Income tax cut shapes 2026-28 Kentucky budget as lawmakers debate funding priorities

LOUISVILLE, Ky. (WDRB) --Kentucky House Republicans have a rough draft of Kentucky's next state budget. It's slightly smaller than years past, with cuts to several major government programs.

"You will see language of cut," State Rep. Jason Petrie, House Appropriations & Revenue Chair, R-Elkton, said. "Spending cut, spending growth cut."

Kentucky dropped its income tax rate from 4% to 3.5% in 2026. While the cut means more money in your wallet, it also slashes state revenue by more than $700 million each year.

"Our revenues are continuing to grow all as projected, all as hoped, and all as designed," Petrie said. "Today, we do not have a revenue problem, but we always have to fight spending that's out of control."

To rein in that spending, lawmakers have proposed House Bill 500, with a general fund of $29.8 billion to spend. That's down compared to the 2024-2026 General Fund budget.

"That's what a major theme of this budget is going to be," Petrie said. "Restrain the growth rate of spending."

This proposal decreases funding for several state organizations and programs over the next two years. This includes state police, Medicaid, and universities.

University of Louisville, University of Kentucky, and Western Kentucky University would all lose a couple million dollars in funding under this budget draft.

"The people in Kentucky aren't asking for a lot," Gov. Andy Beshear said. "They want a good job. They want to be able to see a doctor when they're sick. They want to drop their kids off at a good school. They want to feel safe in their communities, and they want safe roads and bridges they drive on. The house budget doesn't deliver that, yet."

Kentucky lawmakers have until April 15 to finalize the budget, so this draft is not set in stone.

"There will be meetings during the day and at night," Petrie said. "Formal and informal."

Governor Beshear is pushing for roughly $100 million to fund a state Pre-K program over the next two years. However, it was left out.

"I think it's pretty sad they'll put politics over 4-year-olds in Kentucky," Beshear said. "Half of Kentucky's kids aren't prepared for Kindergarten."

"There's no amount of revenue that could feed the executive branch in its wants and desires," Petrie said. "But we will find what they need, and that's how we'll come up with a good budget."

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