Kentucky Governor Andy Beshear announced his state budget proposal for Fiscal Year 2021-2022 yesterday evening in a video address. The Governor also announced a special appropriations package utilizing federal funds for one-time expenditures on priorities such as small business relief and repayment of Kentucky’s unemployment insurance loan from the federal government. 

The one-year budget proposal is unique in several respects but especially in that Kentucky traditionally passes two-year budgets in 60-day, even-year sessions; budget work rarely happens during 30-day, odd-year sessions like 2021. The COVID-19 pandemic, however, derailed the 2020 legislative session, forcing lawmakers to pass one-year budgets in 2020 and 2021. This strategy allowed legislators and the Governor’s office to account for the fiscal and economic uncertainty brought on by the pandemic. Lawmakers will need to pass another budget in the 2022 legislative session. 

Governor Beshear announced a total of $600 million in one-time expenditures, $340 million of which he proposed spending in a special appropriations package. This package includes aid for small businesses and non-profit organizations, and payments on Kentucky federal UI loan. Other one-time expenditures from this pool of money are incorporated into the state operating and capital budgets for expanding broadband access, renovating schools, investing in “emerging industries,” and padding the state’s “rainy day fund.” The Governor also announced a proposal to use CARES Act dollars to provide “supplemental unemployment insurance payments” to certain eligible Kentuckians. 

The Governor’s operating budget proposal includes salary increases for public school teachers and state employees as well as increases to K-12 and higher education funding. The budget document notes that it fully funds state pension plans and includes “no General Fund spending cuts.”

Following the Governor’s budget proposal, Republican supermajority leadership from the House and Senate released a statement, noting, “A budget is the ultimate policy document, and this means we must invest every taxpayer dollar in a manner that reflects our state’s priorities and fiscal realities. This pandemic is far from over and our Commonwealth still faces great uncertainty. We question the prudence of spending millions of dollars in new programs when our economy remains extraordinarily unpredictable.”

The announcement of the Governor’s budget proposal formally initiates the legislative budget process. The next step in the process is for the House of Representatives to review the proposal and make adjustments based on their policy priorities. After that, the House will send their budget to the Senate, which will review and make additional changes. Budget bills, like all bills in the General Assembly, must be passed in the same form by both chambers. The standard vehicle for accomplishing this goal is a “Conference Committee,” whereby legislative leadership works through the differences between the House and Senate proposals to settle on a compromise that can pass both chambers and be sent to the Governor.