Kentucky funds state services and sets spending limits through 2028

Kentucky sets aside money for executive branch operations and building projects. The budget covers Kentucky’s executive agencies and state-supported activities, including schools, health services, and public universities. The 2026–2027 operating budget includes $15.42 billion from the General Fund, $86.68 million from tobacco settlements, $16.69 billion from restricted accounts, $24.31 billion in federal money, and $55.58 million from the Road Fund. The 2027–2028 operating budget includes $15.69 billion from the General Fund, $79.52 million from tobacco settlements, $17.38 billion from restricted accounts, $24.12 billion in federal money, and $57.94 million from the Road Fund. The capital budget authorizes $32.73 billion for 2026–2027 and $833.92 million for 2027–2028. It uses restricted accounts, federal money, state and agency bonds, investment earnings, and other money. Agencies must use money for authorized purposes. These amounts authorize spending; they do not guarantee that every dollar will be spent. The main two-year budget covers July 1, 2026, through June 30, 2028. Some amounts also cover the fiscal year ending June 30, 2026.

Kentucky funds public schools through the Support Education Excellence in Kentucky program, known as SEEK. SEEK supports Kentucky public school districts. Its intended base amount uses average daily attendance rather than total enrollment. District payments may fall if money runs short, except for protected funding based on 1991–1992 amounts per student. Extra funding requires available money, the education commissioner’s written request, and the governor’s approval. The budget sets aside $7,412,500 each year to reimburse selected districts for school mental health staff. Selection criteria include Medicaid funding use and balanced statewide distribution. The listed teacher development and school improvement programs receive no General Fund money, with the stated purpose of funding school mental health staff. The $4,626 base amount applies to fiscal year 2026–2027; $4,792 applies to fiscal year 2027–2028.

Kentucky funds Medicaid benefits and sets payment rules for contracted health plans. The funding covers Kentucky Medicaid patients, participating health providers, and contracted health plans. For 2026–2027, benefit funding includes $3.01 billion from the General Fund, $2.32 billion from restricted accounts, and $18.28 billion in federal money. For 2027–2028, those amounts are $3.01 billion, $2.25 billion, and $18.25 billion. Health plan payments must fall by 2.5 percent in Plan Year 2028. Federally approved state-directed payments are exempt. Provider payment rates cannot be cut under this requirement, and savings must raise rates for care paid directly by Medicaid. If the state budget director confirms and approves a projected deficit, health officials may reduce payment rates, optional services, eligibility, or programs. They must first give written notice to lawmakers and the budget director. The benefit budgets cover fiscal years 2026–2027 and 2027–2028. The 2.5 percent health plan payment reduction applies to Plan Year 2028.

Eligible state workers receive scheduled raises, while executive agencies must reduce operating costs. Scheduled raises cover eligible state employees. Separate rules govern prosecutors, and cost controls cover executive branch agencies. Cost-cutting directions apply unless state law, federal law, or a court order requires otherwise. Officials must prioritize temporary staffing, advertising, and travel. Later priorities include eliminating positions vacant for six months, freezing discretionary raises, and reducing services that laws or rules do not require. Commonwealth’s attorneys, county attorneys, and their staff receive no base salary increment under their separate budget provisions. The scheduled raises take effect July 1, 2026, and July 1, 2027.

Kentucky sets grade and service requirements for certain college assistance awards. The grade rule covers eligible high school students earning Kentucky Educational Excellence Scholarship base awards. Service rules cover veterinary training support and optometry scholarships. Veterinary and optometry recipients covered by the service rule must sign an agreement with the Kentucky Higher Education Assistance Authority to practice in Kentucky for at least one year for each year of support. Failure to finish the service within the authority’s timeframe converts the support to a loan. Interest runs from the first payment at a rate set by the authority. Collection costs and attorney fees may apply if the borrower defaults. Recipients who received this support before fiscal year 2027–2028 are exempt from the service rule. The grade rule covers fiscal years 2026–2027 and 2027–2028. Service rules apply to students receiving their first award in fiscal year 2027–2028 or later.