House Appropriations and Revenue Chair Jason Petrie filed HB 500 on Tuesday, the first official step in the process lawmakers will follow as they continue crafting the state budget.
The measure is cosponsored by the committee’s Vice Chairs, Representative Adam Bowling and Representative Josh Bray.
According to Petrie, HB 500 represents a departure from the traditional budget process and is driven by a desire to make the budget process more transparent and push state agencies to curb overspending and expansions. Instead of approving the Beshear administration’s $10 billion in requests for new funding over the next two fiscal years, lawmakers are challenging agencies to make their case before the House’s budget review subcommittees.
“This version represents a clear starting point and a clear direction. The next step lies with state agencies as they provide information and work with our budget review subcommittees to determine what, if any, additional funding is needed. I’m hopeful that the executive branch will see this as an opportunity to identify how they can become more effective with the money they already receive,” Petrie said.
The budget provides a two-year spending plan for state agencies and programs. The initial version of HB 500 protects the state’s needs: public safety and law enforcement; K–12 education and workforce readiness; healthcare access; and infrastructure maintenance.
In addition, the bill outlines potential reductions, with targeted exemptions to protect critical services, and additional funding when necessary to meet core responsibilities. The process behind the measure aims to reevaluate and reduce unnecessary allocations as well as programs that have outlived their purpose, including COVID-era programs that are no longer needed; duplicative grants and incentives; administrative bloat and consulting contracts; programs without clear performance metrics; and programs that could be better performed by private Kentucky citizens or organizations.
Work on this spending plan began shortly after lawmakers passed the current budget in 2024. Budget leadership has been monitoring state spending and revenue, while receiving more than 800 agency budget requests and hundreds of spending requests from legislators, nonprofits, and other non-government agencies. While far from a finished product, Petrie says HB 500 requires additional focus.
“This measure represents the next step in our efforts and yet another major shift in how we write the state’s two-year spending plan,” Petrie said. “It is past time to challenge the notion that state programs have an unlimited lifespan, or that spending is sacred. Uncontrolled spending hurts Kentucky families - through inflation, higher taxes, and fewer opportunities. Right-sizing government focuses us on what truly matters — not growing government for growth’s sake.”
Specifically, the bill includes $14.9 billion in annual base level spending. The provisions include a spending reduction of 4% in the first fiscal year (FY 27), and an additional 3% in FY 28 for most state agencies. However, HB 500 exempts several core areas of state government, including:
Education Exemptions:
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SEEK per-pupil remains at $4,586
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SEEK transportation reduced to the FY 25 appropriation amount of $358.9 million
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School safety funding
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Mental health professionals
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Career and technical education
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FRYSCs
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School Facilities Construction Commission operations
Postsecondary Education:
- Postsecondary Performance Fund remained at $115 million each year
Cabinet for Health and Family Services Exemptions:
- Behavioral Health, Developmental and Intellectual Disabilities which includes state-owned, state operated, and contracted residential facilities
Justice and Public Safety Exemptions:
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Juvenile Justice
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(DOC) Community Services and Local Facilities
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(DOC) Adult Correctional Institutions
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(DOC) Local Jail Support
Additional Exemptions:
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Veterans’ Affairs, including state-owned Veterans’ Centers and cemeteries
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All debt service obligations
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County costs/Sheriffs’ fees
As filed, HB 500 also includes additional funding for:
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Public pension contributions - all plans receive full actuarial funding, including on-behalf contributions for school districts
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Employer costs for health insurance (capped at 5% growth year over year rather than at estimated levels of 14.1% in FY 27 and 10% in FY 28)
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2% salary increase for state employees in each year
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2% increase in training stipends in each year
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KLEFPF/Fish and Wildlife officer stipends
Capital Budget:
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Agencies received funding for maintenance pools (at the same funding level as the current biennium)
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All leases were authorized
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Universities
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Each university and KCTCS received $10 million in FY 27 for asset preservation and $100 million to be distributed via formula in FY 28
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University of Kentucky received authorization to construct an Arts and Innovation Complex
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The additional $10 billion requested would require Kentucky taxpayers to carry the burden of the increase either directly through tax increases, or indirectly by spending down the budget reserve or borrowing money by bonding projects.
“This budget makes it clear that reserves are not a blank check and debt is not the default solution,” Bowling added. “For far too long, Kentucky’s elected leaders have used the budget to win votes and curry favor, rather than recognizing it as a responsibility. That hasn’t been our approach, and it certainly isn’t the approach reflected in this version of HB 500. The process moving forward prioritizes fiscal discipline, long-term stability and respect for the hardworking Kentuckians who ultimately foot the bill.”
Bray added, “This is a starting point, not a finish line. Now we focus on making sure the final product reflects our commitment to the Kentuckians who work hard for their paychecks. After all, they expect their government to do the same with their tax dollars.”
House Speaker David Osborne spoke to the potential for improving the overall budget process and how it will benefit Kentuckians.
“If we want to continue making Kentucky the best place to call home - a place where families can thrive, businesses can grow, and opportunity is real - curbing the reckless expansion of state government is critical,” Osborne added. “This budget is about protecting Kentucky’s future. It is about providing for a government that reflects Kentucky values: responsibility, accountability, and long-term strength.”
While HB 500 will be assigned to committee in the next few days, budget review subcommittees have already begun their efforts to review agency budget requests and gather data as members work to draft changes in the form of a committee substitute.
House Appropriations and Revenue Chair Jason Petrie provides a briefing on changes to the budget process after filing HB 500, a ‘starting point’ for lawmakers as they continue to craft the state’s two-year spending plan.
Photo courtesy of Kentucky
