

But critics warn the plan doesn’t spend all the money available to the state, setting the stage for a major overhaul of Kentucky’s tax code that will reduce revenue in the coming years.

During a legislative meeting Tuesday, GOP leaders unveiled a budget flush with cash from last year’s $1.1 billion budget surplus and federal dollars through the American Rescue Plan Act

Republican House Speaker David Osborne of Prospect said the proposal attempts to make long-term, fiscally responsible decisions.

“It is certainly the best budget I will have voted for since being in the legislature and I think it’s probably the most fiscally conservative and fiscally responsible budget that we’ve had the chance to vote on,” Osborne said.

The Republican-led House and Senate passed their own budget plans earlier this session. GOP leaders from both chambers hammered out a compromise version in private, before unveiling the new proposal Tuesday morning.

State employees can expect to see much-needed raises under the plan, according to Sen. Chris McDaniel, a Republican from Ryland Heights and chair of the Senate budget committee. Experts have said raises are needed to attract and maintain talent in government ranks.

The budget proposal includes an 8% raise for state workers in the first year of the budget and a 12% raise in the second year. Social workers, public defenders, non-political judicial branch employees and state troopers would also see a boost in pay.

The plan also includes full funding for all-day kindergarten and a slight increase in Kentucky’s education funding formula called SEEK – from $4,000 this year to $4,100 in 2023 and $4,200 in 2024. The budget would also fund 70% of school district transportation costs and fully cover vocational schools.

Republican Senate President Robert Stivers, of Manchester, said the budget would make a number of investments to attract people to Kentucky, including  a $75 million tourism recovery fund, $20 million for basic maintenance at state parks in the first year and $150 million in the second year for an “overhaul.”

“One of our greatest and best assets is the natural beauty of our state and we made some serious investments to bring people back to this state,” Stivers said.

Democrats said they hadn’t seen the plan until shortly before it was unveiled Tuesday morning.

Also on Tuesday, Republicans passed House Bill 8 out of the legislature. The plan would reduce the state income tax and expand the sales tax to new services, costing the state about $1.4 billion in lost tax revenue over the next two years, according to an earlier version of the bill’s official fiscal note.

McDaniel said the bill would not include a $500 tax rebate that was floated in an earlier proposal

The tax bill would reduce the state’s income tax from 5% to 4.5% in 2023 and lower it further in future years as long as tax revenues exceed expenses and the state has the equivalent of 10% of its budget in the Rainy Day Fund.

With a day to spare before Democratic Gov. Andy Beshear’s 10-day veto period, the final budget plan still has to be approved by the House before heading to the governor’s desk. Lawmakers will return for the final two days of the legislative session on April 13 and 14 to consider overriding any vetoes.

This story has been updated.

Ryan Van Velzer is WFPL's Energy and Environment Reporter.