New compromise KY budget ditches retiree ‘13th check,’ increases health care spend
The final version of the state’s executive branch budget bill made it through the Kentucky legislature with little time left to spare.
Though the bill, House Bill 500, was still not available to the public as of Wednesday afternoon, it was on its way to approval just hours before the deadline for it to pass and withstand a veto from Democratic Gov. Andy Beshear.
HB 500 passed the Senate on a unanimous vote and later Wednesday passed the House.
At $31.1 billion in General Fund dollars over the next two fiscal years, which begins on July 1, the bill is slightly more generous than the versions proposed by both the Senate and the House. It’s the result of a Free Conference Committee, which is formed to hash out a compromise when both legislative chambers can’t agree on a bill.
The bill scotches a proposal to distribute an extra “13th check” to state retirees, totaling $350 million, that was in the Senate’s most recent version of the bill.
In some areas, particularly in health care, the bill provides more money. The bill allocates more dollars to Medicaid programs and hospitals than previous bills, while also beefing up funds directed to Justice and Public Safety cabinet initiatives.
The bill was discussed, but its exact text was not revealed, in a committee meeting last week.
“Medicaid, while it will not have all of the funding that everyone would like, will have a great deal of increased funding over where it is right now. As we know, there is no area in government that has seen growth in the way that Medicaid has seen growth. It is an area that needs responsible governance brought to bear. It needs cost controls brought to bear while still providing for health care for the truly indigent,” Senate Appropriations & Revenue Chair Chris McDaniel, R-Ryland Heights, said at the meeting.
In education, the per pupil funding rate ended up mirroring the House version of the bill: $4,626 per student in the next fiscal year, and $4,792 in the following fiscal year.
No “13th check” for retired employees
The final budget nixed the Senate’s proposal of giving a “13th check” to state retirees.
The Senate’s version of the budget had set aside $81 million of a $350 million transfer from the Insurance Regulatory Trust Fund for those checks, which is a self-funded regulatory pool meant to support Department of Insurance operations and regulatory oversight.
The remaining balance of about $269 million would have gone toward the Kentucky Employee Retirement System’s Non-Hazardous Insurance Fund, which pays for retiree health insurance benefits.
McDaniel told reporters Monday while the House and Senate “negotiated on that a lot,” it was “probably going to struggle” in the final version.
In the House’s version, that $350 million transfer was directed to the Budget Reserve Trust Fund. Of that $350 million, $250 million was set aside to potentially cover Medicaid benefit payments.
In the final version of the budget, $290 million is transferred from the Insurance Regulatory Trust Fund to the Budget Reserve Trust Fund for a Medicaid “lockbox.”
“It is the intent of the 2026 General Assembly to reserve $290,000,000 for potential appropriation for Medicaid Benefits in the 2027 Regular Session if deemed necessary for claims and payments in fiscal year 2026-2027 or fiscal year 2027-2028,” HB 500 reads.
Negotiations on juvenile justice centers
Lawmakers want to see a comprehensive plan from state agencies for a high acuity juvenile mental health facility before giving the green light on funding.
Language in the state budget directs the Justice and Public Safety Cabinet to work with The Department of Juvenile Justice to issue a request for information that will “solicit input and assess feasibility regarding the planning, development and delivery of high-acuity mental health services for juveniles, including the potential construction of a treatment facility.”
The request is required to address “evidence-based practices for high acuity behavioral health services, cost-effectiveness and long-term sustainability and plans for data collection, performance metrics, and outcome evaluation,” among other things.
Sen. Danny Carroll, R-Paducah, is the driving force behind legislation attempting to improve mental health care for Kentucky youths in state custody. He introduced Senate Bill 125 this session, which would build two girls-only detention centers for the Department of Juvenile Justice, with one in Western Kentucky and one in Central Kentucky, as well as a mental health juvenile detention facility.
SB 125 lacked any funding for any of those projects and still awaits for action in the House. While the House didn’t include any money for Carroll’s projects in its budget, the Senate had set aside $45 million for one girls-only detention center and $35 million for a high acuity juvenile mental health facility.
The compromise in the final version of HB 500 is for the cabinet and department to submit a report on the request for information to the Interim Joint Committee on Appropriations and Revenue by Nov. 1.
“It is the intent of the General Assembly to authorize the use of funds from the Budget Reserve Trust Fund if the Request for Information results in a viable project, including a defined cost estimate and a feasible timeline for the implementation of the project for the delivery of services,” HB 500’s language reads.
The final budget also authorizes the design of a girls-only detention center for fiscal year 2027-2028.
Dolly Parton Imagination Library funding restored
The Dolly Parton Imagination Library Program in Kentucky will continue to receive dollar-for-dollar match funding after concerns raised on language surrounding a contribution formula in the Senate’s proposed budget.
In the Senate’s proposal, a statement from the Dolly Parton library said, lawmakers changed a formula used to calculate the state’s contribution to the book program so that the state would only cover one-third of the cost of the books provided to children.
Every month, Dolly Parton’s Imagination Library Program mails an age-appropriate book to children from birth to age 5 at no cost to families. A local partner in each county enrolls children and raises money to pay for the books themselves.
The new formula, the library said, would have kept thousands of dollars from reaching local partners, and many local partners wouldn’t be able to fill the funding gap. That would have put the program at risk in larger counties with thousands of eligible children and small rural communities with limited fundraising opportunities.
But the formula change wasn’t included in the final version of the budget. The final version also directs the Department for Libraries and Archives and Cabinet for Health and Family Services to collaborate on “researching ways to increase enrollment” for children from low-income households and living in foster care.
This story was originally published April 1, 2026 at 5:48 PM.
