Kentucky General Assembly Concludes Legislative Session State Budget Priority Issues for Lawmakers

​Legislative advocacy is an important benefit Commerce Lexington provides to its members.  Each year, Commerce Lexington works with leaders in the business community to identify the key issues to advance Lexington and the region’s economic competitiveness. The organization serves as a voice for business at the local, state and federal levels of government by developing strong working relationships with officials and advocating for priority issues. 
 
Recently, Commerce Lexington engaged in state advocacy efforts on behalf of the Greater Lexington business community. From January to mid-April, state legislators convened in Frankfort for the 60-day Regular Session of the Kentucky General Assembly. Of the more than 1,200 bills filed in the House and Senate, less than 215 bills and resolutions made it through the process to become law this year. 

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The priority issue for state legislators was crafting the state budget for the next biennium. Kentucky’s state budget is viewed as the ultimate public policy document because the allocation of the state’s financial resources demonstrates legislative leaders’ priorities for the Commonwealth.     
 
Top of mind for legislators this session was crafting the state budget that allowed for critical investments in education and infrastructure, while continuing to set the stage for further tax modernization in future years. Legislators also had to decide how much to allocate from a massive budget reserve surplus nearing $3.7 billion above and beyond recurring budget expenses.
 
The Governor, House leaders and Senate leaders each presented their ideas for spending, and negotiations took place over the session. While Republicans hold super majorities in both chambers, House and Senate leaders had differing spending priorities but ultimately reached a compromise during negotiations and passed key budget legislation.
 
Three major pieces of budget legislation passed:

• HB 1: Budget Reserve Surplus Allocation
• HB 6: Executive Branch Budget
• HB 265/266: Transportation Funding

HB 1: Budget Reserve Surplus Allocation

​The final version of HB 1 spends more than $2.7 billion of the $3.7 billion in budget reserve trust fund for one-time spending for infrastructure projects across the state related to transportation, economic development, water and sewer infrastructure, and community development. It specifically provides $450 million to the Kentucky Transportation Cabinet to support road projects over the next two years. 
 
For Lexington, HB 1 provides $36 million for the Kentucky Horse Park, $5 million for Bluegrass Airport, and $10 million for the Lexington Affordable Housing Project that will support infrastructure on the site that was formerly the Transylvania University baseball field.

HB 1 also allocates $70M to the Kentucky Product Development Initiative (KPDI) for FY24-26. Continuing this program is a priority for Commerce Lexington and regional leaders because of the need for more job-ready land in the region. Since 2019, the KPDI program has been extremely beneficial in accelerating local and state investment and regional collaboration in getting more land/sites ready for jobs in Greater Lexington. To date, 12 projects in Greater LEX have been approved for KPDI with four more pending approval from the Kentucky Cabinet for Economic Development. 

KPDI Project Map (March 2024)

HB 6: Executive Branch Budget

The final version of HB 6 (Executive Branch Budget) distributes more than $30 billion over two years from the General Fund to support needs identified in the budget.  

Some highlights related to Commerce Lexington priorities include:
K-12 Education:  Increasing funding through the per pupil SEEK funding model and more funding to support school transportation needs.  There were no direct raises for teachers included in the budget. 
Higher Education: Increasing investments in the performance-based funding model for universities, KEES scholarships, and work-ready scholarships.
Workforce Development:  Continued funding for the KYTRAINS program utilized by BCTC to help employers with worker training needs.
Childcare: Investments in the Childcare Assistance Program (CCAP), the Employee Childcare Assistance Partnership, a new program to allow childcare workers to automatically qualify for CCAP, funding for early childhood development scholarships, and a new Innovations in Early Childhood grant program, which could help support new employer-based childcare services.
 
Commerce Lexington monitors closely how the state budget impacts the University of Kentucky, because the university is the largest employer and has a significant impact on the economy and workforce. This session, the budget increases both the base funding from the state to UK, and the performance funding pool, which measures the performance of all public universities in several key areas, such as enrollment and numbers of graduates. UK also received authorization from the state to use its resources to construct a new bed tower next to Pavilion A of UK HealthCare’s Chandler Hospital, funding for new infrastructure for the Martin-Gatton College of Agriculture, Food and Environment, and resources for continued renovations to facilities in the core of the campus, which the university would, in part, match. 

HB 265/266: Transportation Project Funding

​HB 265 and HB 266 make up the state’s transportation infrastructure spending plans over the next two years.  HB 265 is the operating budget for the Kentucky Transportation Cabinet. HB 266 outlines the road plan for construction projects in each county for the next two years. The total road fund is approximately $1.8 billion each year. Lexington-Fayette County received nearly $166 million in state funding to support major transportation road funding projects including the reconstruction and widening of U.S. 25, reducing congestion on I-64/I-75 from Paris Pike to the Southern Split and safety improvements on New Circle Road. 

State Tax Code Modernization

​Modernizing the state’s tax code has been a priority issue over the last few legislative sessions, as legislators work to lower the state’s personal income tax.  To modernize the code, legislators implemented a series of triggers to gradually lower rates based on revenues.  In past sessions, legislators also passed modest expansions of the state’s sales tax to new business services. Kentucky’s individual income tax rate is now 4 percent (down from 6 percent). It is anticipated Kentucky’s personal income tax rate will lower to 3.5 percent next year. 
 
This session, legislators passed a revenue bill (HB 8) with modest reforms and technical changes to the state’s tax code, but there were no new sales taxes added to businesses.  

Other broader business-related issues addressed this session of interest to Commerce Lexington include:

​Data Privacy: HB 15 creates a statutory framework for data privacy, security and consumer protections in Kentucky similar to other states.
Autonomous Vehicles: HB 7 provides structure for when an AV may be deployed in Kentucky. Twenty-eight states have enacted similar AV legislation.
Paid Family Leave: HB 179 helps employers who would like to offer an additional benefit to employees. It amends state law to allow voluntary paid family leave to be offered as an insurance product.
Statute of Limitations: HB 320 changes the statute of limitations to help ensure clarity in court cases between employers and former employees.
Childcare Centers: HB 561 creates a process to remove planning and zoning barriers to opening childcare facilities.
Planning & Zoning Policies: HB 443 requires planning staff to follow local planning and zoning laws. HB 18 prohibits local governments from adopting ordinances that prohibit property owners from refusing to rent to a person when the source of income includes funding from a federal assistance program. 

What's next?

​Additionally, two Constitutional Amendments passed this session and will be on the ballot this November; one focused on voter eligibility and another that, if approved, would allow state taxpayer funds to go to non-public K-12 schools. Legislators will meet over the summer and fall in Frankfort for interim joint committee meetings. Issues expected to be discussed through working groups include AI, workforce attraction marketing strategies for Kentucky, and housing affordability.  The Kentucky General Assembly reconvenes in January 2025 for the 30-Day Regular Session. 
 
Commerce Lexington urges members to stay connected on state, local and federal policy issues during the year.  Regular email updates will be provided to members throughout the year to keep businesses updated on what’s happening in City Hall, Frankfort and Washington, D.C. and the impact on the Greater Lexington region. 

Contact:

​If you have questions, need assistance with a policy issue, or would like to get involved with advocacy efforts, contact Andi Johnson, Chief Policy Officer and Director of Regional Engagement.