Revised HB 500 Clears House; 2% Raises, SEEK Increases, Health Cap Debate

A revised version of House Bill 500 moved through the Kentucky House in late February, advancing an executive-branch two-year budget that includes 2% state employee raises and adjustments to K-12 funding while reopening a contentious debate over the Kentucky Employees’ Health Plan. Kentuckytoday and Louisville Public Media reported the amended bill cleared the House on Feb. 26 after a House committee approved a substitute the night before.

House Appropriations and Revenue Committee chair Rep. Jason Petrie, R-Elkton, introduced the committee substitute during a Feb. 25 session, a moment captured by the Kentucky Lantern’s Liam Niemeyer. Spectrumnews1 reported the committee passed the substitute Wednesday night and noted the updated bill language was posted online only after the meeting; the bill had two of three required readings, making floor passage possible on Feb. 26.

On K-12 funding, the substitute raises the SEEK base from the 2026 level of $4,586 per pupil to $4,626 in fiscal 2027 and to $4,792 in fiscal 2028, figures reported by the Kentucky Lantern and Kypolicy. Rep. Petrie and Spectrumnews1 characterized the change as a 2% increase in each fiscal year, while Kypolicy calculated the 2027 step as less than a 1% bump and the 2028 step as a 3.6% increase; Louisville Public Media described the package as a 2.7% average increase over the two years. The bill freezes school transportation funding at about $399 million per fiscal year, a level Kypolicy says is roughly $89 million below what statute would require.

State employee pay is written into the substitute as 2% raises in both 2027 and 2028, according to Spectrumnews1 and Kypolicy. The substitute also removed language that would have capped employer contributions for state employee health insurance, a change Spectrumnews1 and Kypolicy flagged. Kentuckytoday reported HB 500 “funds the Kentucky Employee Health Plan at the actuarially determined amount,” saying that would translate to a 14% taxpayer increase in year one and a 10% increase in year two. House Democrats had proposed an amendment to add $279 million for KEHP, the Kentucky Lantern reported.

The substitute preserves other line items and adds targeted funding: Spectrumnews1 said the bill sets aside roughly $100 million for administering SNAP and earmarks dollars for juvenile justice facilities under construction in Jefferson County. Louisville Public Media reported HB 500 appropriates $6 billion for Medicaid over two years but still leaves an estimated $220 million shortfall versus the Beshear administration’s projection even after a $250 million rainy day fund set-aside. Kypolicy flagged a 16% cut to higher education compared with the last budget and noted the budget releases $27 million of a previously appropriated $67 million intended for pay compression while letting $40.6 million lapse to the state’s budget reserve trust fund.

Floor fights and political maneuvers accompanied the budget debate. LPM reported Democrats attempted six floor amendments, covering affordable housing, school employee raises, pre-K expansion, retiree benefits, rural hospitals and Medicaid waivers for people with special needs, but those amendments failed after GOP procedural moves. Lindsey Burke, House Minority Caucus Chair, told Spectrumnews1, “There are some things that I think are still really missing and because we're not going to have a meaningful ability, it doesn't seem, to add those things, I'm a 'no.'” Burke added, “It means a lot that SEEK is growing; it means a lot that the contract employees health plan is secure for at least now.” Rep. Josh Bray, R-Mount Vernon, suggested earlier that some requests might have been funded “if Beshear had not spent so much traveling to meetings in Europe and other states to promote Kentucky,” LPM reported. House Republicans issued subpoenas for KEHP data on Feb. 24; a Beshear spokesperson told the Kentucky Lantern the subpoenas were “a stunt with no merit.” A “Scrap the Cap” coalition in Frankfort including the Kentucky Education Association, Kentucky Public Retirees, Kentucky Government Retirees and Teamsters Local 783 protested any move to shift health insurance costs to workers and retirees.

Kentuckytoday quoted Rep. Petrie saying the updated HB 500 “protects the state’s core priorities,” listing SEEK, Medicaid, juvenile justice, corrections and veterans programs among exemptions from spending reductions. With the House action reported on Feb. 26, the bill now faces Senate consideration and further scrutiny of the KEHP actuarial language, Medicaid gap and higher education cuts as it moves through the next chamber.